Transcripts For CNBC Squawk Box 20100331 : vimarsana.com

good morning. president obama is set to lift restrictions on offshore oil exploration later today. a blue chip boost, honey well, gosh, i wish it was still in the dow, raising its first quarter and 2010 earnings guidance. that stock looks like it might hit a 52-week high. and the first quarter coming to a close, stocks turning in a very positive three months as squawk box begins right now. good morning, everybody. yes, it s wednesday morning. welcome to squawk box here on cnbc. i m becky quick along with joe kernen. carl is out on assignment, but he ll be back tomorrow. president obama will announce a plan today to open offshore areas to oil and natural gas drilling for the first time. this is the reversal of a long standing ban on most offshore explorations. the plan would open vast expanses of water along the northern coast of aalaska and along the east coast. the president is expected to reject some new drilling sites. interior secretary ken salary salazar will join the president to discuss this. this plan has been controversial, but we ll see what the issues are. they excluded some of the areas people were worried about. it includes some areas of offshore alaska where shell has some expected huge reserves. you re going to push cap and trade now. right. it s like, you see, i m not totally against hydrocarbons and we know what we have to do, so you almost sort of throw a bone to the people that larry, gosh, i wonder what larry do you know how many times i ve heard kudlow say drill, drill, drill? constant constantly. but it s something that boone pickens has said recently, too. you ve got to do both. we have talked about it many times. one way to wean yourself from foreign oil. you think that you can hook that windmill up to your suv and do you realize my father is a petroleum geologist? i know, i know, but vnlly, you see the day of the don k quinteo. carl is not here to play the other side. we know where he is now. cancun. he made it some type of business story, right? there was a big meeting of oil ministers down there. not spring break? he just happened to be at the hotel where college kids are. no, i don t know that. the federal reserve is set to end its 1.$1.25 million mortgag program. securitization part of this talf program. is this english? yeah, i think it is. the events mark a key unwinding of the massive and historic credit easing campaign that the fed launched in november 2008. there are big questions about whether this will have a big impact on mortgage prices and in particular, this is something they ve been winding down for a while, but this is the official in. also, redwood trust is report reportedly looking to float securities backed by home mortgage loans. the sale may be announced as early as next week. it would be the first sale in more than two years of private scales securities. and a friend of squawk, richard fisher says the central bank will not make additional purchases of treasury debt of bond yields. he argues that the recent spike is probably due in part to fears about rising government deficits. now, the self-proclaimed inflation hawk was speaking in arizona at a conference. he said the economic recovery is gathering at speed as business recovery picks up pace. also corporate news that you ll want to pay attention to today, honey well is raising its guidance. they expect to profit up 45 to 49 cents a share. earlier forecasts were for a range of 40 to 45 cents on the share. the company citing a rise in orders and sales and several of its businesses. honey well allowed the latest company to log a charge against the recent overhaul that is included in the announcement of their where they expect to see their earnings. shares were higher after the bell. yeah. indicated 45.50 to 47 this morning. and that is, you know, the 52-week high is 45.28. i can tell thaw david cody, the ceo here, he s working hard on the company and its results because he definitely is not working on his golf game. that s all i m going to tell you. it s very clear to me. was he there? he may have been, but i ve seen his work on the golf course and let s just leave it at that. and i would say negative time at the range, bunkers, everything. anyway, citigroup is set to sell a stake worth about $32 million in door to door units. primerica, love having that name coming back. when sandy well came up with that name, it was like the worst name ever written for ual came up with allegiance. what was the woolworth one? venitor. but primerica, there s so many ways to screw this up that but it s back, thank you. the ft reports they could let citigroup move $2 billion off its sheets. it s expected to happen after the close today. a complaint accused aig company officials for catastrophic losses. a manhattan federal judge said the shareholders first failed to ask aig s board take action or show why such a demand would have been futile. rio tinto is asking henry kissinger to help rebuild a relationship with china. i guess the rhetoric did heat up a little between australia and china. i m so confused at this point. china yesterday was saying that oh, you know, they shouldn t be getting into this and jumping into this without, really, making sense of the whole thing. rio tinto certainly didn t jump into it, it doesn t seem like. they just rolled over and let there are employees walk the plank. do you remember yesterday we thought google searches weren t going through in china snap? yeah. today the searchers seem to be going fine. we thought that was going to be the next step from china, but maybe not so fast. yeah. but later i don t know. yeah. this is just as unsecretble as everything that happens in china. so i think that might have been russia, communist places or i mean, they re communist. how can you possibly understand? coming from our society, it s hard to understand. i think the s&p was flat, but the dow finished slightly higher. people say this is a pause before we get to the big jobs number on friday. also, it is a big holiday week. friday, markets will be closed. right now, the dow futures are lower. you right now, they re down below fair value. we have the adp report which may gis some clues as to what to expect on friday s big jobs report. oil prices continue their climb higher, up by 51 cents right now, $82.88. if you ve been watching what s been happening in the bond market, yesterday we had kevin ferry on the show asking if this is the beginning of a bear market for bonds. right now, the yield on the 0-user is 3.859%. this is a question that s been asked repeatedly. on the dollar right now, it s higher gevens the yen. it s down against the euro and the pound. gold prices are up slightly, $4.30 to $1,108.80 an ounce. i was reading this from a viewer. do i have to confirm this? apparent the astin martin ceo sent a crate to germany with their four sports door vehicle saying this is how it should be done. maybe lisa knows. she s in singapore. first, though, to london where carolina climenti is standing by. what can you tell us? a very good morning to you. what i can tell you is that this is the last trading day of the quarter, as you know. european bourses are doing well today. the omx-c 20 index in copenhagen is up almost 14% this quarter. the ftse is up 5% for the quarter and had a roller coaster session in the last 24 hours, hitting an 18-month high before ending gains. the big story here, as you know, is the irish banking stories. just as the uk and the u.s. are thinking about exiting the bank bailout, they are putting money into its banks, nama, who is the government aept s bad bank agency is buying low on sports, 81 billion euros from the three largest banks in ireland. it includes the allied irish banks. the discount is deeper than expected as in no end and the government says banks still need 22 billion euros in extra funds. now, the allied irish banks are significantly down over the past few days ahead of this announcement. now they are trading a lot higher. now, last but not least, the french president nicolas sarkozy was in the u.s. and met president obama yesterday. now, they conclude that they agree on a number of issues, including the franco german air space company eads. sarkozy said as long as the bidding process is fair, eads could rebid again for the tanker refueling issues. now, let s take a look at the asian markets in singapore with lisa. thank you so much. markets over here in asia ending the last day of the first quarter on a negative note. the nikkei down just a touch. the nikkei was up more than 5%, making it the best performing market in north asia. we had the tonkan survey out tomorrow on large manufacturers from the bank of japan. it s expected to be positive. it could send the nikkei on its way to 12,000. this is a fairly important piece of data that you need to be looking out. er for. the yen is tat an eight-week low against the euro, surprising since it is the last day of the trading day for the quarter. it suggests long yen positions are starting to be unwound and risk appetite is starting to pick up. jgb is out today ahead of the tenkan. in souththkorea, the kospi down about .4% led by steelmakers in the great er china region. the shanghai composite down about 0.1%. this index, by the way, down about 5% since the beginning of the year, making it asia s worst performing markets for the first of the year. give yourself a pat on the back. over in hong kong, the hang seng off a bit today and the aussie market down almost 1% because of disappointing retail sales data. the rba, another really great story from this side of the world. they re meeting on april 6th. quite a lively department is starting to emerge about whether or not we re going to see another rate hike in north ameri america. but the latest data with the resail sales has been week. i m going to send it back to you, joe. and you can forget about talking to the ceo of porsche because i see a minivan in your future if your kids are getting bigger. that is cruel. i will tell you, lisa, i bought a flex, which is kind of a cool woody wagon minivan. it s better than a minivan. just give in to it. no! it s inevitable. the one minivan that has the seats that flip around, that looks pretty cool. cool minivan, those words do not exist. they do not go ever together. meanwhile, did you see this thing in the journal today that it says that at&t did you read this? which part? at&t is cranking up efforts to improve its network quality as apple prepares a new iphone in the face of complaints by a cnbc anchor. it does not say that. it says by viewers. oh, i read that they were watching yesterday. joining us now chief global economist allan sinai and from key private bank bruce mccain, i love this piece, allan about junk bonds and we wondered at that remember in december of 08, half of the companies were indicating they were going to be bankrupt. and we knew that wasn t true, but did you have any idea that it was going to recover like this? you re talking about american companies, they re great, they know how to manufacture earnings and they re doing a great job. the earnings will be quite good and that s the main reason for slow interest rates why our stock market keeps going up. but have we seen the best days of the fed? i think so, i think so. and the future junk bond is probably u.s. treasuries. the long run outlook for the united states at the moment in terms of its sovereign debt is really very bleak and the markets are coming around to that. you can see the money flow is working away. it ultimately will. the only way out is if we have disinflation or japanese sales inflation. i don t think it s going to happen. 10-year bond is in trouble. i know if you were milton freeman or if you were gary becker or someone like that, health care, a lot of other things happening, entitlement, they might change their whole long-term outlook on things. have you factored anything new into the development in the last couple of weeks in your view five, ten years from now? the policy direction in the united states is more like the uk, more like europe. it s not good. and we were achieving a lot of good societal goals. i think health care is one of those. but no one i talk to nor do we really believe the numbers of the cvo, the ex ante scoring. they re just wrong, after the fact. they need to first establish structural development, not help it. bruce, have you annualized rates over the next five within ten years base odd what our debt service will be? no, we haven t gone that far. certainly, though, we think it s going to be a time when there s going to be slower growth because of the effects of the consumer having to deal with that and debt throughout society. we ve seen some great companies do okay at aa, i guess. will we have to eventually do that, do you think? we eventually have to do which? we ve seen companies that were investment great, work with me, like general electric, will the united states eventually have to deal? will sovereign countries like the uk or portugal or any of these countries region are they going to have to some of them are already aa. are we going to have to deal with that here? sooner or later, they will look at the united states as the sort of debt uncertainty that you have overseas. while they can print money to pay that off, investors are not likely to get repayment. isn t that the key? you can inflation your wait of you of things if they don t figure it out. particularly, we depend on overseas sources forefunding. absolutely. down the line, it seems that there s virtually no way to get out of this easily. what is your number for friday, bruce? we would bet that it s going to be somewhat better than the consensus. i don t know that dramatically so, but i think the real issue of that is how much of that is on the private side and how much of that comes from government staffing increases as you look toward hiring on consensus workers, for example? there s probably about 90 or 100 headline numbers. we re about plus 35 to plus 60. remember, that will be a one-time effect. that will go on for another two or three months and then it will be over. positive number, but still a jobless recovery. thank you, thanks, allen, thanks, bruce. bye, guys. we re going to take a quick break right now. when we come back, we ll have the highlights. welcome back, everybody. the u.s. equity futures are a little over fair value right now. but remember, we get the adp numbers coming out at 8:15. that will give us a good indication of what we might expect on friday from the jobs number. so you could see quite a bit of trading activity around there, depending on the number we get. stay tuned for that. also in our headlines this morning, republican senator bob corker says he cannot support chris dodd s banking bill. in an interview with the wall street journal, corker does say he s not throwing in the towel just yet and he hopes to get back to the negotiatorsing table. just last week, corker said he expected the bill to pass, although he did say he wouldn t vote for the bill in its current status. mike taibi is in massachusetts. this is a situation we ve seen in new york, new jersey and all up and down the east coast. what s happening in massachusetts? reporter: we have been seeing it for weeks, becky. it s a cumulative issue. two weeks ago, this is brookside avenue in winchester, north of boston. they had huge flooding here, record stream flows. two weeks later, they re hit again. you can see that these houses, which are usually about, oh, a couple hundred yards from the average river are now in the river. that s watts. still in a state of emergency here. as we look at the rainfall totals, some stand out. for example, in philadelphia, they now have a new one-year rainfall record of over 62 inches, that s more than five feet, not of snow, but of rain. this is a huge storm. most of the rain is over now. the flooding will still continue as our rivers crest and the impact and the cost of the storm will be totaled up for weeks and months and years. this is record breaker up and down the coast. mike, i could hear the generators behind you that are still trying to take care of this. i lost power for about six days. in some areas, it s even worse. rhode island has been declared most of the state a foredisaster area at this point? yes. people are being pulled out of cars when they tried to get away and escape. moving around in jet skis and inflatable boats. and people, because they have to volunteer to be evacuated, some of them are trying to stay in their homes where in the coming days and weeks, many of them will be declared unfit. for example, two days before this storm hit, he replaced his furnace. that s the human impact on a case-by-case basis. mike, you mentioned that the rain itself has been phenomenal. but before we got to the rain, a lot of areas in the northeast were under quite a bit of snowfall and that melting snowfall exaggerated the problem. yeah, all of that, yeah. so it s the snow, the rain yeah, because it s all of that because the ground is saturated. auto a cumulative effect, as we said before. there is no place for the water to go. the mayor said yesterday, there isn t a lot we humans can do about this. mike, thank you very much for joining us and for bringing that to us. we know this is a terrible situation. mike taibbi will be continuing to follow this. when we return, we ll have more of the morning s top stories. then later, thomas michauk, his firm specializes in a unique business, so we ll get his perspective. sneak around. good morning. welcome back to squawk box here on cnbc. i m joe kernen along with becky qui quick. carl quintanilla, i thought he was going to be back tomorrow. but he ll be back friday. it s not a long of a trip from cancun. first quarter comes to a close today. let s check out the stocks scorecard. so far this career, the dow is up nearly 5%. the s&p up nearly 5% and the russell up better than 9%. after january, that s surprising because we had to have a really good february and march after the russell is up 9.3%? yeah, small caps. i thought this was going to be return to the big caps. that never happened. broken record, broken record. never see that happen. although i guess the small stocks during the they re in bigger declines and bigger drops? yeah, maybe. we have a packed economic calendar today. the adp employment report hits the tape at 8:15 eastern time. analysts are looking for today appears release to show a rise of 40,000 jobs. adp looks at private jobs, not government jobs, so you won t see any of the census noise in this number today. on the agenda, we have chicago pmi and february factory orders. it s all adding up to a lot. you have to watch and pay attention today. let s get to the trading pits right now. jessica hoversen is standing by. jessica, i don t know if you heard our conversation earlier or yesterday morning when we started talking about what s been happening in the bond markets. kevin ferry told us yesterday he thinks this is the beginning of a bear market for the bonds. what do you think? i have to agree. i think the combination of the emphasis on fiscal z s sustainability and the do argue for a bond weakness. and i think the fact that swap spreads are negative reflect the government s taste for liberal fiscal tendencies. for liberal fiscal tendencies, but when do you think this catches up? right now you re talking about a ten-year below 4%. is it the level that ceos get to or is it how quickly it moves there? i think it s more quickly how it moves there because you have to look at mortgage rates and we have the fed exiting quantities tafb easing read now. that is going to push up mortgage rates and it removes the buyer out of the markets. it s going to away combination of factors. we have to consider if interest rates go up too high, you are facing continued economic slowdown because, obviously, as it stands, loan demand is low. it s still i won t say exceptionally hard to get credit, but there is still trouble getting credit and the macro head winds are still pretty brisk. the housing recovery is being quite slow. commercial real estate is sluggish and elizabeth warren indicated yesterday that i think she said almost 50% of commercial real estate loans could be under water in the coming year. we have a lot of refinance activity and i think that the market is looking at these basically as a tidal wave of head winds and if interest rates, you know, get to a point where not only do they cut off economic growth, then you pile on top of macro head winds, i think they obviously will come down again because the economy is suffering and there is always a safe haid haven bid in treasury peps. jessica, i know where you stand sort of. if you haven t seen this piece in the journal, i want to refer you to it. because the president and he got a lot of flack for it. he said remember when he said ronald reagan was a transformational president and he didn t really say bill was. reagan was transformational to the small government side. if president obama wants to be transformational, there s only way one to go and that s away from the transformation affected by ronald reagan, back the other way, and that s shelby steel s piece here. he has some great quotes here that the president may literally be experiencing himself as a mist in the making. he transcends all the things, something that are very bad about politics in the country in the past. but to be transformational, he has to pursue these liberal policies that you re talking about. yes, i gasses, but i think that his ability to gain a place in history as a transformational president tt left will be regulated to the market s abilities to basically stomach these anti-capital moves. well, they won t be able to stomach it. but transforming society, you wouldn t judge that based on the move and the averages. no, but i mean, just the general momentum in the economy. i think that if you continue to see long sustained high unemployment, the housing recovery state muted but look at europe, jessica. they have aup all those things and they are absolutely certain that the give up in gdp growth is more than offset by the safety net and the quality of life and the health care and everything else that goes with the europe kwan style i would argue that europe is moving to the right. they are now. i think that s one of the great ironies of this recession, is that as we see the american politics move to the left, europe, who has been a bastian for socialism over the last 50 or so years is moving more right. and i think what you re seeing in the peripheral nations is a necessary public retrenchment and that will stay. that is a changing culture in europe. it s going to take massive structural changes not only on the political changes and look at how far greece is. they re already there. one in four workers in greece work for the public sector. i do this, jessica, to drive some of our viewers crazy. there s a trading floor behind you and we re talking adam smith and socialism and stuff. we were just going to ask you about libor and the 10-year, but well, let s ask you about the jobs number. we have adp coming out today. the expectation is for 40,000 new private jobs. this has been weird because people are expecting a strong number, so you could see chaos no matter what kind of reading you get on friday for the jobs number. definitely. i think if you look at adp over the last 12 months, it has a tendency to underestimate payroll. so if you see a strong adp number, i think the expectations for payroll will be ramped up higher. on top of that, i think with the whisper number being around 300,000, this jobs number is going too much to overshoot the current market expectations, or at least the reported expectations or we ll have to see a catalyst higher that would be able to push the equity markets above this range that they re trading in right now in the last couple of days. jessica, thanks for joinling us. thank you so much. thanks to the esoteric discussion. i love it. she rises to the occasion. she does. sdmra france and germany may introduce bank taxes for their riskiest activities. germany may announce such a tax today. france is said to be waiting for comments from the imf in an internal report. also, president obama is meeting with french president nicolas sarkozy today and telling reporters that the two countries are working to try and sustain a global recovery. the two leaders agreeing that sustained global growth means rejecting trade protectionism. president obama said he would like to see long solved doha trade talks move forward this year. go ahead. send them in, comments, questions about anything you see here on squawk, e-mail us. coming up, is rim s rise about to run? obliterating. could a verizon partnership with apple be a blackberry buster? the inside line ahead of the company s quarterly report when we return. hi, may i help you? yes, i hear progressive has lots of discounts on car insurance. can i get in on that? are you a safe driver? yes. discount! do you own a home? yes. discount! are you going to buy online? yes! discount! isn t getting discounts great? yes! there s no discount for agreeing with me. yeah, i got carried away. happens to me all the time. helping you save money now, that s progressive. call or click today. welcome back, everybody. futures are barely budgeting at this pour. of course, this comes after yesterday s movement where, again, the markets barely eked out a gain. people are waiting to find out what to expect from this jobs number on friday. we will get an indication of that friday where we get the adp numbers out at 1815 eastern time. right now, we get a check on the news outside the world of business. monica novotny is here with a roundup of the headlines. we ll start in russia where this morning, at least 12 people have been killed by a pair of suicide bombers. there been there s been no claim of responsibility so far, although islamic rebels are being blamed for this week s subway attacks. president obama has ordered federal aid for the state. bringing as many of nine inches of new rain since monday has read to flooding, road closures and evacuations. finally, a nascar related story for you. texas motor speedway president eddie gossage is offering a dallas area country music radio dj $100,000 if he agrees to change his name legally for one year to texasmotorspeedway.com and he has to get a tms tattoo. i was surprised when i heard this. wasn t everybody doing this five years ago? i ll change my name for a year. but you have to get a tattoo. how big? i don t know. but he has 24 hours to decide. and i know that you like me will be waiting with bated breath to hear what this dj decides to do. how big of a tattoo are you willing to get? tiny. like that big. i don t like tattoos, but tramp stamp. i m clean. i don t have any tattoos. but for $100,000. where is your, monica? where are you been, anyway? i took a little break. the kids are on spring break from preschool. oh, really? next week is spring break for us. we re both out. we did a little rainey seattle to see the family. really? yeah. but you didn t end up with a tattoo in seattle, did you? what s that? oh, no. who am i, jesse james? i m clean. i don t have any. you just said tramp stamp. yeah, i did. i know. it rhymes. anyway, thanks, monica. take care. to this pointed, everybody in the e-mail has liked us today. we may have just turned some opinions. i m not making any value judgments about they re not going the like me, either, for agreeing to sell out. exactly. how big is the tattoo? research in motion getting ready to report fourth quarter results. joining us from toronto for a preview, this guy has tattoos everywhere, mike abranski. no, do you have stocks in the ones you like, the ones you don t like? tell me about, is the iphone news? it s weird, but stuff that apple does might have more to do with rimm than stuff rim does? i think it does from a headline perspective. certainly and we re not even sure that verizon is going to see an iphone this year. but certainly it does from a headline perspective, joe. i think people worry because verizon is rim s largest customer. but at the same time, we don t think the long-term impact is going to be that negative. but from a near per perspective, it pushes the stock around. give us some stock of your estimates so we know what to watch for with rim, mike. yeah. i think the big issue for this quarter will be certainly shipment momentum. we re looking for about 11.2 million shipments this quarter and then we re looking for them to guide actually quite high to about 11.75 million shipments. that would be viewed very positively by the street as a sign that r.i.m. is not getting decimated by competitors. also, asps to ensure that r.i.m. is not facing pricing pressure and then margins. so we re expecting healthy margins in the 43% range both for this quarter and for the guide. so i wonder, if you could paint us a picture of the smart phone market in a year or two years or three years, how would you do that? do you sit around and think about things like that? is apple going to take over the world or will r.i.m. be a leading player three years from now? our long-term view is that there will be several players in the market. we think apple, google and r.i.m. are the highest priority possibilities for leadership in that market. and smart phones are eating away or taking share of traditional phones, yet they re still only about a 10% shift. for how long, do you think? well, i think it can grow for quite a while. we re still at a very early stage. it s a new computing platform. and there s all kinds of opportunities for consumers to increase their user experience in businesses. it s still very early. so it can go for multiple years. our view is that five to seven years is really kind of the run for this kind of business, similar to the growth of the internet or the pc. it s hard to imagine what i m like the guy in the 19th century that didn t think we needed a patent office because everything was already invented. i can t do this i don t know how to do all the things that are available now. i think it s not just adding more, but more people using them. there are still millions and millions of people who are doing sms all over the world or uses voice sms phones. here we think about google. in europe, it s all about nokia. but that s really kind of the dynamic. so united states the transition. the big growth comes from the transition of those people to those new smart phones because they want to do browsing, they want to do e-mail, they want to do app. this is a significant global phenomena that has a long tail to it. i watch the way the commercials for the different carriers or manufacturers and they show things people are able to do or not able to do. you can download basketball highlights and talk to your friend about what you re watching on one system and not the other. you ve seen that, right? yes. i couldn t possibly do this. mike, we ve watched more and more consumers disposable income going towards paying for things like texting to make sure they can download stuff. does that number increase or decrease as more and more people get online? you know, there was always a paradox, for example, about cable internet. people thought, where is the money going to come from? i think certainly the recession, which is in slow recovery globally and still pressuring consumers is going to restrain folks from big ticket items, cars, houses, but they do spend on smart phones. asia, for example, is a status symbol. and so they do invest in those areas. and keep in mind that, you know, there s always kind of things to come, like e-commerce hasn t taken off on your phones in north america, and it will. there s all kinds of i think value that consumers will perceive. plus the pure delight of having that platform like an apple iphone in your hand, like a blackberry in your hand to do things that you kind of didn t do before. so there s, i think, still quite a bit of investment opportunity for folks, for consumers to spend in this area. all right. i need i don t know. i need a tutor or something or i need help. thanks, mike. thanks for your help today on r.i.m. how about your tat? i don t know why we can t have an iphone for all of our business e-mail? well, in the beginning when iphone came out with it, they were ge and a lot of big companies weren t convinced that the security was strong enough so they wouldn t allow you to put ge e-mails or information over it. can you now? no, i don t think so. although i think there is beefed up security with r.i.m. so if you wanted t that was the problem. so if you wanted to have an iphone, you could, but you couldn t get any of your cnbc e-mail on it. i watch people in my house seamlessly move from a windows to a mac. 8 years old, never had any training, seamlessly. and i can t. is it intuitive? intuitive. that s the word i was looking for. it s the 3-year-old who can maneuver it better than we can probably. anyway, coming up today a little bit later this morning, we ll be hopping into the driver s seat or at least joe is. the ceo of porsche cars north america joins us for the ride. speed squawk style still ahead. stick around. (announcer) we re in the energy business. but we re also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won t- hurt-a-bit business. because we don t just work here. we live here. these are our families. and our neighbors. and by changing lives we re in more than the energy business we re in the human energy business. chevron. all right. we re here. we re going to have the ceo of porsche usa on. usa today piece. you should know this. just be warned that nobody has any money in any municipalities, localities, counties, states or cities. nobody has any money. and the way to raise money is for cops to write more tickets. so if you re going 40 in a 35, you think that s the cushion that you ve always been able to have? five miles an hour over? no longer. police in canton, ohio, thanks. nice. 2,011 traffic tickets in january versus 450 in the same period a year ago. i m sure it s a coincidence. yeah. it s definitely coincidence. so if you go on theoretically, they re nice. they pull you over. they re usually courteous. but that s a $600,000 porsche i m driving right there. you re very courteous when the cops pull you over, too. i m scared to death. scared straight? scared straight of the police. it s interesting you brought this story up because we have a guest who s coming up in about five minutes. larry adam from deutsche bank private wealth management, chief investment strategist there. in his notes last night, he said he s gotten three tickets from speed cameras. he said if you drive too fast, you re going to get a ticket. and he is saying the same thing. municipalities are looking everywhere to raise taxes. revenue builders. just be aware. be aware. wouldn t it be great? let s everybody drive the speed limit for a while and not let them get any tickets out. they ll be pulling their hair out. that s a good national campaign. isn t it? everybody do everything legal. they make movies about i mean, trying to people flick their lights when they see a cop, try and warn other drivers. it s us against them. everybody drive the speed limit. and don t make any illegal turns. right. they ll snap. they ll be losing it. coming up, we ll have more of this morning s top stories. plus let the jobs countdown begin. don t wait until friday s government release. the adp report hits the tape at 8:15 eastern today. we ll get you ready with a battery of the street s biggest and brightest. rick santelli in studio. david kelly, larry adam, he s the guy who keeps getting speeding tickets. we ll kick things off when squawk box comes right back. inch drill, drill, drill. miss hoover? the floor is shaking. ralph, remember the time you thought president obama set to announce plans for oil exploration off the eastern seaboard. who benefits and how can you make money? stocks eke out a gain. but financials have been smacked around. everything s going to be all right. get ahold of yourself. so is now the time to buy? the vice chairman will tell us where he is looking in the financial sector. and we re counting down to the adp report. it s the final countdown a fresh look at the labor market ahead of friday s big government jobs number and how it impacts your investment decisions as the second hour of squawk box begins right now. good morning and welcome to squawk box. welcome back. i m joe kernen along with becky quick. carl s on assignment. this morning s rundown includes this. the vice chairman of keith and woods checks in on the financials in about 15 minutes. anyone who comes into the financials business needs to practice briette. it s a big banking firm. famous ceo, jim mcdermott, who i miss. anyway, the bottom of the hour, the president s proposal for new offshore drilling and what it may mean for your portfolio. this was before the big financial scanned dadal. this was a tiger-type scandal. the fed ready to end its purchase of mortgage securities. first, a look at this morning s top headlines. i read my name. well done, joe. becky. becky. checking the futures now, again, not budging a whole lot. this is a continuation of what we saw in yesterday s market activity. people are waiting to find out what happens with the jobs number. that s been the big point. but we get a clue of that today with the adp number. maybe that will shake things up. that s at 8:15, less than an hour and 15 from now. our top story, president obama will announce a plan to permit oil and natural gas exploration along the eastern seaboard. the administration has been weighing the pros and cons of offshore drilling since it took office. the president also likely to cancel some proposed oil and gas leases in alaska. we ll have more on what this plan could mean for your oil markets and for your portfolio. that s going to come up in just a little bit. stephen schork and peter beutel will be here. ken salazar on the president s proposals at 8:40 eastern. google blaming a chinese firewall for blocking its internet search service yesterday. it doesn t know whether the move was deliberate or merely a technical glitch. it does say search traffic in china appears to be back to normal. also, dow s president richard fisher says the economic recovery is gathering momentum. but he told a conference in arizona it is not yet time to begin hiking interest rates. fisher also says that the central bank will not make additional purchases of treasury debt if bond yields continue their upward march. he said the recent spike is largely due to rising fiscal government deficits. the adp unemployment report is coming up in less than an hour and 15 minutes. we also got earnings from research in motion after the bell. and the end of the first quarter today. on set with us for the next two hours is david kelly, chief market strategist at jpmorgan funds. that has $445 billion in assets under management. also joining us is larry adam, chief investment strategist at deutsche bank private wealth management. why don t we start with you. you think the consumer right now is in a little better shape than most people give them credit for. i think so. i think everybody realizes that business spending is probably going to drive whatever economic recovery we see. if you look at the consumer numbers, first of all, in march, we re seeing good gains we think in both retail sales in general and also auto sales and also with f we look at consumer finances, we see a lot of refinancing of mortgages. people are using less of their income to finance their debt. the savings rates, which everybody said was going to go up, up, up, it actually seems to have stalled at 3%. people seem to be willing and able to do a little spending. i think there might be a little stronger consumer spending than people think. you don t think this is just pent-up demand and then they ll go back into hibernation? sure. some of it. but people don t realize how low that spending is. a normal year for vehicle sales, we have 16 million units. we re talking a jump between 10 million to 12 million between february and march. still a long way to get back to normal. you are not a buyer of the new normal theory? i think there are major constraints on the economy after the financial crisis which is preventing the v-shaped recovery after a big recession. i still think the economy can grow at a 3% to 4%, maybe more, over the next few years. i think we can do a decent recovery. it just will take a long time to get back to a fully healthy economy. rarery, are you a believer in that? for the most part, but there are a couple headwinds coming up for the consumer. gasoline prices are getting closer to $3 per gallon. i think that could weigh on consumer spending patterns. you do have interest rates moving higher. that could harm the housing market. and, you know, other than that, just spending patterns have changed. we talk about the frugal consumer all the time. just by going on the internet, you can find out where things are. i think consumers are definitely stretching their dollars as far as they can go. that s why you like consumer staples, correct? correct. especially over discretionary companies. i think the valuations are better for consumer staples. they get a lot more of their revenues from overseas. that s a positive and they have higher dividends. as we go further into this rally, you ll need to get that dividend income. david, you re a fan of the consumer discretionary here because of your thought that the consumer will keep spending. you re not worried about these headwinds? i do worry about them, but the key them for the last year has been, look, this turned into a very nasty business cycle. so we re seeing the up side of a business cycle. and in that environment, you see a bit of a bounce. i do think business spending larry, i was very interested in your notes on corporate spending because i do agree we re going to see more corporate spending on technology. i think that really is going to be the driver of this next expansion. you guys both agree on technology, right? well, it s interesting. for technology, you have a dual path. you have consumers upgrading what they have. they ve been talking about the iphone. consumers continue to want the latest technology. and then you have it on the business side. and i think you have both of those parts of the market upgrading, and that will help that sector in particular. how much of consumer spending is going to be completely tied to the jobs picture? and this is a question i ll ask both of you. larry, i ll start with you. well, it s tied to confidence. and if you think that the recovery is going to happen, that will help confidence. you know, at deutsche bank, we have a pretty big number forecast. we re looking for 350,000 jobs to be created this month. that s a pretty big number, and that could help confidence at least in the near term, and that will help again in the short term with consumer spending. the problem, larry, is they keep on pushing up that number. it s like one of these whisper numbers in a company. if it gets high enough, it s almost impossible for the labor department to actually surprise on the up side here. i actually think that if we do get that 350,000 number, i think that that s actually a negative for the equity markets. why? because i think it drives interest rates higher. and i think it brings the fed back into the game a lot sooner than what people are expecting right now. i agree with you there, david. although at some point, larry, you ll want to see strong economic numbers, right? how long do you want to keep putting off good economic news, just come in dribs and drabs? again, i think the selloffs is just a short-term selloff and then i think the realization that the economy is going to have a sustainable recovery, that actually pushes equity prices higher by the end of this year. and that happens all the time. also the first time the fed raises interest rates. usually you see some softness around that first interest rate hike. but ultimately the rally does continue, albeit at a more muted pace. just one other issue i think is important. we ve seen a lot of people leave the labor force in the last year and a half, in fact, record numbers. one of the things i worry about, even if we get these payroll jobs, right now the unemployment rate is at 9.7%. we think it will peak back over 10% before it comes back down. and so it hurts consumer confidence? exactly. even though we recognize exactly what s going on here, on the 6:30 news they re going to talk about bad news for the consumer, unemployment s still going up, is the economy really recovering or is it going to double dip? i can write the headlines. that s where you get the unemployment rate coming down, i think it s going to be hard to sustain a recovery. larry, you mentioned consumer confidence is the most important thing. is that a scenario that would knock the legs out from under the recovery? yes, absolutely. the consumer still two-thirds of the spending here in the states. obviously, that s a very big part of the economy. as far as the unemployment rate, though, we actually think it goes down to 9%. and interesting statistic is that anytime you ve had two quarters of 3% gdp growth and we think this particular quarter you ll get a number well above 3%, that s led to positive jobs growth and you re seeing the unemployment rate continue to fall. i find it hard to argue with you, larry. i m just a little bit worried about this unemployment rate being so low right now. it s not so low. so many people have left the labor market. i m just worried that some of them are going to come back and push that unemployment rate higher. larry, i don t know if you heard the conversation in the last block before the commercial break, but joe was talking about how municipalities are looking for any way to try and raise tax revenue. you said you ve gotten three tickets in the last month or so. from cameras that caught you speeding? that is correct. i mean, they re very easy. one camera can generate, you know, say at least one picture per every ten minutes. and that generates well over $1 million just from that one camera in a given year. how fast do you drive? we re catching you three times? i m a little bit of a speed racer. i ve got to get to work to talk about strategy. you want to get to work that much. you love your job. that s nice. exactly. you got them all on the way to work? not on the way home? no, all on the way to work. you ve got to get up earlier. that s right. someone also wrote in that it s against the law to flick your lights to warn someone? yeah, you can get pulled over if two police officers are set up down road and they catch you doing that, you can get pulled over. fight the fight, people. yeah. controlled aggression. i have too tell you the most impressive thing about those cameras, going 70 miles an hour away from the camera, they can get your license plate perfect. you were going 70 in a what-mile-an-hour zone? it was 50 because it was a work zone. you just drive too fast. that s usually okay on the turnpike. not anymore. it used to be. joe s got a new theory. he wants everyone to drive the speed limit. don t go a mile over because he wants to stick it to the municipalities. someone wrote in, one of our viewers, we ll drive them crazy. let s stop robbing banks. they won t even chase us anymore. good idea. yeah. larry, thank you very much for joining us today. david s going to be with us through the show. we ve got a lot more to talk about. good talking to you. thanks for joining us. comments, questions about anything, e-mail us at squawk@cnbc.com. up next, what to do with your shares of citigroup. the stock has moved slightly lower since the government announced plans to sell its holdings. we ve got the vice chairman of kpw next on the state of the financials. stay with us. time now for today s aflac trivia question. a group of whales is known as a pod. what is the name for a group of owls? the answer when cnbc a squawk box continues. aflac is not how do i fit it in my company s budget insurance. aflac is help protect and care for your employees at no cost to your company insurance. with aflac, your employees pay only for the coverage they want or need. and, the cost to you - nothing at all. if all you know about us is. duck: aflac! .then you don t know quack. to find out why more businesses provide aflac, visit getquack.com. now the answer to today s aflac trivia question. a group of whales is known as a pod. what is the name for a group of owls? the answer? a parliament. aflac. all right. let s look at the futures right now. a little bit of downward pressure but just barely. just about ten points below fair value for the dow futures. again, this has been like treading water over the last day and a half or so. the market s been holding in there waiting to see what happens with the jobs report. coming up in less than an hour s time, the adp report will give us an early indication. honeywell s increasing its outlook for the first quarter as it sees signs of the economic recovery actually taking hold. the company now expects earnings of 45 cents to 49 cents a share. that s up, used to be 40 cents to 45 krnts. the company also said it will log a $13 million charge that s related to the health care overall. we ll talk a little more about that later. honeywell shares have been indicated higher today. the bid is at 45.50. the ask is at 47.52 at closing. financials are up more than 150% outperforming major averages by a wide margin. is now the time to buy? joining us is the vice chairman and president of keith briette and woods. love having you here not to tell us about these individual stocks, but keith does a huge amount of all types of investment banking business across a spectrum of size of different banks, right? we do. year over year, how are things? what kind of percentage gains do you see? we are going forward in the stocks or just in terms of in the activity that you ve done, let s say, in refuse news and investment banking generated from that sector versus last year in this quarter. really right now the industry is raising a ton of capital. that s been the number one solution. there have been really two periods to that. there is the first period during the stress tests of last year where the government said hey, listen. we want all these banks to go out, do some work and create what could be the worst-case scenario and make sure you have enough capital for that. so that was a huge record-setting moment. you helped and those are mainly the bigger banks where markets are higher in the small and midcap. we did participate. there s a second wave of how many i going to redeem my t.a.r.p.? generally the regulators aren t very happy with just having capital redeemed unless somehow or another it s replaced. so there s a great eagerness to not have the government as your partner. so the industry is doing a second wave. then there s another backdrop which is some banks think this is a once-in-a-generation opportunity to go out and to buy other banks. and so they re arming the balance sheet. companies like first niagara or iberia have been out doing that. from a macro economic perspective, isn t there a risk here that the banks are so busy building capital, they just don t increase loans and therefore don t luk lurbricate s happening in the economy. there s a separation between the winners and losers. if you look at a big company in california and then was bought by east west bank, east west doubled the size of their company. stock price went up 55% on the first day after they announced this acquisition. because they had a great opportunity to take advantage in the california marketplace. so really, i think this is more about strategic positioning than it is loans because i think the capacity to make loans is there already. but i think this capital recapitalization that s happening is to set the industry up for the next date. so we still need to see a change in banking attitudes. yeah. basically, what s happened is that if you re a high-quality borrower, i think you can get a loan. but i think the banks really wanted to stop doing the stuff that was a little more risky. and i think the economy has been feeling the effects of that. the mid and small-size banks, too. a lot of those local banks have a lot of commercial real estate loans on the books as well. how much is that weighing on their ability to make new loans? you know, it s really interesting. it s weighing a bunch because the commercial real estate cycle is a later-stage cycle. and if i were to almost line up for you the banks by asset size, you ll see that more commercial real estate is in the smaller and midsize banks. so it s almost by that perspective, they are having losses later whereas a company like u.s. bankcorp, one of the bigger banks, they re through the cycle faster. so i think it s going to have more of an impact on small bank lending because they re later in the cycle than the big banks. even for the small and reg n regional banks, how long do you think it s going to take to get through this problem? three years? four years? we ve asked our analysts to tell us the future. we said make models for 174 of the banks that you follow, and tell us when they return to normalized earnings, okay? so we have some of the bigger banks like jpmorgan and u.s. bankcorp returning to normalized earnings by the second half of 2011. because they paid off t.a.r.p. they ve paid off t.a.r.p. they re through their problem assets sooner. they re able to get back in the game. some of the regional banks and others might not be till 2014. but if you had to pick a median for the 174 that we picked, we think you ve got to get to the end of 2012 to get everybody in. but what we re saying to investors is, invest in the stocks who come out earlier because they re going to be able to have organic growth sooner than the late-cycle banks. elizabeth warren recently said 50% of commercial real estate could be under water in the next five years. does that sound like a realist realistic focus? clearly there will be losses. the question is when you say under water, is it the appraised value or the cash flow? what we re seeing is that in many cases the appraised value has dropped much more than the cash flow. the other thing is, it seems like every time i turn around, i hear about another stressed real estate fund being started. and one way i would describe it and david, you may know this better than i i describe this market as very liquid. the fixed-income markets have had huge inflows. one thing that makes me feel more positive about bank stocks is there s a bid for bad assets. six to nine months ago, uncertainty was high. assuming the worst-case scenario was acceptable. i think it may be hopefully more muted than the worst case. but you have people holding these assets now that might get in trouble depending on how much they leveraged it up. they re going to get left holding the bag but it s safer? there are losses to be taken. and the question is can it be done in an orderly manner? because what we saw in 2008 was disorderly. as long as it s kept orderly, i think the industry can chew through it. all right. is there a ceo at your company? there is. he s a fine man. john duffy, my boss, vice chairman along with andy. the three of us get all the suggestions on how to do things better. very good. we like having you here. yeah. talking about citigroup. they ve got to sell. we ve got to go. anyway. i d love to talk about it. we can, then. because the perception is that you ve got this big overhang, so it s a tough time to really buy as a new investor, you might want to wait or something, but has pandit really done something here? well, i have to tell you. the thing about citigroup is i think management s doing all the right things. the thing is a lot has to be done, okay? so when we asked our analysts to do these models, we don t see normalized earnings until 2014. so there s a little bit more execution risk because they ve got so much work to do. i think they re doing the right steps they can. i think citigroup will emerge as a pretty good company, but when do they get there? that s the big question. the government s selling their stake. i m actually proud of the fact that the government is coming out as quickly as they are. there are a lot of ways there they re unplugging themselves from the industry right now. and i think they re doing it in a responsible manner. actually, government is doing it in a responsible way and making a profit. there s all this talk about losing money on t.a.r.p. in fact, money lost on t.a.r.p. is really aig, the financial companies repaying it don t spread that around because it s much harder for the punitive taxes we re going to put on the bonuseses. that s what we ve got to do. does this pass by may? i think the regulation does pass. how are think going to get a 60th guy? who are they going to get? something will happen. it s not viewed as a political bill. i think this too big to fail absolutely has to happen. what s interesting, industry participants are saying that. that s not a political issue. i want that to happen. it will be more of an orderly place if the government has that authority. all right. great. thanks, tom. thank you. we re counting down to the adp report. stick around. more squawk after this. as we head to the break y trade is now $8.95 tdd# 1-800-345-2550 no matter your account balance, how often you trade tdd# 1-800-345-2550 or how many shares. tdd# 1-800-345-2550 you pay what they pay what everyone pays: $8.95. tdd# 1-800-345-2550 and you still get all the help tdd# 1-800-345-2550 and support you expect from schwab tdd# 1-800-345-2550 millions of investors. one price. tdd# 1-800-345-2550 at charles schwab. tdd# 1-800-345-2550 investors rule. tdd# 1-800-345-2550 are you ready to rule? when we return, a look at stories making headlines. then the president s plan to drill offshore. what it means for the oil and natural gas markets. and for your portfolio. as if we know. anyway, stay tuned. ess. and the startup-capital- for-barbers business. and the this-won t- hurt-a-bit business. because we don t just work here. we live here. these are our families. and our neighbors. and by changing lives we re in more than the energy business we re in the human energy business. chevron. and still no one knows the sun life financial name. 145 years of financial stability that changes today. i hear you re the clown in charge. so, cirque du soleil becomes. .cirque du sun life. because soleil means sun.. (gibberish) i ll take that as a yes. sooner or later, you ll know our name. sun life financial. it looks like the rain is finally slowing down. welcome back to squawk box everybody. still to come this morning, it is a memorable day for the fed. steve liesman will be here to explain why this is such a big day. also, today s big number, the adp report on jobs due out at 8:15 eastern time. a possible preview of the government jobs report that we ll be getting on friday. also at 8:40 eastern time, interior secretary ken salazar on the president s plan to explore offshore drilling. first, though, let s get a look at what is making headlines this morning. if you ve been watching the markets, not a whole lot of movement just yet. markets down by less than four points below fair value for the dow futures, more of what we saw yesterday. the big question, what s going to happen with the jobs report? we ll get an indication of that in about 45 minutes time when we get the adp report. mortgage applications edging higher by 1.3% last week according to the mortgage bankers association. there s demand for new home purchase loans that reached their highest level since october. and it won t go down as carl icahn s better investments, this time selling 13 billion class a shares. this all comes as the video rental company discloses that it is no longer in compliance with new york stock exchange market value requirements. president obama is about to reverse a longstanding ban on offshore drilling. he ll reveal the plan to allow offshore drilling off the virginia coast and expansion in alaska to go forward although it leaves in place a moratorium on west coast drilling. let s get more on the obama administration s plan to expand offshore drilling. joining us now from stanford is peter butell, president of cameron hanover. and here on set, stephen schork, editor of the schork report. unfortunately. maybe next time. no stocks? dumbo. dumbo. peter, since steve made the effort to get in here, he gets the first question. steve, in addition to this drill, drill, drill which i sound like larry kudlow, there s also the bp story on iraq. will any of this do anything to stop this what looks like a climb we re seeing? probably not. but what it does do is it puts a fundamental case for the bearish scenario. those don t work. eventually they do, down to $30, the bubble did implode. part of what was driving that higher was the fact that we saw a significant contraction in the surplus between excess capacity and demand at this point. now, if we look at what the potential what we have off of the coast of the pacific and the coast of the atlantic in the u.s., outer continental shelf, we re talking about 14 billion barrels of oil. now, venezuela, one of our key suppliers, gives us approximately 350 million barrels of oil last year. if we access the oil we have off the atlantic and pacific coasts, we re talking about 40 years worth of venezuelan imports. stop me if you ve heard this before. the leader of venezuela is not exactly friendly towards the united states. and when oil was on its rise from 80 to 90, 100, so forth, the control went out of its way to steer barrels away from the united states. so any access to domestic production, be it off of the atlantic coast in anwar, anywhere we can access it, helps the bears putting excess supply onto the market. that s what you d hear immediately. so far off to talk about that easing? any supply anytime soon. isn t it ten years away at least? as we know markets do not trade on reality but fundamentals. now, we had the opportunity, for instance, to go into anwar in 1995. president clinton vetoed that action. it was expected to take us ten years to get into anwar. we went into anwar in 1995. in 2005, we would have sheen those venezuelan imports coming on to the market. so yes, it is off in the offing. but then again, we re talking about you re talking about 14 billion barrels of oil. world consumption is 30 billion barrels of oil per year. even if we tapped every single drop i m not saying it s a good or bad thing, but if we capped every single drop in the atlantic and pacific, it would keep the world going for at least six months? it doesn t change the equation that the oil is running out of oil. i disagree with that. i believe we have political p peacoil. there was a study there were approximately 1.3 billion barrels recoverable in the dakotas in the united states. ten years later we have estimated $4 billion of technically recoverable oil. what we do not take into account is hike prices are the best cure. when we do see high prices, we see technology and the market. you said that like you know as an economist. how could you possibly know that it s going to end? the nightmare of all the minerals in the 70s, for one-tenth the price you can get even more. in 2008 as the world economy was sinking into a deep recession there were no of course the issues if this was simply a matter of current supply and demand, we wouldn t be at that price. you know for a fact that we don t have nothing in life is certain, but i do elicit one of the single biggest vulnerabilities in the u.s. economy is we are importing two-thirds of the oil we can assume. we re talking about how much the world has left. you talk about anwar, if that isn t the ends of the earth, i don t know what it is. we are drilling a mile down into the caribbean to try and pull oil out of there. we are going to extraordinary levels. why are we drilling a mile into the outer caribbean? we re not allowed to go into the shallow gulf of mexico. if you want to pooh-pooh this no, but look at this as a harbinger. ten years ago we were told natural gas production in the western basins of alberta were running out. they invested heavily because we were going to be relying on foreign sources. less than ten years later, we re running out of their supplies. have we hit peak oil, peter? i don t think we ve hit peak oil yet. if it happens, it s a number of years away. the stone age ended. they hate us and it s a risk to our national security. you better watch out for sean penn when you leave here. one thing that people stephen is absolutely correct. proven reserves increase as price increases. a prove is oil you can get out of the ground at two days price. but this opening up is a very good thing because it will reduce some of our dependence on some of the crazies. and venezuela is not the only one out there. he ll be after you now, too. he carries a shotgun around with him, sean penn. what are you doing? just replacing venezuela, though, is not going to help that much. we ve got to replace saudi arabia, everyone eventually, right? well, you ve got to start somewhere. you ve got to start somewhere. all right. becky wants windmill-driven cars. i want that, too. i want us to take demand. one of the reasons we re so vulnerable, we consume 25 barrels per barrel. that makes us completely vulnerable. i agree completely in terms of technology and i have no problem at all about expanding drilling. my demand is we need to control demand. if something happens in the gulf, we are sunk. yeah, okay, so you do agree with the link. it sounds like you re arguing economically. yes, i want to get more domestic supply. but ultimately vulnerability, it s also about consuming too much domestically. i m in favor of higher cap a standards. gas taxes. but we do need more supply. this is something that has to be tackled at every angle. we didn t get to 147 because it was one aspect of the problem. we really need to address the demand, the supply. i d love to see everything the republicans want to do, the democrats want to do and anything close to energy security. from your perspective, peter, if you look at what s happening on capitol hill, the president puts up an energy plan. will we see it get passed? well, i think this is, you know, potentially a good start. i don t think that it s going to be everything that the republicans want, but i think it s a lot more than most people thought a democratic president was willing to give. you know, we ve had this very, very dichotomous government, that s increase standards and do alternatives. it would be nice to see more nuclear, alternative, wind and more drilling at home. ways to use it. so many things we can do. but we almost have to do them all to avoid another situation like june 2008. it wasn t just that we were running out of supply. there was investment buying by the big funds that pushed it up. but we will have another one of these spikes if we don t start addressing it on a number of different levels. this is addressing it on one of those levels. stephen, would you is there enough to worry about where we re not allowed to still do it? i mean, would you say we should be doing it off california, some of the other places where the president excluded it? we should be doing it every possible way. peter is absolutely right. now, i absolutely favor a green economy. going after wind, solar, so forth. but we cannot this is not a one-sided issue. it has to be addressed in every possible way. one year ago actually, two years ago when we were on the way to $150 oil, i sat in vienna across the table from the head of petroleum analysis for opec. he asked me point blank how come pat united states isn t going into anwar? why are we not drilling? and they re absolutely right. we consume upwards on a per capita basis. then again, we also drive 25% of the world s economy. so that consumption is going to growth worldwide. but we can sit there and try to opec saying that they re not doing enough to drill and get enough oil on the market whereas we re not going to go into anwar. so i m not saying that there is absolutely we shouldn t be doing one and every possible avenue to get more btus onto the market, wind, solar, nuclear or oil. one last thing. i agree that price brings forth more supply. i agree with that. but also demand. what i would prefer to see is a situation where we raise gas taxes and cut income taxes with proceeds. i m not in favor of higher taxes, but i d rather see an economy where we had lower income taxes and higher gas taxes for strained demand. when the price goes up, it shouldn t be going to fund ahmadinejad. that s only part of the problem, though. i mean, you can cut demand, but that s only part of the problem. absolutely. absolutely. this is such a mammoth situation. with china, i mean, as soon as they start getti intin inting ce got something like one carper every 100 people. we ve got two cars for every one person. if they get anywhere near the number of cars we have, if they have one-tenth of the cars that we have, we re going to be using so much more oil that we ve got to attack this from every angle conceivable. that s the equation. we ve got to have multiple equations. i absolutely agree with that. every day you hear another one, like a car. there s a way of dealing with it. natural gas buses, trucks. we ve got plenty of natural gas, right? we ll sandal this. you ve got the jobs report to worry about on friday. bear market in bonds. bear market in bonds. we re paid to worry. that s what keeps us up at night. gosh, you look so young still. but you re only 23. that s the problem, right? twice that. all right, stephen, thank you. thank you. peter, thank you. thank you. when we return, a big day is this me? yep, it s you. yeah. let me start over, give it some feeling. when we return, a big day for the fed as it ends its mortgage purchase program. liesman will tell us what that means for the economy and markets. is santelli really here? yeah, he s in studio. one will leave, the other will come on. yeah, they re going to be sitting next to each other. you ve got to stay tuned for that. history in the making today or perhaps the unmaking. the fed is set to halt its purchases of mortgage-backed and agency securities and senior economics reporter steve liesman joins us with a look at that controversial program. morning, steve. stop the presses. i always wanted to say that on tv. the money printing presses, that is. on november 25th, 2008, at the height of the financial crisis, the fed announced it would, quote, initiate a program to purchase, end quote, the securities of fannie mae and freddie mac along with mortgage-backed securities. those programs essentially end today. treasuries bought $300 billion, not a huge change. they actually had sold off a bunch of treasuries, then restocked it. the agencies were big. they hadn t bought those. $175 billion and mortgage purchases, a quarter trillion. about 107 right now. not sure they ll get there if they stop purchasing today. effectively that ended up tripling the nation s money supply from $800 billion to nearly $2.3 trillion to date. the biggest chunk coming from mortgage priurchases. the fed credit it with mortgage rates and interestingly corporate credit yields as the fed forced investors into riskier credits. also today the fed is ending the consumer credit side of its talf program of credit card loans to commercial real estate part of that program will end in june. so now with the fed getting out, we wait to see if the private sector will step into the mortgage market and whether it will step out of corporate bonds. that s really a question we have here. and there s also other questions about the stock and the flow. was it the stock of mortgages that the fed put aside that have caused interest rates to be down? they will stay down while the fed still holds its big chunk, or is it the flows of the purchases? that would suggest that mortgage rates might rise from here. what s the chance that they ll get back into private mortgages with everything right now? a couple things. it s a nice coupon. if your cost of funds is 25 basis points or whatever it is and you go out and buy 4.5%, 5%, plus the fees on top of that, it s still a decent business. and if it s not, becky, the thinking is the private market will put the yield into place where it s a good buy. and some mortgage rates will be moving up. i think mortgage rates are going to be moving up anyway. how much, david? well, the problem is over the next few years, i think ten-year treasury yields can go back above 5%. you add on to that. over the next how long? over the next two or three years. i mean, already mortgages are up above 5% again. you know, possibly, i don t like trying to time this, but possibly within a year we ll be over 6% mortgages. when housing activity is so low, when mortgage rates move up demand falls off. not so much the demand falls off, but people realize they had better get in because this is a great time to buy a house if you can get a mortgage. as the market eases, i think we ll see an increase in mortgage activity. it s not only the end of the fed doing these things but the tax credit. double whammy to housing. it s hard to say how much will be because of the fed activity. you d like these things to be phased out particularly on the incentives. you know, you hate to see it all end in a month and then another fallback in home sales. we don t know what the problem is. is the taxes or is it because the fed got out? we won t be able to tell. or what distortions the federal reserve gave to the market. and now the bigger question, we ve got to go right here, is whether or not the fed is going to put in the mortgage market? because if you look in its rhetoric, we could come back in mortgage rates go out. that might help the mortgage market but there are questions whether or not it ends up ultimately distorting the market. steve, you ll be back with us. that s a good tease for a conversation we ll have later this morning. adp coming up in 26 minutes. real quickly. 28. 28. no, you re right. i m wrong. it s hard to do math on television. joe does it well. i always flub. up next, health care reform and charges of a vast ceo conspiracy. then we begin the countdown to the adp jobs data. john bogle and william gross. we ve got the markets, the economy and everything in between covered. squawk box will be right back. natural gas is a cleaner burning fuel, yet a lot of natural gas has impurities like co2 in it. controlled freeze zone is a new technology. being developed by exxonmobil. to remove the co2 from the natural gas. so we can safely store it. where it won t get into the atmosphere. exxonmobil is spending more than 100 million dollars. to build a plant that will demonstrate this process. i m very optimistic about it. because this technology could be used. to reduce greenhouse gas emissions significantly. we heard from these companies, one last night and one this morning, andist a subject of an editorial in the wall street journal today. normally i don t cite it, but this one really drives me crazy. apparently a white house staffer told the american spectator that these republican ceos trying to embarrass the republicans and democrats in general, where did you hear this stuff? the wall street journal. no one picked up on this but you guys. but the companies have been talking about that which include caterpillar, deere and at&t are doing what s required by sec accounting laws. they are required because they know that the tax credit will be going away to make sure they fess up and tell their investors and the public this by the end of the quarter which is exactly what these companies are doing. we started this before the journal wrote anything, we had gary locke on. then the journal wrote a piece over the weekend about the interview that we had. the thing that where i m not that excited anymore, this is a tip of the iceberg. this is about the prescription drug thing. this is the effect of this on business is unknown at this point over the next two, three, four, five years. over entire health care legislation. this is the tip. this isn t even what i m worried about, small noncash charges. listen. the democrats chose to eliminate this exclusion. this was an exclusion written in so if you have retirees who you are continuing to pay benefits above and beyond what s required by medicare, that you could take a tax credit from it. it was part of a 2003 ban when they were breaking these things down. when you say you don t cite from the wall street journal you don t cite anything. no, no, i usually don t cite editorials. i usually cite from news pages itself. but this is something that i think is an outrage. and the wall street journal editorial page is exactly in the right. when we come back, more on the adp employment report. this is a special presentation of squawk box, countdown to the jobs report. today, the markets get a big clue. the adp employment report from march. the numbers and the instant reaction at 8:15 a.m. eerp. plus, special guests bill gross of pimco and mutual pioneer jack bogle provide today s market wisdom. mama, i m going fast! and if you have the need for speed what are you doing? the ceo of porsche north america is on squawk box. find out how the luxury sports carmaker is trying to keep sales in high gear. porsche. there is no substitute. start your engines. squawk box begins right now. still like that old-time rock n roll that kind of music just soothes the soul hello element welcome back to squawk box here on cnbc. first in business world my mike do a side shot so you see how far away he is. we are set up normally i would read to this it s not even there. normally there s a camera to my right, but we re setting up for a three-shot here because santelli is going to be here with other guests, right, mac? mac, can you explain no, he s running. he s running. that s why we re on this shot. i m joe kernen along with becky quick and carl quintanilla who is on assignment. our guest host gets to read into a camera right in front of him. david kelly. let s check out the markets ahead of the adp report. you re lucky i can read that. which is less than 15 minutes away. futures right now down nine points with a minus six. down about three points. that has recovered a little bit, becky. it could all change. a little. you couldn t possibly read that far? yeah. you couldn t possibly. no, no, no. i was past that. the federal reserve is set to end its $1.52 billion buying program today. central bank will also complete its $175 billion purchase of agency securities. and in the consumer loan securitization part of the talf program. these events mark a key unwinding of the credit-easing campaign the fed launched back in november 2008. also today president obama will announce a plan to open up offshore areas for oil drilling for the first time. that plan would open vast expanses of water along the east coast, the eastern gulf of mexico and the northern coast of alaska. the president s also expected to reject some new drilling sites that had been planned in alaska. this is a move to some of the environmentalists who were very concerned about this. he s going to be making that announcement at andrews air force base in maryland. ahead of that, interior secretary ken salazar will join us to talk about what s going on. he ll be joining the president a little later this morning as well. honeywell is raising first quarter guidance. the manufacturing conglomerate now expects a profit of 45 cents to 48 cents a share. earlier it was 45 cents to 45 cents. consensus calls for 44 cents. the company is citing a rise in orders in sales and a couple businesses. it s also become one of the latest companies becky was talking about, a much smaller charge related to health care overall. i think it s just $13 million. contrast that with at&t which was $1 billion. for whatever reason, that stock is going to trade at a new 52-week high and will help the dow. no, it won t. honeywell is out of the dow at this point. still think of it as a dow component. gives us a very good read on what s happening in the industrials. yes. it sounds like they think things are improving which is good news for the economy. yes. co cody s been on, i think. did he guest host? i swear he guest hosted. i d like to have him back on. i won t make the golf joke again. i said earlier that he s focusing on the company, that s for sure. not his golf game? squawk s quarterly financial summit is beginning this hour. with us, the bond king, bill gross. pimco has other than $1 trillion under management. and our guest host, jpmorgan chief funds strategist david kelly. i don t think we ve spoken with you. a lot happening and percolating not only in your neck of the woods, but there s no one i d rather talk to about what s going on in the bond market. what do you make of tremors, beforeshocks, what are they? well, there have been a number of shocks, inflation, not one of them, joe, typically the bond market and almost all global markets, but there are other forces going along. you know, i ve said that the bond market has seen its best days. i think it has to the extent that riskless treasuries and its anchor which is commonly known as the fed fund s rate, as you know, has fallen to 0% which, by the way, has produced significant capital gains for three decades. obviously, diminishing yields were down at zero. there s nowhere for that rate to go but up. what the investor can do is to capture a carry in the form of credit risk or interest rate risk or premiums to reduce a return which pimco s opinion is in the 4% to 5% range. just the important point, the historical returns over the past ten years which, for example, for pimco for 8.5% annually which were adjusted for today s lower starting points. with some of the arcane techniques, you just ascribe to keep capturing yield, you d be willing to help an investor do that. you can t do 8.5% anymore. what do you think you re capable of delivering? well, you know, i m fond of saying that it s like the fram oil filter man in a bond market. what you see is what you get. and when you see a 1% two-year treasury and a 1.7% ten-year and a 4.65% 30-year treasury over that period of time, presumably that s close to what you re going to get. so returns in the bond market to the extent that the bond market in total that you ve just spoken to yield about 3.5%. and returns are in that category. a company like pimco hopefully can produce something beyond that because that s been our historical track record. are you saying that we are going to go into a secular bear market in bond? no. but what you can say is that the returns as reflective of extremely low yields will be lower than what they have been over the past ten years, and that s the important point. the bond investor or a stock investor is looking to duplicate returns, you know, over an historical period of time. in the case of bonds, of course, the past decade have been very friendly. not so much in the stock market. you know, to the extent that we ve seen 8%, 9% total returns annually before the first decade, if they re looking to send their child to college on those types of returns, that s going to be a stretch. you have to reduce your expectations. i don t think it s a coincidence from the market in bonds, they went hand in hand. it doesn t sound like great news for equities, does it? well, i mean, it s great news for equities in this sense. and that is i m totally in agreement with bill. it s the current yield that s going to determine your returns for the next ten years. honestly, i m not interested in anything that goes on between now and then. with the sources of returns for a bond are the coupon, that s about it. so we might be looking to 4%, . 4.5% and maybe long maturity to deliver over the next decade. so what about stocks? well, we know the dividend yield is pretty skinny, 2.1% or 2.2 on the s&p 500. we ought to be able to get from these earnings levels, even not given a particularly good economy, maybe an earnings growth of 6%. that would give you a total return on stocks which is a little bit over 8%. and i think that s a reasonable forecast. that s not guaranteed. and i don t expect the pe, the speculative, will take that 8% up or down. so i look to stay the same in a decade. nobody knows what that means. let s call it for purposes of conversation a 4% bond market. when you compound toes those numbers over ten years, you re probably talking about almost 100% for stocks and 50% for bonds. that s a big difference. yeah, i think one thing that s hanging over both the bond market and the stock market is just the history of the last ten years. you know, a decade ago people loved stocks and hated bonds. now it s the exact opposite. we ve seen 26 straight months with more money interesting into the funds. because of that, i think it will take a long time to shake off that fear of stocks. and i would agree with jack that we re going to get not much pe expansion here. but overall, i think the key thing that s going to affect particularly the bond market is the growth and government debt. if you look at the numbers, they re truly staggering. two years ago t, it was $5.3 trillion. it s now $8.2 trillion. by 2020, it will be $20 trillion. if you increase it for the safety of treasuries, in another ten years at a time when hopefully the economy and markets are improving, i think that does push long-term interest rates up and generally move money out of the bond market and towards the stock market. hey, jack, i have one other thought. i mean, a lot of financial payouts, dividends, are depressed now from what we went through. so you might think that maybe dividends could grow a little faster than they have historically. i would think that might be positive. but then the negative i see is that the after-tax what you re left with with dividend taxes, definitely headed higher for a lot of different reasons. that that might counteract anything positive from dividends growing. well, to begin with, and you make a very good point, obviously, i don t think dividend taxes will go back to the level of earned income taxes, salaries and so on. it s an interesting point that almost probably 70% of all dividends are paid to institutions that are tax exempt. pension plans, 401(k)s and mutual fund managers who think they re tax exempt but they re not. they pass those taxes along to shareholders. so they operate as if they re tax exempt. so i m not so concerned about that. i agree with your general idea that after what turned out to be the biggest dividend cut, around 22% or 23%, the third biggest cut, i think, in the last ten years, we ought to be able to get bounce from that, but we don t see it materializing yet. i would guess it would come along. we ve got a hard number with adp. so our conversation with jack, and david will continue in just a couple minutes. as you can see, this isn t your typical midwestern farm. the reason lies six thousand miles away. in japan, where a producer of specialty eggs needed corn for feed. grown to precise standards. cargill identified the producer s needs, then introduced an illinois farmer to grow the exact corn needed. and developed a system to ship it separately, connecting the farmer with a japanese customer. who was very appreciative. this is how cargill works with customers. we ve got breaking news on the way. take a look at the futures now. they re below a little lower but still above fair value. the adp report is about to hit for march. steve liesman is here, and he s got the numbers. becky, thanks very much. adp reporting that march payrolls were declined by 23,000. that s a 24 february was revised down as well from minus 20 to minus 24,000. that compares with a nonfarm payrolls estimate for 200,000. now, adp claims there is no weather effect, there was no weather effect in february, so there wouldn t be a bounceback. remember, this is also private sector so there s no census. no matter how you explain it, it s going to be a disappointment. one bright spot there s total private, 23,000, 24,000 revised. the one bright spot in here, service providing industries, up for the second straight month, up 28,000. we continue incredibly to shed jobs for the goods producing sector and in manufacturing although that s one of the lower manufacturing declines we ve seen. let s bring in joel, chairman of macro economic advisers. joel, this is going to be a huge disappointment, i think, to the bulls in the market. what explains it? i think you re right. it is a disappointment in the sense that it s less than what was consensus forecast was for today s number. and i think the answer to the question there is that the economic recovery has not been long enough yet or sustained enough for us to start generating rapid growth in jobs. we re still a few months away from that. let s talk about the split between small business, big business and large business. across the board they re still cutting jobs especially in small business. i think the distinction you made between services and goods producing is an important one. the service economy looks like it s adding jobs across all establishments whereas in the goods producing sector we re still losing jobs. those losses are still particularly sharp in the construction industry which hasn t managed yet to rationalize its employment situation given the decline in construction activity that s occurred. joel, you made a point in your release here to say that this really confirms the rise or the failure to fall at least in the claims numbers during the survey period. it does. you think that s going to change now? i mean, we did have a bit of a bump down in claims since perhaps this was done. yeah. so while this is a disappointing number today, i can t say it was totally unsuspecting, it really took a pause between february and march. so i wasn t totally surprised by today s number. it does appear claims are starting to edge back and given our forecast of continued growth, i expect unemployment numbers to turn up in the next few months. and i do like the point that you made at the top there, steve, about the difference i expect two see between today s number and friday s number. the bla month last month, we ll reverse it and that s also not reflected in today s number. so on friday, i wouldn t be surprised to see a number of 200 know or so. joel, steve, why don t you guys stick around. that s really interesting. 200,000 even though he right. because you d think this would put you on the short side of friday s number, and joel is really not. let s bring in the rest of our panel. we still have bill gross as is david kelly and jack bogle, plus rick santelli is here from the pits in chicago. rick, you look at the market reaction, this is a disappointment. futures sold off a little on this news. i think it is a disappointment. maybe it will put sanity in expectations to the work others friday. i think this is a good thing, almost preparing the market a little in advance. i think on friday i ll be the only guy on the floor in chicago. there was the sense, the whisper number had been ratcheting higher to 350,000. there s no way that you could see any of that going on, right? well, if three-quarters come off in august, september, october, i want to see how discriminating the market is. is this just going to be, hey, i see a big number, let s sell treasury ands forget the significance of what types of jobs, longevity of jobs. i m curious to see how the market does in a holiday setting on friday. we should put up a charge. we plunged from 386 to 382. jerry? this is important stuff. if you re going to drive the consumer, you ve got to drive employment. employment always lags everything else that happens in the economy. i was concerned because the week hi hours worked has not been the internals, not as good as we d like to see them. on the other hand, we ve started to see a pickup many capital investment. usually that goes neck and neck. it s a chicken. i was much more hopeful. this is a disappointing number. the number suggests maybe we re not paying so much attention to what shows us. this is not as encouraging. the last number, the adp number has continued to lag the nonfarms number. i d be looking particularly they ve been pretty dpood. good. i don t know if you got that. joel was saying that earlier. look at the household number. yeah, the household number s been the odd man out here. that s been the leadingish you auto. we ll see what that s about, then a lot of us will have to look at the strength of this recovery. what we re still seeing is a recovery more about productivity than about activity. that s why i was concerned to see whisper numbers of 300,000 because that s not the sector we re dealing with. we do think that jobs are coming back. i d be very happy. we ve got 150,000 we cheer anything that s positive. what we need to see now is a self-sustaining recovery. you ve got to have a little more investigation, a little more employment which leads to a little more purchasing which leads to productivity. let s get bill gross s thoughts. what do you make of the numbers first of all and then the move in the bond market, too? well, the yb obviously is a bit of a shocker. i knew you were sitting there, thinking about the new normal. you wouldn t take a victory lap on a 180 adp number, would you? there have been breaks, breaks in automobile manufacturing, breaks in employment to rejum old types of levels of 250,000 jobs a month, it was unrealistic unless we create a new economy. and that new economy hasn t been created yet. is this a surprise for you given this market? well, no, the bond market was expecting a number at least in terms of adp to 250,000 to 300,000. that means the economy is slower than expected, the fed may be concerned about raising interest rates so it s a bond market positive from that regard. it also shows you that inside some of the rise in yield s a little bit of expectation of better economic times ahead. we were there is at least a component. i don t know how big a component. i think we might see by the end of the day, people will hedge their bets partly because of what joel said, don t get off the train of a 200,000 print on friday and some sort of rebound that you don t want to go all the way in terms of betting on it. i think there s a component, and i think this reaction proves that. 383,000, the highest. we used to have that at the opening range in the 80s. i think everybody s getting way too insane on trying to make treasuries on the precipice of huge activity. i don t disagree with it, but i haven t proved that we re at the top of the range. but you do that concerns. oh, we do have concerns. we re going to have a band in here today to celebrate the death of quantitiative easing. the new normal is another way to say abnormal. i think it s a stronger than green shoots component in terms of interest rates, but also the end of quantitiative easing. it s provided $1.5 trillion worst 12 months, and that s financed the entire deficit. to the extent that disappears, interest rates will be affected and to my thinking have been affected for the past three months. investors have been anticipated this, and we ve seen a gradual lowering of interest rates. i would expect that component to continue for some time. the other component in terms of inflation and anticipating federal reserve behavior, you know, is more of a. you haven t weighed in yet. you ve seen a lot of economic recoveries. does it come as a surprise to see a pullback? maybe one two, it s tiny which you think about the global system, these tiny changes in numbers that are often restated. i think we focus much too much on the short term and not enough on the long term. the reality is no matter what those numbers showed today, the adp numbers showed today, we have an enormous unemployment problem carefully hidden behind a greatly understated unemployment rate. i guess it s now 9.7% or something like that. stated. but it s actually, if you look at people who have given up looking for jobs, you can get that number up to 18%, 19% ease yi olympic so a fundamental economic problem that suggests the recovery is going to come hard to come by. you talk ed about mortgage-backed securities. what is pimco now doing? are they ready to go back into that government and play a role in that? the same question is what yield do we really enter? our exit has been in the form of yes, selling mortgages, but also moving money from the u.s. to euroland securities which hasn t, you know, had a quantitiative portion. so yes, this will be a yield in a deflationary economy to the united states which is attempting reflation. what that level is, it s hard to say. is it nowhere near the levels rev right now? the u.s. treasuries has widened by at least 35 to 40 basis points to an advantage of pay german investor like pimco. at some point we begin to look in another direction but perhaps not yet. are you talking one or two basis points or quite a bit? oh, no. for a trade of that size, you have to be talking 10, 20, 30 basis points. you know, with kwquantitiative easing, if only an easing over the next several weeks. gentlemen, we re going to leave this conversation here. steve liesman, rick santelli. we ll continue our conversation with david kelly, jack gross and david bogle. topping today s stories, the adp employment report just showing the u.s. economy lost 23,000 private jobs in march. that release came as a surprise to markets. the polled forecasters had been expecting an increase of 40,000 positions. we have seen a little selloff in the market. right now i think dow futures are down about 23 points below fair value. in other headlines this morning, president obama will announce a plan today to open offshore areas to oil and natural gas drilling for the first time. this is a reversal of a longstanding ban on most offshore exploration. interior secretary ken sal zal will join us to talk about this proposal. also, we ll go behind the wheel with porsche. 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it. td ameritrade. independence is the spirit that drives america s most successful investors. announcer: trade commission free for 30 days plus get $100 cash when you open an account.  we ve got some news just crossing the wires. boeing is the latest company to announce a charge related to health care reform. boeing saying it will take a $150 million noncaps charge. it says that will reduce first quarter earnings by about 20 cents a share. as you can see, that is having an impact on the stock this morning. that stock closed yesterday at 73.53. the bid now at 72.22. the ask at 73.48. again, this is the latest of a number of companies that have told us what this is going to mean for that change in the tax rules. what that means, they re required to tell us about this in the financial quarter, that quarter ends today. we expect to hear from more companies. some minuscule item about prescription drugs in the health care plan. it was changed back in 2003 to try to keep companies from dumping retirees on the prescription drug promise. it is adding up. at&t, $1 billion. compared to the health care reform this is going to have on businesses, this is like a couple basis points. that s something we don t know, but we do know what this means. stay tuned. all right. let s get back to our financial summit with bill gross, crow cio and founder of pimco, jack bogle, our guest host, david kelly. and gentlemen, we re going to be saying good-bye to bill and jack in just a moment, but we d like to get your final thoughts. if you had one idea you wanted to leave investors with based on the adp numbers today, where would it be? becky, less as opposed to more. we should expect a new normal instead of an old normal. we should acknowledge the fact that the private economy is delevering on a global basis and that that means that the consumption and household income growth will be less than it has been in prior years, and that means ultimately in terms of risk assets, whether it s stocks or high-yield bonds or even bonds themselves, that those types of returns will reflect a slower rate of growth. in other words, instead of 8% to 10% in terms of returns for risk assets, you should expect 4% to 6%. and in the bond market, as i ve suggested, you should probably look for a 4% to 5%. so reduce your expectations. jack, you are not quite as riled up about what you see coming out of washington. you think washington needs to do more on some fronts including financial regulatory reform, correct? yes indeed. i would be in the camp that would say bring back glass steegle. i say let s have an independent consumer finance agency. and i would also say let them look at the mutual fund industry. this industry is not free from considerable abuse. and certainly we need derivatives to be out in the open, all those kind of things that are hopefully going to get through that bill. it s hard to see these two parties contending with each other on the fundamentals the fundamental need for financial reform, but i guess they re so polarized that it s going to be hard to get any intelligence. it will probably be diluted, and that s too bad for the country. david, very quickly what you think from these adp numbers. what we re seeing is an economy that is gradually improving. don t miss the tide here because if the economy gradually improves, 3% gdp growth in the first quarter, maybe 4 to 5% in the second quarter. if this companies, we will see the jobs. that s going to gradually change attitudes, and that will grad l gradually push interest rates and stock prices. i d still be overweight stocks and underweight bonds. and don t miss out on that by being distracted by all these other issues. david is our guest host with us for the rest of the program. thank you very much for joining us for the financial summit. great to be with you. are we going to porsche? porsche at the new york auto show this week unveiling the world s first hybrid race car. joining us now first on cnbc is president and ceo of porsche cars north america. it s good to see you, sir. good morning, joe. good morning, becky. new world we re living in. you think porsche, you don t necessarily think a muscle car like one of the old, you know, z-28s or something, but certainly speed. you don t think economy necessarily. but you need to. and i guess hence the hybrid version, some of your best-sellers. absolutely. we have to sustain the economy, too. it s a very important day. we are launching the new family of the cayenne, new technology, completely new lightweight system, a new completely revised interior and exterior design and most important, as you said, a completely new innovative technology for the kns hybrid. the cayenne was a huge success when it was introduced. maybe not everyone thought it was the porsche absolutely. should be going. absolutely. we introduced cayenne in 2003 and since then we found nearly 100,000 customers in the united states which is still the biggest market in the world. we sold about 300,000 cars in the world. and we expect to go even further with the new cayenne generation. i think cayenne sales held up well in the downturn. maybe the carrera and others didn t hold up as well. is the luxury buyer back? yee, we ve seen improvements. it s very important that we show to our customers that we are working hard for the future of the sports cars where social acceptance is very important. this is exactly what we are doing with our new products. we have shown in geneva. this month three new concepts. it s a new race car with hybrid technology. we have shown a prototype of the spyder. the future is real for the sports cars and of course they re hybrid. huge improvements in terms of consumption and fuel economy. roughly minus 23% in terms of consumption. strong improvements, but we have strong plans for the future. this is david kelly. so when you say there s a 23% improvement in consumption, so how much gas does this new sports car use? so far we haven t gotten the final number for the new cayenne. but if you come see the new cayenne s hybrid, basically we are providing a car with a v-8 performan performance. so it s a huge improvement for that car. i have a feeling i can feel less guilty about the environment as i drive this thing down the highway. absolutely. it s very important to make sure our customers know that the sports car. he puts spice in the cars but to be ready for the future. how is the panorama doing? has it lived up to expectations? is it going to be a permanent addition? and is this the final version, or are you still working on what will future years look like? is this the car? in the united states it was introduced in october. and since then we have sold more than 2,500 cars in the last six months, which is a huge success and intake is keeping strong, so we are very satisfied with this unique concept. our customer seems to like it. we got more than 80% new customers with this new car. all right. thank you, detlev. we appreciate it. number one in dependability, too. number one in dependability. absolutely. jack daniel s, he s my guy. i figured i d say his name. thank you very much. bye. all right. the white house making a major decision to open new offshore areas to oil and gas exploration. interior secretary ken salazar will join president obama today to make this major announcement. but he joins us right now from washington. and mr. secretary, thank you for joining us this morning. good morning, becky. there have been a number of news reports that try and get to the details of this announcement. the best i can tell so far maybe you can tell us if this is correct there will be new oil drilling allowed about 50 miles off the coast of virginia. there will be areas opens up as well as in alaska. but the proposed leases in bristol bay, those would be cancel canceled. is that a fair assess snmt we re taking a new direction on oil and gas development in our oceans. it means both having protection as we re doing in bristol bay up in alaska as well as the eastern gulf and off the atlantic. it s both development as well as kefrgs. conservation. obviously, we have people that point out that state we need energy conservation in this nation. you believe that plan should include more drilling where possible but also conservation steps? absolutely. president obama from day one has said we need to move forward with the conservation plan, we need oil and gas but also move away and develop new technologies such as hybrid vehicles. so there s a lot going on with the president s agenda that s all part of the comprehensive energy plan. can we expect to see cap and trade pushed forward any time soon? our announcement today is about the administrative authorities. there is great conversation going on let by senator kerry and senator graham and snore le and senator graham and senator lieberman. do you think your case presenting an energy plan that includes cap and trade was weakened or strengthened by the passage of the health care legislation? i think what the health care legislation showed us is that anything is possible. certainly no one ever ought to doubt this president s resolve. he makes a decision that this is for the american people, we re going to figure out a way of making it happen. and in the case of energy and climate change, those are moral imperati imperatives. they re about national security and they re also about protecting our children from the dangers of pollution. so i think, you know, we re in a good place moving forward. it won t be easy. nothing in washington is ever easy. these issues are not going to go away. just a few months ago business leaders were convinced. were they dead wrong on that count? i think cap and trade is not in the lexicon anymore. what people are doing is saying we need to move forward and address energy independent, create jobs for the people of america and deal with the dangers of harming our children and our grandchildren. it s senators who have been working on this package will put forward proposed legislation that will try to address those issues. a number of investors and ceos have been hoping to see energy legislation that would allow more tax credits for energy sources. yesterday we had mike splinter join us. we have talked to boone pickens. is there money left to still allow for those, or is the money dried up at this point? i think great incentives have already been put in place in the recovery program. that s in terms of how we re looking at energy these days. as we move forward with the package, there is going to be room for natural gas and some of the other ideas people are talking about. i think there s a great hope that we ll be able to break through the partisan gridlock and move forward with democratic and republican support. secretary salazar, this is david kelly here. getting back to the announcements you are making today, how much extra oil do you think is going to come from these fields feeding into the u.s. economy, and how quickly will we get it? david, each area is different. in the gulf of mexico, there will be very significant production in what we call the western and central gulf. in the eastern gulf which has been more controversial, we re still going to stay 125 miles off the coast of florida, but we know there are significant resources there. in the atlantic, the information there is 30 years old, so there s a lot of information that has to be developed. we re confident there will be additional oil and gas that can be brought into the energy portfolio for the country. from the ground it s going to be a few years, though. yes. secretary salazar, thank you very much for joining us and thanks for hanging out with what seems to be like a windy exterior out there today. thank you, becky. again, secretary salazar who will join the president later today at andrews air force base to roll out this proposal. more coming up today. more of the top headlines of the morning and reaction to this morning s adp report. we saw a little selloff in the stock market. we ll talk more about that when squawk box comes right back. the stock of the day is on the way. is it in your portfolio? find out in just a few moments right here on squawk box. tdd# 1-800-345-2550 that s why, at schwab, tdd# 1-800-345-2550 every online equity trade is now $8.95 tdd# 1-800-345-2550 no matter your account balance, how often you trade tdd# 1-800-345-2550 or how many shares. tdd# 1-800-345-2550 you pay what they pay what everyone pays: $8.95. tdd# 1-800-345-2550 and you still get all the help tdd# 1-800-345-2550 t you expect from schwab tdd# 1-800-345-2550 millions of investors. one price. tdd# 1-800-345-2550 at charles schwab. tdd# 1-800-345-2550 investors rule. tdd# 1-800-345-2550 are you ready to rule? in the north of england to my new job at the refinery in the south. i ll never forget. it used one tank of petrol and i had to refill it twice with oil. a new car today has 95% lower emissions than in 1970. exxonmobil is working to improve cars, liners of tires, plastics which are lighter and advanced hydrogen technologies that could increase fuel efficiency by up to 80%. all right, welcome back to squawk box. the adp employment report was out earlier this hour. it showed that the u.s. economy lost 23,000 private jobs in march. that did come as a little bit of a disappointment to the markets. polled forecasters had been expecting an increase of 40,000 positions, and that s why you saw a little sell-off in the futures. in fact, if you look right now, the futures are near their weakest levels of the morning, down about 45 points below fair value. also, news crossing the wire in the last ten minutes or so, boeing is the latest company to release a charge related to health care reform. they will be taking a $150 million noncash charge. they say that will cut into first-quarter earnings by about 20 cents a share and has that stock under pressure. bid s at $72.12, ask at $73. the equity markets may be closed on friday, but squawk box will be live from 6:00 to 9:00 a.m. it s going to be fantastic. you re going to want to tune in. huge. going to be big. oh, you guys have any guests that are we have a lot of guests. you do? we have a packed table all morning. you do? this is the number. this is the job report. the jobs report. we re coming right back. all right. take a look at the stock we re not doing that. that was a tease. how come we re not doing it if the guy says it? let s just say it s honeywell. next block. that s coming up. it s a tease. our guest host is david kelly, chief strategist at j.p. morgue funds. talked about so many things today. what do you think is the highlight of what we ve learned? that adp report has really got everybody scratching their heads about private employment again. yeah, and it s got to come back slowly. i think the biggest thing to realize, we heard bill gross earlier on talk about the new normal, and it s very important to realize that we had a huge recession. i mean, this was a 7% decline or sorry, this was a 3.8% decline in gdp. normally after that kind of decline, the economy bounces by 7% or 8% in the first year. we think we re doing about 4%, and that s a new normal, but 4% is more than people are banking on. that s a real recovery and we think we are basically on that track. people look at all the distortions in financial markets. people need to think about the distortions in their own minds, because people are so conservative. we spend so much time arguing about a few basis points in the bond market, and the truth is, the stock market is up 70% from its low. so, i think people need to look at the balance of their portfolios, make sure they re allocated appropriately. up at least 50% from the new normal, anyway. next week we will have the stock of the day. stay with us. already gave it away. you did? [ clinking of plates ] you still day-trading stocks? yeah. i switched to commodities. there s even more volatility in markets like gold and crude oil, and i can go long or short any time, with no special rules. commodities? yeah, and commodities always have value, unlike some stocks.