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tv   Squawk Box  CNBC  April 4, 2012 6:00am-9:00am EDT

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have so much to get through today with him. at the top of the next hour, eddie lampert and david bonderman. >> they don't come on ever. >> are you sure? >> yeah. >> they've never been on. >> they are today. >> who says they're coming today? >> so i'm told. you think we're going to have empty seats at 7:00 a.m.? >> i think that's the first time either one of them -- >> has done television. >> this is going to be huge, joe. >> it is. >> i'm truly excited. we tweeted last night about this. >> you tweeted her? you tweeted -- never mind. you tweet -- >> yes, we tweeted everyone. >> 600,000 people when you tweet. >> a lot of people. dude, where's my car? you know who the undisputed leader of tweeting is, ashton. >> but you're second, i think. >> no. >> he's huge. >> we've got all these other guys -- >> we do. along with the lineup we've mentioned, we have a member of the exclusive squawk icons and rebels club, sir richard branson joining us at 7:30 eastern time.
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this is just the beginning, the tip of the iceberg today. we have a huge lineup for you coming all through the morning. >> major players. guys associated with richard -- in some way or another. it's amazing who is going to be on the show. >> it is. we're going to need the three hours. we're going to try and make it work and -- >> yeah. taking additional time. we're going to cram it all into our three hours this morning. >> okay. before we get to more of our guests this morning, we do want to tell you about some of the top stories. jobs obviously is going to be front and center on the economic front today because the march adp report comes out at 8:15 eastern time this morning. forecasters say the economy likely added 200,000 private payrolls last month. today's release will offer insight into the labor market ahead of friday's all important payroll. tomorrow is a market holiday, but "squawk" will be here for a
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special presentation live from 7:30 to 9:30 eastern time to make sure we get the jobs report to you. >> i'm going to go out thursday night. >> from 9:00 to 9:30. >> it's half an hour, but 7:00 a.m., i'm not going to know how to act. that means theoretically and plus we don't have to do a lot of -- you know, it's the jobs report. i may prepare nothing. i know how -- i may get here at five till 7:00. >> you're going to play -- >> you have make-up -- >> i'm going to pull -- exactly. you don't -- >> if there's traffic, you fly over. >> i don't worry about traffic. >> in global markets news this morning, we've got a couple of things on tap. the ecb holding a policy-setting meeting today. analysts expect rate to hold at 1%. germany has been flagging an exit to the crisis fighting mode. economists say it looks increasely fragile and concerns are growing, again about spain.
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in corporate news, moody's is downgrading the credit rating on what? on general electric? a notch to aa-3. that's moody's fourth highest downgrade rating. cites risks associated with -- >> s&p would you say? >> i tried something. i'd give it 49% of my best to spin it a little. cites risks associated with ge capital. moo moody's says because of ge capital's large size, it still has to rely on funding from financial markets even though it's much less than it was. if you recall, andrew, the company never wanted to be that dependent on the cp on the overnight funding. they've done a lot, but now the ratings agencies are paying more attention. moody's argues these markets were not reliable during a recent credit crisis, but says the company's industrial businesses, at least, are
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strong. in a statement a ge spokesman says ge's liquidity and capital position have never been stronger. moody's actions were based on a change in their own methodology rather than our credit position, which has only improved in the past few years which is what my impression was of -- i thought this would have been, but probably a guy -- >> andrew williams. i know andrew very well. >> oh, i do know -- he's the -- >> for tim geithner. >> he's robert downy jr. >> he does have a little bit of robert downy jr. style. >> maybe he's got the current robert downy jr. lifestyle. i know that guy. he's hosted us, i like that guy. he's one of his guys. >> he's now. and this is interesting stuff. the cftc, this is ding -- to me this is personally interesting. the cftc is set to penalize jpmorgan for actions linked to the demise of lehman brothers at
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the height of the 2008 financial crisis. the "new york times" deal book reports this morning that the regulator is expected to file a civil case against jpmorgan this week. the cftc is going to accuse the bank of overextending credit to lehman for two years. this is almost ironic. >> what? >> up until its bankruptcy. jpmorgan is expected to settle the matter and pay a fine of about $20 million. this would be the first federal enforcement case resulting from lehman's down fall. >> you extended them liquidity for two years and didn't kill them off sooner? >> the great irony of this case is that they are arguing that jpmorgan extended them too much credit, actually counted to make a parallel to mf global oddly enough that they actually counted customer money at lehman brothers as part of lehman's overall pool of collateral and they shouldn't have done that. >> so in other words, go for the quick and early kill, don't ever let a bank kind of extend its way along and think we're going
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to make it up and be okay. in other words slit the throat immediately? >> that's the argument. the other argument is it's unclear whether or not jpmorgan knew that the collateral that lehman brothers was using was also customer money. >> if nobody was ever given any grace periods, if no bank was given any grace periods through the financial crisis, where we would be right now in terms of banks survived? >> i have no idea. to me this case is -- i don't want to say it's silly, it makes no sense. the irony is rich. also, if you remember, lehman brothers estate sued jpmorgan for effectively putting them out of business and putting them out of business too fast. this is the exact opposite of that. >> that seems crazy to me. if you went through some of the toughest times where people had issues at the close of business and you immediately went for the kill them all the way, i don't know who would be left at the end of the day. >> it is an only $20 million fine. so i'm not -- i'm not arguing -- >> it's the principle. it seems crazy. >> it's very confusing.
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let me tell you about another story you probably expected to see. groupon is now being sued by a shareholder who is accusing the company of misleading investors about the financial prospects and concealing weak internal controls. you knew this was going to come. the lawsuit is seeking class action status and this announcement comes days after the online coupon website unexpectedly revised the results of the first quarter as a public company. internal weakness in the internal controls and you can expect to see lawsuits like this taking place. burger king plans to go public again. it was taken private by 3g capital management less than two years ago. the hamburger chain plans to list kbagain with justice holdings. co-founded by the newburgher king company has expected the list in the next two to three months. i'd like to know -- >> this is one of the very in and out but also a -- this is
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one of these entities where people -- it's a blank check operation. people invest into something. this was started by martin franklin. he's done this many times before. a lot of people thought they were historically scams and people would then, they'd use it to back into the public markets, in this case, going to the public market without an ipo. it's a different issue. at this point, he was part of justice holdings. martin franklin has done this successfully in the past couple of years. he's proved the model may not be a scam, or at least people were anxious about. but american apparel, by the way, was something used that hasn't worked out. >> do you have a feeling for who made you more uncomfortable? ronald mcdonald or the king? >> the king with the mask? the more recent modern -- the modern king -- >> the one with the mask. >> i was older. >> oh, you were?
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>> i mean, ronald mcdonald i was a kid -- >> you're talking about -- >> is the creepy king that everybody gets skeeved out or ronald -- >> ronald never creeped me out. >> because he does good work. but clowns don't -- a lot of people don't like clowns. >> you're thinking -- >> no, i'm not. don't even bring that up. i'm thinking kramer on seinfeld. >> i thought you meant jim cramer. >> no. >> okay. you see that. >> that doesn't creep me out. it's only the music. ronald mcdonald -- >> he's over our shoulder staring -- >> i have warm thoughts of him as a kid. >> and he does good work. just clowns in general. >> the hamburglar. >> they didn't cry? they do have you as a father. >> they kind of liked it and they probably think i'm a clown. i know you do. >> i'm going to read from this eventually. did you read this yet? >> the "wall street journal"
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op-ed page? i imagined in three hours -- >> you saw obama's speech yesterday. he's sharpening up his rhetoric for the campaign. but did you know about the gop's plan now, apparently grandma and grandpa according to the president yesterday are going to be drafted for the "hunger games." they're going to be out there actually fighting. i didn't realize that modern republicans are so radical they oppose research and care for alzheimer's, aids, autism, down syndrome, deny education and food to all children and their mothers, pave over yellowstone and back fill the grand canyon and want to reverse, actually, since they oppose rail, they want to reverse all of the 19th century industrialization. they also want to hand $150,000 to every millionaire and a million dollar check to every billionaire and a billion dollar check to ever trillionaire. it was all about paul ryan. this little guy that no one ever heard of before is the new -- is
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the it boy. he's the new anti-christ in this administration. if there's a -- this is great. if there's a curve for presidential invective, they hit it yesterday. trojan horse, social darwinism, the president's depiction of the formally obscure house budget chairman as a political monster. is itself telling. >> do you think paul ryan could be v.p.? >> i would -- i would -- couple of rs. the logo we got for rubio we can't use. the r.r. logo. >> i've seen his name come up in a couple of places. >> he's competent. >> he's interesting too. >> he's got the new haircut after we, you know, i think carl used to talk about it, remember? >> remember, though, they asked him to run for senate, this campaign to try to get him to run for senate. he said he wanted to stay where he could do the most work on ways and means committee.
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>> this is a nasty editorial. mr. obama's conceding -- >> where did he say all this? >> a speech yesterday. mr. obama's conceding he can't run on the economic recovery, stimulus, health care, green energy, or any of the other grand liberal ambitions. all either unpopular or failures. >> i will say both sides have made this out as a campaign to capture the future. and there's going to be a very different path for the future depending on which candidate is selected. mitt romney had some very similar things he was saying how he would like to lay this out -- >> he won three -- he won all three last night too. are you willing yet to engage? >> to look at him -- >> well, not engage, but you figure he'll be the guy to beat, right? >> of course he'll be the guy to beat. who else could be -- >> do you have a strategy? what do you think they're going to say about him at this point? rich guy? >> i think they're going to run out of things to say. that's my sense -- >> and you would pick ryan?
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>> i think -- i find ryan very interesting. i don't always agree with him, but i think he comes to the table with real ideas. even though i think some of the ideas are too -- for me are too -- >> too draconian, too social darwini darwinism? >> but he's willing to put them on the table and have the conversation. >> we've got to deal with some of that, right? we've got to figure out a way. all right. so you took so long to read it, they switched it. >> they switched it. >> gave it to becky. >> and it is for -- i was going to say bertha, it could be bertha coombs, but it is becky. >> you may have heard yesterday about the multiple tornadoes that hit the dallas-ft. worth area yesterday, there were hundreds of homes and businesses that were destroyed. the national weather service is going to be in the area today surveying the damage. cnbc's bertha coombs joins us from lancaster, texas, one of the hardest hit suburbs there. and sounds lie they still don't know exactly how many tornadoes touched down. >> reporter: right. right now the preliminary estimate, becky, is somewhere in the range of 13 or so. but those crews from the local
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national weather service are going to be fanning out over the area starting at 8:00 local time. take a look at this home. this is a brick home and it's pretty much destroyed, the timber has come in. we're not sure where these cars came from that are now in what probably was the front area of the living room or so. even when you see these cars move to match boxes, the most incredible video was at the schneider national depot in dallas. just south of dallas. that is a big hub for this wisconsin-based company. their 7-ton tractor-trailers were tossed around like match stick toys and at this point, the company says the miraculous thing is because they had a little bit of warning, people were able to get safety and get some shelter and no one was hurt. of course, an awful lot of damage there. as far as the homes, the red cross here just in lancaster
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alone, they're estimating about 650 homes. lancaster, arlington, another community that is heavily damaged. both of them declaring states of emergency. and there's several other communities where these cells, super cells touched down are going to be assessing that today. the biggest hangover nationally is going to be dallas-ft. worth airport, american airlines yesterday canceling some 450 flights. so that is going to ripple through the national system. what's interesting at the airports, they were worried that one of the cells might touch down. but it wasn't a tornado. but hail that caused an awful lot of problem, airport officials in dallas saying that a number of planes were damaged by large hail. over at love field southwest, didn't report any damage to planes, but they also grounded nearly 50 flights, so that also is likely to reverberate through travel today. unclear when they're going to open. of course we're going to keep you updated on that situation.
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back to you in the studio. >> all right, bertha. thanks. let's check on the markets this morning. not a great day yesterday. i saw some interesting stuff from -- don't always cite doug when he writes in, but he did mention maybe this great liquidity-driven rally is starting to subside. aren't you getting the feeling that qe-3 is -- >> yeah, david malpass wrote -- >> love richard fisher. he talked to us about tbt. do we call it tbtf? >> is that the book or the idea? >> both. >> it really is both. did you see his op-ed piece in the journal? >> he doesn't -- i struggle with this only because he doesn't have an answer for how to do it. >> i know. >> i wish he'd offer up a framework for how to think about how to break them up. >> nobody really has a good sense of -- >> or how to cut the -- some of the things that make it so systemic. couldn't you stay big if you weren't systemic? if it wasn't all interconnected
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where you could take down the whole system. if you could be big to compete globally but where you weren't systemic to the system. >> this is supposed to be the idea. >> too systemic to fail. >> that's supposed to be the living will. if you have a living will and a way to take out something -- >> but people say that we don't. >> i know. >> it won't work. down 65 yesterday and we're down 100 part of the day yesterday and looks like -- >> the interesting thing was that both fisher did tell us what would be in the fomc minutes. both of them gave us a pretty good idea of what to expect from those meetings yesterday. >> there was a risk off yesterday. i think oil was down, gold was down. >> pretty much across the board. >> we'll see what happens today. right now time for the global markets report. ross westgate in london. and good morning. >> hey, becky. good to see you. we are down on the session lows right here in europe three hours
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into the trading day. only around about 40 stocks in positive territory out of 600 on the dow jones stocks 600. we started off the day in negative territory. down on the service side for the eighth month in a row, although they were a little bit stronger than the flash numbers. what's really taken us down to losses on the ftse 100, nearly 2% the dax down yesterday and 1.5% lower on the cac, the result of a spanish auction this morning. it was across three issues, three, four, and eight-year for the spanish debt sale. but demand wasn't that strong. they were looking to raise a maximum of 3.5 billion, so i say small numbers, only raised around 2.6 billion. yields across the board compared to the last time we auctioned those particular maturities. and as a result, the key thing here, spanish yield now up to nearly 5.7%. we haven't seen those yields in ten years since the beginning of the year early january.
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at the same time, cds spreads in spain have widened out to levels we haven't seen since last november and the ibex, as well, back to levels we haven't seen since the autumn. the take away is that investors now are just prepared -- are not prepared to hold spanish debt without a higher risk premium. and so that is just starting to infect all the other asset classes. it's also driven italian yields up a little higher this morning and also driven euro/dollar down to fresh lows, as well. as far as the other yields are concerned. a euro/dollar, remember, only a week ago, we were up at the upper end of the range trying to get up to 1.34. that's been the driver this morning. we did have good data out of the uk, pmi services data came in better than expected. the third pmi this week that is better than expected, 55.3, which suggests the uk will not enter -- that forecast looks to
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be wrong. 1.5867, the dollar reacting to the minutes out from the fed. we've got to keep our eyes on the spanish yields today as they continue to rise and cds, that story hasn't gone anywhere, particularly as they revised up in last week's budget the debt to gdp ratios are going to be higher in 2012, nearly 80% than they were at the end of 2011. back to you guys. >> all right, wes. >> wes. that's as cool of a name. >> ross westgate. >> you ought to do that occasionally. i've -- i asked carl -- i just think it's cool to be able to interchangeable really. and your name isn't really ross either. we know that. >> i like ker jonan. >> that's not bad. >> kind of like pig latin. >> i called him wes rossgate.
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>> is your name alexander? what is it again? >> it's -- alexander ross westgate. >> oh, okay. >> what would becky be? >> becky doesn't work. quickie beck. >> quickie bay. >> that's kind of interesting. >> coming up, a "squawk box" to remember today. a lineup of market-moving news makers that will have you doing a double take. some of them you've never seen before because they've never been on tv before. barry sternlicht, he's got provocative things to say. not everybody gets 2 1/2 hours. he's coming on from 6:30 to 9:00. at the top of the hour, eddie lampert, david bonderman will both join barry. if that's not enough to get your attention, we will mix in another really rich guy at 7:30, sir richard branson.
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and then a lot of other people associated with the legendary richard rainwater, we'll be talking about him today. "squawk box" not to be missed. stay tuned. what the world wants to know and share is here. demand media expands on the big board. only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz.
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welcome back to "squawk" on this thursday morning. take a look at u.s. equity futures at this moment. we open up about 102 points lower, unfortunately. making headlines this morning, legendary private equity player henry kravis. at a conference in new york, he said, "a tax system that is going to be conducive and really encourage investment and creation of jobs, that's the only way we're going to get this economy going." kr a, vis didn't say what he thought the tax rate son carried interest should be. but has said many times the increase would be negative for the firm and its investors. coming up, we have a super-size "squawk box." check out our board room this morning, it is loaded already. how is this for a 6:30 meeting?
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among the names who are mingling this morning, barry sternlicht and john scully. both of them joining us live onset right after this.
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they'll talk about how legendary investor richard rainwater influenced their careers and investments. our guests include barry sternlicht, david bonderman, john scully, and many others. and it all starts right now. good morning, and welcome back to "squawk box" here on cnbc on this wednesday morning. i'm andrew ross sorkin along with becky quick and joe kernan. and we have been saying this for the past half hour, but we'll say it again, we have a very big show in store, and it's starting, i would argue right now, and joining us right now is our guest host for the morning, barry sternlicht, chairman and
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ceo of starwood capital group. and i want to set the stage for what we're doing here today. because later in the prod cast, we have eddie lampert on the show, guys that don't do tv coming on tv for the first time. and they are all coming in part to talk about a guy named richard rainwater who means a lot to you and to you and really helped you get your start in the business. and i thought we'd start if you could by talking about richard and what's going on in his life right now. >> well, first of all, we had this thought when you guys asked us to put together this tribute for mr. rainwater. and all of us were honored. so you've got this incredible lineup of people who have agreed to come on today. and it's exciting for me and i know for them to talk a little bit about this amazing guy. i met richard when i got out of business school and i had friends that worked down there.
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i wrote him a letter and he said -- i want a job in private equity. my undergraduate education was liberal arts. i'd never taken a math course. but then i wanted to get into investing and i heard of this amazing shop down in ft. worth. and i wrote him a letter and must have been 50 letters, but richard responded. and the first thing you learned about richard was he was like a grown up child. he had so much energy and so much enthusiasm and a big smile. and it was like he waited his whole life to meet you that first time and i was 26 years old. . and he left such a great message for america because he was so optimistic and the world was your oyster and it was anything you wanted to do you could accomplish. and i think as you see these people that republican coming on today, a lot of people who took that message and ran far beyond our beliefs of what we could accomplish in our careers. he's so inspirational, i think, and john you have a fellow who knows him probably longer than
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anybody you're going to see today on the set. and as you may know, he's ill. and he's very ill. and he may not make it much longer. so -- >> has something called psp. >> similar to a neuro -- >> it's a neuro degenerative disease. >> even involving the same protein involved with alzheimer's and other forms of dementia. >> and he's doing a lot of interesting work around that. >> research -- >> that may impact. >> my grandmother has alzheimer's -- >> one of the guests dan stern an old mentor and friend of mine, he will talk about that too because he's very involved in the research phase and what they're doing. >> and to put a little bit of context around richard, the deal maker, disney, columbia, let's talk a little bit about these deals he worked on and some of the real sort of turn arounds. this is -- he is one of the great legends that doesn't get enough credit for it, frankly. >> i think he, you know, back in
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the day, in the '80s when i graduated business school, they were almost on a league of their own. they were stand out. people would -- i stayed in the worthington hotel in ft. worth and it was like -- it was a black glass building in the downtown ft. worth, there were two towers, right? >> on a good day. >> on a good day. i felt like i was going to see darth vader of deals, except he was so nice. he was the white night. and they were -- they were the predecessors to an entire industry you'll see today. you'll see people like barry, someone he invested in at crest view. and richard's amazing because i think one of the things i learned from richard and i think you'll hear from some of our guests today that we sat. because he was at 70,000 feet, he could see the world at a different place than other people. he was removed. he didn't really bounce
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day-to-day, he bounced theematically from one great investment idea to another. and his investment track record is probably the best in the world. >> he also for some reason was able to look at you and tell whether you were going to be great at what you did within five minutes. it was a five-minute conversation. >> sold himself. >> yeah. a five-minute conversation. yeah, it's the right idea. and he's even said. once you pick the right guy and let him do what he was going to do. >> exactly. shockingly instinctual. >> almost like an intuition. >> astonishing. astonishing. >> my question for john was an instinct question, which is there a lesson? do you need to have -- is the gut something you have or something you can be learned? you learned at the feet of this man. >> well, they were -- they were in school together. >> we were at school together, same business school. i actually met him on the touch
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football field. we were 22, richard was the quarterback. but when he threw the ball, we realized why, he could throw it about 50 yards and hit his target. and richard's team won. that was a metaphor for his life. he would very instinctually. he would figure out if this deal is going to work, this public market idea is interesting, if this real estate is appropriate or say the meeting's over, it's been a pleasure, good-bye. >> not in a mean way, just moving on. >> i don't want to waste your time. you're a very nice young man, thu deal's not going to work. send me a christmas card. >> how would he know? watching today, if you're a viewer who doesn't know richard but wants to learn the lessons of his life, is there something he does? a way he thinks about these things? >> i can't talk about him before he was 22.
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he was a math major, excelled a the the university of texas and someone said you ought to go to business school and someone later said you ought to be in finance. from the day i met him at 22, he was that glowing, excessive reductionist. he would get to the core of an issue immediately. and he would say this is not going to work, joe, you're a very nice -- it's not going to work with us. tell me more. i love this idea. come over to my house tonight. >> to make an office to go back and forth and talk -- >> and also, he -- was that you he did that? >> no, it was a hotel. >> eddie lampert in nantucket, they had one room here, eddie was in the other room. they built a door so he could go back and forth. >> he was, you know, he had the original white boards. i didn't know what a white board, and his entire wall in his office was a white board and he would scribble some idea down and it looked like some nasa plot.
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and it was -- he had nothing on his desk. he -- but he read people like no -- and if you think about his people track record and the people he backed and the people he associated with, it's probably unparalleled in the history of investing. >> i would say that his record is 90% successful. and dollar weighted 95%. i did some numbers in my head last night. remarkable, you know, non-random walk through wall street. >> but what people don't know about richard is he probably made more money in retirement than he made when he was working. >> oh, sure. but i saw him quoted saying and all of these guys were going to get filthy rich, but i don't think money was really the end result for him. it was earned success, wasn't it? wasn't it sort of being -- >> it was his sport. it was going back to his football. his business -- it was the score. >> it was the score. >> john, you -- >> and by the way, he has given away millions and millions to all -- to stanford university, we've got a beautiful new business school.
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thanks to him and phil knight. me gave -- he's giving money as we speak to thousands of kids in elementary and high school areas where he has done business and had interests. he's a very, very much a sharing, giving back individual. i don't know anyone who has ever said i did so well for richard rainwater and he screwed me. he did not compensate me, i didn't own the right percent of that deal. that person doesn't exist. >> when i -- two things i'd say about richard that i think are important for your viewers. one was he had a protege who came and spoke at business school and said be careful where you set your goals because you may achieve them. that's a richard rainwater statement. he set amazing goals and we stretch to achieve them almost like we wanted his approval. when i went to work at j & b, i called him up and we were talking and he was like, you know, you're going to be great. i mean, it was like having a cheerleader in your pocket.
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an instant cheerleader. and you thought you could accomplish anything. and as you think of mentoring people and young people set their own goals, it was an interesting -- he was always positive. lest move on, always positive. >> when you think about the great richard rainwater that has emerged in private equity land and wall street, do you think that it was richard rainwater that attracted great talent to him? or do you think it was that everybody who was around him learned so much from him that they were able to go off and flourish in this other way? >> i think -- >> probably a combination of both. >> combination of both. i think we reached out to him and then, you know -- >> so many people did. eddie lampert. >> there's a story there or dan stern will tell you about how they met. he was on the hunt and gave young people a chance. really young, i was like 26 years old when i first met him. and he took the time. and i think he really liked the energy and enthusiasm and we
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don't have any limits thing of young people. and i think he looked into us and said this kid's going to fight and he's not going to -- he's going to get kicked and get up. >> were there kids he would not take on? >> yes. >> he was very polite, but he did -- it was a little club. he went through -- >> he went through the people. that a lot of people walk through his office. you'll talk to a few people who office with him and they'll tell you about all the people that walked in and out of his office. it'll be interesting to hear from them about that selection process because they were there. >> john, you were a co-founder, co-general partner with texas partners with him. >> correct. >> and when you look at how business was done then versus how it's done today. what's changed over that period? >> well, richard and i are incurable optimists, you've already heard about richard. and by the way i'm an incurable optimist. i want to see the first happy pessimist. you may have made money, he or she, but they're not happy
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people. so we're very optimistic. and i said this is a guy who didn't know a stock from a bond and already he's smarter than i am. and i started in eighth grade buying stocks. we were drawn together and he -- we are both optimists and we try to at our best we try to connect dots, what are things that others have not thought of that is apparent? and by the way, any consensus, anything that everyone -- when you have people sitting around this table saying this, this, this -- run the other way. >> is that still the case today? >> yes. >> and when you look at what the consensus is right now, maybe it's that china is slowing down, europe's in big trouble. it's that -- >> how do you look at that and say here's the different play on that? >> we say i'm glad you're so smart that you can figure all that out. we can't.
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we've been doing it 40 years. thank you very much and you go out and find three great new investment theses that nobody gives a darn about because the greece drachma is under pressure. >> how do you do that? what's -- not that i'm busting on your trade secrets, but what's something that we haven't thought? >> well, maybe the best way is to look at the theme -- richard, first of all, richard was good as everything. public investing, private investing, venture, all kinds of real estate. all kinds of energy. one of the great ironies of life now is we sit here today, there's a company that richard reorganized, pioneer natural resources that we think is the star player in the -- south texas shale oil play. richard made that -- brought that company back to life. that company was boone pickens and chapter 11. he said there are assets there
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and brought it back to life, they reformed the company and it's trading at $110 today. >> would you -- would you say to anyone that sells this country short is in the wrong? >> absolutely. >> you would say it's always morning in america no matter what? >> it -- maybe it's 11:00. but it's morning. >> okay. we're going to have to leave it there, john. thank you for coming on this morning. >> my pleasure. >> and of course, barry will be with us for the rest of the broadcast. >> all right. not 11:30? not 10:45? >> 11:08. >> i want to get back to 7:30, if possible, i think. comments questions about anything you see here on "squawk," e-mail us. our special guest will continue. still to come at the top of the hour, eddie lampert, david bonderman both holding court in the "squawk" board room. we'll let you in on that conversation. first, though, phil lebeau brings us a first on "squawk"
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unveil of a new beamer. >> bmw now the number one luxury auto maker in the u.s. and coming up exclusively on "squawk," look at that and all the glory of the orange, the new x1. we'll unveil it exclusively on "squawk box" after this.
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welcome back, everybody. the new york auto show kicks off the first media day this morning. but why wait? bmw is unveiling the new x1
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right here on "squawk box" right now. phil lebeau with a sneak peek and another first on cnbc interview. phil? >> reporter: this is a car that's done very well in europe and they're excited to have it here in the united states. we're talking about the x1. the member of the board at bmw, an old friend of ours. would you like to do the honors with stacy and nicole? >> just a little bit of a teaser. >> no, the full thing. >> ready. >> folks, you're seeing it for the first time. stacy, nicole, let's pull it back. and there you have it. a small crossover or small suv some would say. how would you classify it? >> it's a small suv. and it adds from the x3, x6, and now the x1. >> it's been red hot over the last year, you're pleased with it. spartanburg is going gang busters right now. is this market slowing down at all in terms of that sport activity vehicle and the demand that's there especially in the
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luxury segment? >> i don't think so. and people are looking for more vehicles with more flexibility. crossover that go between sedans and suvs. suvs. this is an entrance into that area. hugely successful in europe and other parts of the world. we couldn't bring to it the united states until we brought extra capacity on board and that comes on board in china in the next few weeks. >> reporter: let's talk about the u.s. market. march sales of 16.5%. last year you had a record year. record first quarter for bmw overall, globally more than 400,000 vehicles, correct? >> that's true. we're going very strong. the 3 series will roll out over this quarter and third quarter the year and we expect that to even give us more pace as we go into the second half. >> reporter: there are some who look at the luxury segment and say the pent up demand is even greater there than for the mass market because you have a segment that's now saying i have to move in.
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i have waited long enough whether it's two years, three years, four years, i have to move into the luxury segment. are you seeing that relative to the mass market? >> we believe overall that the luxury market is going to expand faster than the volume market right around the world in the years ahead. i think that fits with that. as you say, lots of markets around the world have declined in recent years and that means the car fleet, the age of the fleet, the ownership of the cars has been getting older and older. sooner or later that has to come through. i was delighted in detroit this year, high degree of optimism. we were looking at expansion in the u.s. market and we're seeing it now three minutes. >> reporter: 900 million you're seeking to sink into spartanburg in your plant down there. we'll be here all day long but i want to leave you with one final stat. bmw is opening one new dealership every week in china.
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that's how quickly things are growing over there. guys, back to you. thanks, phil. looks like a great bar. coming up, check out our boardroom. if you know anything about private equity or hedge funds, they are names you've heard for years but faces you have not seen on television. we have a very rare and exclusive interview with david bonderman and eddie lampert that's coming up at the top of the hour when we return. tdd# 1-800-345-2550 i'm constantly working my screens. tdd# 1-800-345-2550 checking the charts. tdd# 1-800-345-2550 looking for support, tdd# 1-800-345-2550 resistance, breakouts, tdd# 1-800-345-2550 a few other tricks that i'll keep to myself. tdd# 1-800-345-2550 that's how i trade.
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good morning, everybody. welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. yahoo! is expected to begin a new round of layoffs that will
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affect about 2,000 people. the cuts are expected to affect all departments. groupon is being sued over the restatement of its financials for its first quarter as a public company. a shareholder is accusing groupon of misleading investors about its financial prospects and of concealing weak internal controls. groupon is accused of not accurately stating its potential growth and competitive threats and this is all coming after some very public problems that have come over the last few days. groupon declined comment on the suit. at least 12,000 people remain without power in the dallas-ft. worth after several tornadoes touched down. american airlines cancelled nearly all departures from its hub and diverted airlines to other airports. we're watching the futures this morning and there are some big red arrows. those dow futures down by 96 points this morning. coming after the release of the
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fomc minutes yesterday. a lot of questions about qe3 at this point. not looking so likely. joe, send it back over to you. >> thank you. we're micing up to the world's most powerful investors. they will join us in a rare television appearance to talk about the influence as we have been the entire show of legendary deal maker richard rainwater, and the influence he had on their high-profile careers. we're going to be talking to david bonderman, founding father of texas pacific group and eddie lampert, esl partners founder. sears holding chairman and we continue our guest host for the morning. you were partly responsible to cou corral these two to come in here. >> we've known barry since he had hair. >> that was a first.
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i lost it at the age of 2. no that's not true. >> the reason, and i just outlined the great richard rainwater, and we're talking about this, the list of players that somehow were inspired or discovered by him. it's phenomenal. can you explain it, eddie? >> i met richard in nantucket. i went with two other guys from goldman sachs to visit dan stearn and with no expectation dan said richard wants to have lunch with you guys. first time we met bigger than life. bigger than life. >> filed the room? >> yeah. he filled the restaurant. but he was very casual and very inspirational. his pitch was there's life after goldman sachs. he was there for two years. and at the time i was thinking about, you know, what i wanted
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to do, whether i wanted to leave or whether i wanted to stay. i went to visit him again the next weekend and pretty much spent the whole weekend with him. >> was it '88? >> summer of '87. for me you had a one hour packing and he sent you packing. he immersed himself in your life. you're able to immerse yourself in his life. >> what did you know about him at that point? disney was already legendary at that point? >> i was at goldman sachs. the bests were already known in the financial community at that time. they weren't broadly known. they had done the disney deal and were involved with disney. i knew richard's name but i didn't know much more about him. so, but when i met him, again, there are certain people you meet in your life and it was one of those moments where you say this d
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this guy is something special. >> disney was buying gibson group. they were going to buy gibson greetings and put mickey mouse on gibson greeting cards. were you there? >> i arrived just when that was being done. >> you should explain how you know richard. >> yeah. >> it's a longer story but for these purposes a short version. i was running braniff airlines. i was a lawyer. richard was thinking about buying it because hit new tax laws to carry over which in those days you could use it for unrelated business. you could shelter everything else. in very richard style had this deal teed up where he was going to buy up vf where i was the owner of wrangler jean. it was too complicated for to it
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happen. richard asked me to come see him. i went over to richard's office which was with the bass brothers on one of the upper floors of the only tall building in fort worth in those days. i walk in there and get ushered into richard's office. richard is there. he's got this big plate glass window in his office and it's covered with a sheet. you can't see out. so i said richard what's going on here. he said let me show you. he peels the sheet back. there's a view over this construction site down the block where the rest of the bass brothers with their money and some of richard's are building two new office buildings, later referred to as darth vader at the o.k.corral. and richard said i can't stand to see my money being put in this. >> you worked for robert, right? he worked for sid. >> what happened in that context was that the brothers split the
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business and richard had been running the business for all four brothers and it wound up with two-on-one side. i wanted to run the business with the other brothers bob and extend one of his other brothers. richard came to me and said hey you're a lawyer you have no idea what you're getting yourself into. i'll tell you what, come sit in my office and watch what i do and you'll learn. just show up any time, spend the day with me, whenever you want, come around. and so you walk in, i walk in, i spent three or four hours watched what richard did. some worked for me some didn't. richard might be standing on a desk to make a point. you could never tell who you would find in the office. people who came through there, the last time you asked who came through. one of the people richard put into business rick scott the governor of florida. george w. bush who was the president of the united states
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who richard hired to be effective at the baseball team. you can't believe the people who came through fort worth which was the center. >> fort worth. >> fort worth. >> that was the center of the world at the time. >> nature versus nurture. did you guys already have it or he breathed it into you or is at it combination. you had it and then you learned? >> i think it's a combination, for sure. i think that, you know, kids go to kentucky to play basketball, they go to duke, north carolina, they have these great programs so they attract great talent and then talent has to make of itself what it can. but i think barry said something earlier, richard made people believe in themselves more than they actually believed in themselves and i think it was contagious. you got to see and work around people. i was there when the baseball deal was put together.
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i was there when rick scott started. we started roughly at the same time. sort of out of nothing came something. i think that richard -- >> a big something. >> you felt great investing in westin. sears and other things are things he told you that he imbued you with that you think about today? >> the thing about disney at the time you have to have a point of view, you have to have a belief and see something other people don't. a lot of times when you see something that other people don't there's nothing there. other times there's something there. but is it worth it to invest your time and money? i think richard, the thing about natural gas, his view of natural gas and energy was persistent and he did very well. i was there during periods of time where energy and natural gas didn't do well.
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and he never really waiver ed. richard had a belief in his own ideas. i mean it's watching somebody do something that you didn't think was possible. richard created things out of thin air. >> there's something else about you that i think richard would agree which is that you made very few, very large concentrated bets and been very patient. you talk about natural gas. he would sit for years in a position that was under water and he didn't care. >> that was his style. richard's style was 100% confidence in his ideas after he thought about them and as john scully made this point earlier, richard was able to do this with some data but not with what you would consider complete data. richard within an hour with barry and say barry you're a
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money maker, i'm backing you. what are we buying because he thought barry would be good. he didn't think barry would be good. >> but there's a time -- >> that was an example. >> but there's a time to know. >> do you have examples of him getting out of something or did he change his thesis along the way? >> a couple of things i remember. he had an investment in ami. american medical international. it was a competitor to hca. i don't know how that worked out. i think he did okay, not great. but it gave him an insight into the hospital industry which he had with hca and his relationship with rick scott. sometimes you make investments and if they don't work out what you learn are applicable to other situations. >> he backed rick scott and then ultimately fired rick scott. >> yes. but, richard, again had the courage of his convictions. i just started to bork for bob on the other side of the
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business and i get a call from richard i want to you come down here. we were in the same building but on different floors. he considered to me to rick scott who he met 30 minutes previously and decided the best idea is a chain of hospitals and rick scott is the guy to do it. right. here he's ready to go. he wants to know if i'm ready to join him and gives you 15 minutes to make up your mind. >> he was running his own money. don't you think it's quite different? >> richard was quite different in a whole lot of ways. but one in which he made this point often, you've seen this before, richard was in some sense a one man band. he was very instincinstinctual. he doesn't need armies of guys running numbers.
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he understands number. he didn't say natural gas is at six going to four. he had a theory there would be an abundance or not an abundance it and he would stay a long time. >> did he look at a spreadsheet? >> no. but he had a yellow pad. >> what was on the pad? >> your phone number. >> i remember this when i first started in this business. i didn't come from as a lawyer. i didn't come from a numerically expert background. richard had the view if you couldn't pencil it out on the back of an envelope it wasn't worth doing. it took spreadsheets and computer programs, et cetera, et cetera, i shouldn't do it because if you couldn't pencil it out in six lines on the back of an envelope, forget about it. >> what do you guys make of the world right now? can i ask you that while you're here to get some, boehnerman and eddie lampert, we have to find out. what do you make of the globe
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right now? >> i'm waiting to see what eddie's next idea is. >> pass it over to you. where are you? this economy. europe. everything. >> i'm sort of in a place where, i think risk is coming back into the markets. i think people are willing to put their money at risk. they want a return on money rather than a return of their money. you're starting to see this. low interest rates are having an impact. people are tired of not making any money as the markets go up it sort of brings other people back into the markets. pension funds have a lot of money to put to work and a lot of need to earn returns. >> do you think the markets are ahead of themselves >> i don't have a macro view. if you look at the my cross going back to '08 alibi '09 a lot of people were concerned about the debt coming due in 2012 and 2013. we're working through that.
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there's a lot of refinancing going on. so a lot of companies have been reliquified. i'm not a big regulation fan. when i think about was coming potentially with health care it's hard to make sense for a large company with a large population of workers. what does it really mean? what will the rules be? how many different iterations will there be. that one certainty one way or another will be helpful in letting businesses move forward. >> put things off until june. we may know something in june. might know a little more. >> i would handle that question a little differently. i want to go back to the point that john scully made earlier. people are optimists. they can't stay depressed for two years in a row. sneeps in the u.s. >> the glass becomes half full even if it's half empty.
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it's the nature of human beings. so where are we? no human beings. >> i'm with you. >> so, where are we? u.s., the economy is better than you think there is. there's mixed signals. there's this and that. people are starting to expand. you look at the numbers. they are actually not that bad. last quarter was better than you thought. 3% growth or something like that. u.s. is not in trouble in the short term. long term may be another story. >> europe? >> much less than what meets the eye. it won't fall off the edge of the world. they will get beyond this business of people being silly enough thinking that the italy's iou is the same as germany's iou. beyond that what will happen to the eurozone is nothing. it will look like it does now five years from now. greek will be there. europe is the high cost of everything. you don't have a lot of business there's but it's not falling off
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the end of the world and spaghetti is the best in europe. >> what about asia? >> asia is the long term winner in this game but highly volatile and a difficult place to invest. >> eddie would you invest in anything? >> we do -- most of our investments are in the united states. but, you know, i think back 20 years when investing outside of the united states, the accounting standards were unclear. the idea of actually creating shareholder value was less pervasive and i think the accounting is much more transparent and the attitudes have changed. but i think that we're sort of going in the wrong direction from a regulation standpoint. a lot of the rest of the world is actually more regulated but moving in that right direction. that will unleash a lot of potential. >> if richard was going to start investing today, where would he do it? >> i want to steer this conversation back to richard because that's really why we're
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here and this is what this is about because richard is a legendary investor in so many ways. but richard, i want to have people leave with the understanding that richard is a world class character. in addition to being a great investor. i remember they had just done the disney deal which was swapping down this broken down developer which turned out the be worth $14 billion at its high. best deal done by anybody. right after that richard is going san diego to meet with the head of the then mason computer company which he thought about making an investment in. he didn't phone us. he took all his clothes in a paper bag. and he tells this guy who is the ceo of the company he's going to meet at baggage claim and he'll be the guy carrying a paper bag. richard shows up to negotiate this multimillion dollar deal carrying his toothpaste and socks and underwear in a paper bag which he got from the
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safeway. >> wow. he's a character. >> you negotiate ad deal with this guy, moved the headquarters from california to utah and made a ton of money. >> we should also talk about where richard is right now, and part of the reason that you are all trying to raise awareness at this point too. he's been diagnosed with degenerative disease. >> richard has a degenerative disease called psp, one of these things very hard to diagnose. they are not sure it's the right diagnose. for lay people it's a cross between lou gehrig's disease and parkinson. >> they are also trying to find a way to fight alzheimer's and dementia. >> dan stearn will be very
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knowledge able on this issue. >> like all these disease it won't be curable in somebody's lifetime. >> he met with him a day or two days ago. >> and working on where the protein is impacting this particular disease. >> exactly. >> i just want to ask, off topic. i have to ask you this one other thing and this is about retail in general. there are some that say sears could be a best buy. great. who wants to be a best buy when i see that's the shopping place for amazon. i wonder about all retail in general given what would rainwater think of the future of bricks and mortar given the way -- how do you think about it? you have these long term things. does it ever -- do you ever look at the world and say oh, my god my long term thing is eight years ago and now the world is different in. >> the world is very different.
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two end of the spectrum. there's the disney end of the spectrum which is great, iconic american company. but the world has changed. and the question is george will wrote an interesting editorial. he wrote sears as an example. leading retailer probably in the world and all of a sudden walmart came along and look what happened to sears. i think companies especially in retail are finding themselves in the need of reinvention. j.c. penney in the need of reinvention. sears in the need of reinvention. best buy in need of reinvention. and that means that you're going to have to try new things and if you're unwilling to try new things and to fail and learn, you don't have a shot. that doesn't mean you're is going to be successful but you have to try to change. i think the same thing is happening in the media, the media business. you know, this integration of,
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you know, whether it's television, print media, online, mobile, people are trying to figure it out. it's helpful to figure it out while you're making a lot of money. if you're not making a lot of money your openings become much more limited. but the things we've been working on over the last five years, for example at sears, those things are now -- at least those ideas are becoming more obvious and more appearearent a observers. the hard part is executing. walmart is experimenting with smaller stores. you have virtual stores in the uk, tesco has stores that literally are closed. you pick online and they will ship them to your home. there are stores -- not set up, set up more like distribution centers. so companies as established as
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walmart and tesco are finding a need to experiment. you're seeing in the media -- i look at both business, retail and media, both in the process of reinvention and they are going to be winners and losers and i think that certain things that seem obvious aren't obvious, and, you know, from my standpoint i look at a company like an autozone or auto n both in retail much different businesses, much more stable, much less impacted by the internet and what's going on. you look at a company like auto nation two, three, four years ago, $4 oil was the demise or decline of the auto industry. now it's driving behavior that's actually positive. >> did you see mike yesterday? >> i didn't see him but i heard. >> i'll send you a transcript. >> you know, people are adaptable. companies are adaptable. you either adapt or die. so two or three years, $4 oil it's a completely different
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perspective and it was obvious before is not obvious now. i think retail -- i think it's going to be great and it has been great for the american consumer. the question is it good for business? i think a lot of businesses will have profitless prosperity and we got to adopt and i think the companies like amazon, e-bay, they've made -- they turned this into a big opportunity and we got to be able to compete with them not just walmart and target, et cetera. >> does that mean you'll go more towards this idea to have these stores become distribution centers and do more online? >> we're really focused more working customer back and i think that's where information and i think who owns the relationship with customers generally viewers, you know, that create as platform. and, you know, i remember when -- i started in 1984. i don't think cnbc existed then.
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now this is an incredibly important source of news and information. so, i think, i think that, that a lot of companies like whether it's disney, ibm, et cetera that were recreated, something inherent in those companies that you can build on. and i've made investments in companies whether it's an autozone or autonation or a sears where there's something to build on. the question is how well do we execute. >> going back to your retail point what's changed dramatically by the internet is distribution methods. what hasn't changed is the valve brands. in fact, there's a bigger differential now because if you own brand, if you're j. crew, let's say, and you can only buy j. crew merchandise from j. crew -- we don't have an ownership interest there -- but the point is you're in one position. you're j.c. penney and selling
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other people's brands you're in a different position because that person who controls the brand may choose to distribute in many different ways in clueding over the internet. >> or federated or macy's. >> guys are buying brands. if you don't have a brand and dependent on somebody else's brand you're -- >> i see the same thing in media too. content of a brand and distribution. >> interesting. i was thinking as you were talking. i'm not aware of richard making any international investments of scale in his career. i'm wondering given our $15 trillion deficit, do you think richard would be looking offshore today? would he be saying i want to get out of the dollar and put 90% of his net worth in another currency? >> you're definitely right that richard was not international. you think of when richard and sid and scully and all the guys, stock pickers got started, these guys are all class of 1969,
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graduated from stamford business school. in 1969 nobody was aggressively investing abroad. there was no liquidity. there was no rules. no sec. people weren't investing in those. richard i would suspect be investing in coal mines in mongolia. >> i do think another lesson from richard which is an important lesson is, you know, invest with what you're familiar with. invest with what you're comfortable with. because the opportunities are in russia or china or india, he's not going to run there. 'll to the opportunities that he'll be looking for where there's disruption. but something that he could sort of, he feels comfortable with. he understood his capabilities. i used to say tennis and golf, he wanted to be in business with guys top two or three. they make all the money. everyone else, you know, sort of struggles along and that's what richard wanted to do. he wanted to get into business
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with great people and i think that was a lesson of how important people are to making businesses work. and i think richard sort of, you know -- >> i think the farthest international trip richard made from fort worth was new york. >> when you started with richard the private equity business was a private business. you didn't have these publicly trade entities. maybe you've talked with richard since. what does he think about these firms going public. these hedge funds. >> not going public. richard's view of life was if you were in the business that richard saw himself being in as being a guy who did investments and did deals, if you will, what you didn't want is to have a big overhead and a whole bunch of people you had to feed. what you wanted to do was have some smart guy like eddie or barry show up with some idea where you could put money in. if barry failed barry would be living on the street because he didn't get any money.
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there was a richard rainwater model which was don't raise a fund, don't set up the business, you'll find the money if the deal seeing right. you'll find the money. as opposed to getting 20% you can get 80%. own the whole thing it's your capital. >> does that mean your colleagues that run publicly traded versions of what you do are good investments or bad investments? >> well, that is a complicated question. the market has not figured out,000 value these businesses. if you look at the guys who have gone public whether it's a blackstone or something other they are valued differently. they are valued on numbers you can't understand. the structures are very complicated. richard would have hated that as an investor. that doesn't mean they are not good in this market but richard himself would never have invested in something where you had to read a 400 page prospectus to figure out who fwets what. >> it's been great.
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i would ask you back. like some of the other questions that might not get answered. thanks for coming on. i know it's a unique situation why you're here today. >> well we appreciate you putting us on for richard. we're here because of the respect we all have for richard. >> still good to have you on. >> it's been extraordinary. >> thank you. >> barry stearn is comfortable here and he'll show you he likes coming on and both of these guys are great as guests hosts. >> we hope to see you back. >> we're going to do it. we got some headlines. if you're just waking up this morning. mitt romney has a strong and clear lead in the republican race for the white house. he won all three prirms last night. the poll has him leading by 16 points. today he prepare for the next round of prirms in rhode island, new york, pennsylvania and at this point it does look like santorum will stay in for pennsylvania. he said that's his next watch. investors should watch
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shares of illumina. also the futures this morning, they are down by about 102 points. the s&p futures are offer by over 11 points and more on this. don't forget today is jobs wednesday leading up to a jobs friday. we have the adp report that will be hitting at 8:15 a.m. again take a look at those futures. you'll see right now down by 100 points. "squawk box" will be back after a quick break. greetings from the windy city of chicago. people here sure are friendly but some have had a hard time understanding my accent. so to make sure people get every word of the geico savings
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welcome back, everybody. virgin america is spreading its wings today welcoming its first flight into philadelphia. joining us right now to talk
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about this latest expansion and other virgin business as well is sir richard branson founder and chairman of virgin media. thank you for joining us. talk to us about philadelphia. why the expansion here and what's happening? >> well, we set up virgin america to give competition and increase the quality of air travel for poor americans who i think have suffered somewhat for many, many years domestically and it's doing great. we're opening a lot of new routes around america. philadelphia has almost no competition between philadelphia and los angeles and philadelphia and san francisco. and in time we'll be flying to other places out of philadelphia so we thought we would come and give the one airline that does fly a bit of a run for their money and i think it will go great. >> that's u.s. air out of the
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hub there in philadelphia? >> yes. doesn't have any plugs for plugging in your equipment, no entertainment system. you know, anyway i can carry on. but with virgin america we have the kind of airline that people from philadelphia and the west coast enjoy to fly and i think we'll do well on this route. >> richard, the area of air travel in the united states seems over the last few years to have been getting to the point where you get nickelled and dimed for everything. there was a story about an airline charging people $35 if they want to bring any carry on luggage with them to store in the overhead compartments. what's virgin's thought? >> i think we agree with you. virgin likes to come in to businesses where people are being nickelled and dimed and where the quality of services is
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pretty dire, and for some reason or other what's happened in america is you got these enormous big airlines that are getting bigger and bigger and, now, last thing they seem to think about is quality of service whereas in every other industry in america, you know, hotels, restaurants, clubs, et cetera, quality is of paramount importance. on a competitive basis, they play into our hands the more they make decisions like this which the public dislike. >> richard, consolidation. is it a good thing or a bad thing? we've seen as you just referenced a lot of it here in the u.s. it's made the airlines stronger but prices have also gone up. you've made your name going up against a virtual monolie that was british airways. >> consolidation is not good for the consumer and it's incredible that the competition authorities keep allowing it to happen. i mean in britain in their
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wisdom they just allowed british airways to take over british midland the competition authors. >> it sound like you're saying that sarcastically. >> you wonder how they got the title competition authority. competition authority should be telling airlines to compete and if you don't compete successfully to go away so you can make room for new up and coming companies with better ideas. you shouldn't just be able to be propped up by, you know, getting together with an even bigger carrier and then being able to monopolize and put fares up because you have no competition. it's madness in what's happening in the airline industry in the last five years. and then you also have this bizarre thing in america where, you know, if a company goes bust well it doesn't go bust it goes into chapter 11. it screws its competitors by screwing its creditors, comes
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back out of chapter 11 and then most likely goes back into chapter 11 again few years later. continental has been in chapter 11 four or five times. there's not one carrier in america that we competed with over the last 25 years that hasn't gone bust, at least once. generally four or five times. >> but some people would argue that's an argument that there's been over capacity. is that not the case? >> well, you know, if it's over capacity, that's the airline's fault. i mean it would be much better -- if a tree dies, you know, an old oak tree dies it should be dead and then let new sprouts come up. and with virgin america we have real problems getting slots at some of the main airports because you got these incumbent carriers who offer next nothing to the traveling public except
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high fares and pretty awful airlines blocking our way. so, you know, i do think there's an argument to be said, let some of these big carriers go to the wo wolves. >> we take this show on the road. i don't know about orbit. we may let ashton kutcher start first. you never spoke about 90 acres. how far is that from where we are here. probably 45 minutes, and that's quite a story that we can tell out there. don't you think? >> sorry, i'm not following your question. >> 90 acres is close by. the property that you own out in far hills with all the natural food. we want to take the show on the road but not necessarily -- we want to wait on the orbit, taking the show up there. let kutcher try that. can we do it from 90 acre?
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>> that would be lovely. we would love to have you have the show there. >> it's an amazing -- you don't see business and environmentally-friendly things get together very much and it's a novel concept for how to do it, i think. >> it's a delightful place. and all the food that is cooked there is grown on the property. and anyway come and bring your show there. that would being a great. >> all right. we also want -- your mobile operations are notifying chile. you want to talk about that as well? >> i'm off to south america next week, actually for two reasons, one we're launching a mobile phone company down there. we'll be launching it in a lot of south american countries. and i think virgin as a group has been slow to getting into south america but we're going make up for that now. and i've also a member of the global drug commission and there's a big meeting taking
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place next week where south american government is going to try to decide whether to decriminalize drugs and in effect stand up to the american government and to be honest, you know, the global drug commission, hopefully they will decriminalize drugs because we think the war on drugs has failed and doing damage to south americans and irreparable damage to hundreds of thousands of people over the world. we'll be doing a bit of a push on that as well. >> richard it's barry stearn, how are you >> i'm doing very well. >> you made a push or announced several push into the hotel industry. how is that going for virgin hotels? >> going very well. we have our first hotel opening in chicago next year. and we very nearly got a property in new york and in miami and, you know, so virgin flies with its various airlines to a lot of american cities.
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and we would like, to you know, be able to treat people in the way that we feel they should be accustomed to be treated by creating special places. >> you'll gate back massage in the hotel when you check in? >> of course. massage back. massage whatever you want. >> richard, before you go, i know you're not a u.s. citizen but from afar given we're in the midst of these primaries i'm curious how you look at u.s. politic and how foreign business investors are looking at the u.s. right now. >> i thought you had a brit on to give yourself a break from u.s. politics for five minutes. but i think that, you know, we're looking at america as a country that's, you know, coming out of what could have been the most horrendous recession. that recession was avoided, you didn't get to 1929 crash that you were on the verge of. and, you know, it really does
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look like you're over the worse. and so very hopeful in that way. you know, i think that, you know, i don't want to get involved in american politics but obviously president obama is popular overseas. and, you know, it seems from the opinion polls to be, looking like he'll have a second term. so we obviously watch with fascination but have very little influence over it. >> france might be a little more fascinating for all of us watching what's happening, i guess. but, yeah. >> france is fascinating in that you've got a president that looked like he was down and out. he seems to be coming back. >> yeah. >> richard, we want to thank you very much for joining us today. again, we hope to see you in person very soon. >> thank you very much. >> coming up, much more from today's guest host barry st
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i think you knew his answer. i may have to ask barry about -- >> i didn't know where branson was going with politics. >> in the next hour, the man behind michael dell's fortune, john phelan. we'll talk about his investment philosophy and his long term outlook. more than 150 million professionals
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are connecting here. linkedin connects with the big board.
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introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. . we're back on this wednesday morning. before get to our next guest, we have break egg news. ecb leaving rates young changed this morning. going to have to chew over that news. i think that was basically expected so i don't think anybody will be that excited. investors might be wondering which alternative investments offer the best potential upside and we have two experts ready to provide some answers.
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dan stearn is co-founder of reservoir capital. and barry volper. both barry and dan have been influenced and mentored by richard rainwater. we've been talking about him all morning, one of the great legendary investors behind turn arounds like disney and columbia hca, bought the texas rangers. a legend in his own right. dan, you're probably one of the closest people to him that we've even had on this morning and you're working with him right now on and probably understand some of his health issues better than most. can you give us a sense of where he is? >> yes. i met him. i've known him 30 years. i met him in college. he did a deal with my father. you met him on one day and said i want to do this deal. i've known him for 30 years.
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the amazing thing is he's applying in the hashness of this disease the same philosophy to solving it. he said i'm going to go out the the u.s. open and find out the number one tennis player. he found bruce miller who may be among the best clinician on this protein that tangles in the brain that causes this disease. it may have profound affects for everyone including alzheimer's and the whole country because he can do things with his capital and flexibility that other people can't do. they are moving incredibly quickly. they formed a consortium of the best people in the world to dig in and figure on what's going on. in alzheimer's there's a protein. so solving the issue may break open -- >> my grandmother has had alzheimer's disease for a very long time. i'm fascinated by this issue. there's a question mark whether the protein is the cause or the by product of the disease. and it sounds like richard is take approach that it's the
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cause. >> you know, it's holistic. let me get the pest people in the world, put them in the room, fund them and let them go. maybe it's not the cause. maybe it was always there but the flushing mechanism in the brain that takes these cells out isn't working. he's attacking all of it. that's how he attacked businesses. he got the best people in the world. funded them and let them go. >> we introduced this segment to talk about alternative investments. do you still talk about markets and investment ideas with richard? >> the disease is such that his cognitive function is perfect. he has difficulty communicating because it affects your vocal chords. when he still gets up and goes to the office and trades stock and it's amazing. he has light. he has light equities. liked equities and been long big cap high quality equities. >> what about natural gas? >> he's not a fan of natural gas. he just thinks that the marcellus and all the supply is
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great for the country but not great for natural gas the last time i talked to him which was a couple of months ago. look, he still loves this, the game. he loves investing. he's brilliant at it. all his cognitive functions there are. if you can communicate with him it's incredible. >> he has a sense of humor. >> and a sense of humor. >> barry, put it in context how are you investment philosophy and richard's. >> well, i got to know richard relatively later compared to the rest of the panelist its only met him 20 years ago. >> we'll take that. that's still a reasonable amount of time the. >> really got to know him ten years ago. i think richard looked at my track record when i was in the private equity business at goldman and some of the transactions i had been involved in. when i went to see richard forced a vice on what should do i next in my career, you know,
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it's another richard story, isho tucson to canyon ranch to meet him and he wasn't there. >> he was supposed to be there. >> well he knew i was coming and he was supposed to thereabout. >> he was where? >> he was playing golf. >> but he was in tucson. >> he was in tucson. and dan had teed up for me. two hours later he showed up off the golf course and he saw me and he basically said oh, good grief you've been waiting here. we spent over seven hours over dinner and breakfast talking about vehicles. >> a lifetime for richard. >> unbelievable. it was like sitting with yoda, the master. >> explain that. that's what we've been talking about all morning. is there a lesson. if you're a viewer and don't know richard or have an opportunity to learn at his feet is there a great lesson about the way he thinks about
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investments that can be applied in the real world? >> there are many. start with he's an investor not an asset manager. so his first comment, i heard david bonderman say it earlier why would you giveaway 80% of profits of your best idea. you can always find capital. wait until you have a great idea and you have total conviction. second comment is you should have enough conviction to put 25% of capital into any one thing or you shouldn't do it. think of that coming out of an institutional mindset. exactly the opposite. if you don't find anything to do just don't do it. i said to him for how long? and he said he had gone as long as two years between, you know, his eighth investment and ninth investment and that was fine with him. you think about that in the context of a transactional firm like goldman sachs where i game
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out or any of the large bio firms i came out of, two years is a long time. >> we invest in property and investors are calling us why can't you doing deals. it's not the sponsor issue, the investors are saying these guys are active and you're saying i don't like the price. it just happened to us. we stayed out of the market in the beginning of last we're. when the world ended in august and september we got very active again. so, you have to be old enough and be able to stand up to the pressure to put out capital and wait for your best ideas. >> up like energy? >> we do. >> does richard like energy the way you like energy? >> we're in the oil field services business. we own a water company. so what we provide frack water. we provide it, remove it, recycle it, dispose it. that's the kind of business richard likes because the cash is terrific and we're not
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really -- we don't care what the price of natural gas is as lone as the price is high muff thenot people keep drilling. you're shifting rigs from gas to oil but the count is the same. >> we have to leave it there. i want to thank you guys both for coming in this morning. >> richard is one of the legends and he complete deserves it. he's at canyon ranch watching us. >> terrific. thank you for being here. when we come back today we'll have more from our guest host barry sternlicht and in the next hour ken hersh who is joining us along with john goff. "squawk box" will be right back. zap technology.
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♪ welcome back to "squawk box" here on cnbc first in the business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host is barry sternlicht. checking in on futures. not pretty today. we'll see what happens after adp but still indicated down roughly 100 points or just under or just over three quarters of a percentage point on the dow. >> in global markets news the ecb holding its key interest rate steady at 1%. policymakers resisting pressure from germany to exit crisis fighting mode. ecb president will be holding a news conference at 8:30 a.m. we'll keep an eye on that. european equities at this hour. we have red arrows across the board. the ftse 100 down by 1.27%. >> pressure is here with futures. less than 15 minutes away from the adp employment report. the economy added about 200,000
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private payrolls last month. today's release of adp will give us some insight into the labor market. we're always looking for some insight ahead of the friday jobs number that is coming up. friday is market holiday but we'll be here for a special presentation for "squawk box" from 7:00 to 9:00 eastern to give the lead up and actual newspapers and analysis of what you can expect taking away from that jobs numbers. >> in texas 12,000 people remain without power in the dallas-ft. worth area after several tornadoes touched down tossing trucks into taxpayer and ripping roofs off of homes. fort worth based american airlines cancelling all departures from its hub and diverting flights to orlando international airports. about 110 planes were damaged by hail. joining us right now is another special guest today. he is the man hired to help manage the money of dell co-founder. john phelan is the managing partner and co-founder of ms
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capital. he too was mentored by deal making legend richard rainwater. he joins us right now in a cnbc exclusive. thank you very much for joining us today, john. >> thank you for having me. >> i know you have an interesting story how you got started with richard rainwater. you were in business school and you wrote him for a summer internship. >> that's right. i wrote richard a letter for a summer job. i remember really clearly today. he called me on friday, it was about 4:15, and i answered the phone. he goes is john phelan in. i said yes, this is john. he said this is richard rainwater. i said sure it is. i heard in his southern accent excuse me? i went oh, my god it's richard rainwater. i'm really sorry. i apologize. i thought one of my classmates was playing a joke. richard said that's pretty funny. he started laughing. he said that's a good one.
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>> what letter to begin with. >> i rather not say. >> that mean i know which letter. >> one or two words. >> it was two words. >> two words. >> it was a tough one. so richard asked me a number of personal and business questions, you know. he said to me how does a guy from miami end up at southern methodist university school of economics and then goldman sachs and now harvard business school and asked me about my family and things along those lines. then he asked me a question which to this day i still use in interviews which was of all the businesses you've looked at what's the best one and why? it's a really tough question if you think about it. and, you know, i spent about 30 minutes on the phone with him and richard said hey why don't you come down fort worth and meet some of the guys. >> what did you say? >> my answer -- >> your first year. >> first year in business school. what i said to him was, i think
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a great business, i haven't spontaneity lot of time looking at it would be parking garages in new york city because you have a fixed asset, not a lot of capital intensity. good yield. future development. >> do i this for a living. >> he liked that answer. and then i went down to fort worth and spent the day with richard and i ended up working that summer with richard and eddie lampert who richard introduced me to while i was in fort worth. >> you worked five years with eddie. >> seven. >> you guys in florida together or up here? with eddie? >> i was in dallas originally and then greenwich. >> so, we have been talking a lot today about some of the lessons that people have learned from richard rainwater. and i guess if you take a look at what you learned and how you apply it today what's the surest sense of something you really
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picked up that's stayed with you that whole time? >> i would say richard, you know, really practiced the contrarian opportunistic investment philosophy. with my partner and i that's what we developed at msd. so i think we try to mimic a lot of things that richard did. so that's what really stuck with me which is make your bets. understand them. and do the only things -- do the things that you think make the most sense and don't worry about the noise around you. >> how do you play contrarian today? we heard from the fed yesterday. we got the minutes. it looks like there is not more quantitative easing on the horizon. how does that change the environment? >> i think the environment -- look if you spend ten minutes on the economy you spend nine minutes too long. i actually agree with that. i think what i would say is, is the microis reasonably good.
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it's the macro that's bad. when i look at our outlook we're fairly optimistic over the next six to at it months and five years out. in between is hard to call. how do you practice being a contrarian we were an investor in leading mack. i think you look at different things and theories that people are espousing and ask yourself does it make sense. citibank's energy analyst came out and said he thinks u.s. will be a net oil exporter by 2020. think about the implications of the united states acnbeing a ne oil exporter. that's eight years from now. a lot of people don't think out that far. we're trying to think about those trends and what that means. >> how do you take advantage of that? one thing on recognize it. >> go long houston. go long areas that are beneficiaries of that.
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>> buy real estate around it? >> yeah or even terminals or distribution centers. you actually represent a pool of capital that's kind of similar to richard's. your choice in careers. you went for a high net worth individual. had capital. that probably influenced how you wound up in this particular position. >> i think that's right. richard and dan stern and eddie recommended me to michael when michael was looking for someone. i had spent a fair amount of time with richard when i had -- when i was kind of putting together a business plan to raise my own fund. >> weren't you at zell? >> i was with sam when i got out of business school. i was work on the executive life deal which we lost. and i went into sam and said hey we should set up a junk bond operation. this is a big opportunity. sam said this is a good idea, i
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want to own companies not interested in owning pieces of businesses. i called up richard, i want to do this, this is a huge opportunity. richard said i got a guy doing it but call-up ed did you and go see eddie. i went and sat down with eddie and spend seven years with eddie and basically did all of our distressed investing. we owned junk bonds mesa before richard bought it. sun energy. i've had a lot of great mentors. and michael in particular has bean great mentor. >> what is it like to work for michael. how often do you go to him and say i want to do x. this is very interesting. some people -- you have lot was investors, for example. you have to answer to all of them in a way but in an odd way you have more control or less, i don't know. you have one investor. is there times when you have an investment piece or where and you go to michael and he says i either don't get it or i don't
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want to do it. how does that work? my kale when he started the firm gave glenn and i full discretion. in essence we would like to have michael a lot more involved but michael was focused on running dell corporation and that's what michael wants to do. if michael wanted to be an investor he would be extremely good. he's very astute. he gets the drivers of businesses very quickly. but his focus, his passion is dell. >> when you do a tech investment does michael weigh in or you don't do them? >> we don't do them. we have to pass that through dell in reality if it's a private investment. >> if you look at the landscape for you today and you think about the way richard would look at the world, what's the big contrarian bet that you think you would make -- what would richard be saying with your kind of capital, you know, he's ill, obviously, what do you think those five year out -- because richard made a lot of money
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acvery big contrarian on tail end risks, one of the trades we didn't talk about when oil was down in the 60s and 70s he went long on oil contracts that nobody wanted to buy at 120. oil goes 150 and now he's made a lot of money. where do you think? does that influence you these big tail risk out of the money trades that you can make unimaginable multiples on your capital on? >> we look at them. tail risk is a bit of a misnomer in the sense you want insurance which is what tail risk is when nobody else wants it and right now everybody wants that type of insurance. in terms of it's very expensive. in terms of a contrarian bet. indymac was a case to me in the middle of the crisis to put that kind of capital to work was a pretty contrarian bet which right now looks like it worked out pretty well for us. i think that trying to understand how these different industries are going to break
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down, you know, european deleveraging has a lot of impacts. all the corporate debt that needs to be raised. john thank you so much for your time. >> stick around we'll be right back. gy. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪
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we're just seconds away from the adp employment report for march. steve liesman you have the numbers? >> yes. >> give them to us now. >> i can't. >> now i can. total private sector employment rising by 209,000 according to the private payroll company adp. that compares with an upwardly revised february of to 30,000. they added 14,000 to their prior number and then also compares with the nonfarm payroll estimate for friday that's for the bls number which includes government and the private sector of 200,000. so you see there it's pretty much in line as well as 200,000 being the estimate for adp with some expectation that the government will still be losing jobs or detracting -- i want to show you a r quick that are. adp and bls have been pretty much on top of each other. decent indicator.
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barry you like that chart? they seem close. similar gauges. your base numbers are 135 million. measuring close. it's been a pretty good gauge. there's all your numbers there. you see the to 30 revised up for february and 209. goods producing. let's bring us joining us live is joel bracken chairman of macro economic advisors. let's talk about this chart. the goods producing sector up 45,000 bath surge in service providing up 164,000. joe, this is the recent recovers in jobs are supposed to happen. >> has to go this way. early in recovery you see a pop in manufacturing output and manufacturing employment but that sector no longer counts enough for total employment in the united states to be the eventually long run driver. >> now we come back to the p
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paradox we've had between you and other small business surveys. this is the fourth out of the last five months where small boys employment has risen by 100,000 or more. so the small business sector seems to be doing pretty well accord touring data. >> that's right. employment on small payrolls is moving ahead normal cyclical pattern and definitely a good sign. >> what does this say overall about gdp growth and overall health of the economy at 209,000. >> let's not forget employment is a lagging indicator. it tells us more about what happened in the last several months than going forward. but in summing up the number today i would say another month, another 200,000 that's the pattern we've been in. going forward gdp growth of 2.25% to 2.5% it's encouraging. they are good. we should see faster growth than this if we're is going push the
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unemployment rate down persistently. >> what's the number. what's the nut of the economy here? some will say it's 100,000. anything above that helps bring down the unemployment rate. >> the answer to that, steve, depends on what happens to the labor force participation rate. for a steadily growing population, employment growth of 125,000 will keep the unemployment rate changed. if the participation rate rebounds from its recent loss it will take much faster growth than that to push the unemployment rate down. >> there's an interesting debate in the profession about whether that recent decline cyclical. >> how much weather? >> i'm glad you brought that up. there was concern that today's number might fall as a consequence of having being elevated the last few months because of good weather. we've done some work on that ourselves.
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there's a suggestion that work, perhaps, private employment is 50 to 75,000 higher than otherwise would have been because of the weather. so i'm actually quite encouraged that i didn't see a little bit of a slowdown in the employment numbers today. it suggests perhaps l wasn't a large factor or if weather was a factor numbers are ber than this. >> the fed is debating, economists are debating this, what number is telling the real story of growth in this country? the jobs numbers seem to suggest we're growing 3% to 4%. the income data says we're at 1% to 2% economy. >> first of all, gdp measured from the expenditure side has been growing very differently than gross domestic income. income is growing faster than expenditure. our sense is that you ought to at least put some weight on the income numbers which has faster
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growth. the employment numbers, you know, suggest productivity profile, little harder to reconcile. but, you know, you really can't know how it all fits together until you get to the annual benchmark provisions and see -- >> if you had to guess what you say it? >> i think it's an economy that's growing roughly at trend and i put trend in this environment somewhere around 2.5%. >> thank you very much for joining us this morning. all of this confirming joe kernen's contention it's not a science it's like a black art. is that the best way to put it? >> social scientists -- >> you can't get the income and spending sides of the same side of the gdp number to agree let alone gdp and jobs -- >> i know. >> fall on my sword here. >> supply and demand. >> that's a science. >> everything else is opinion after that. that's all you got. i was going to ask, without --
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does construction finally -- i'm worried that we're two percentage points away from ever getting a 4% again because the housing bubble never comes back. that's not right? >> that's not right. >> either president will have a very good number come next year in the housing market. >> and all these jobs that we say are permanently gone will come back. >> on the construction side it's multifamily first which is exploding, gone from 140,000 to 250. then single family -- >> no new base numbers. we're not stuck at six or seven. >> market not impressed by this number. >> it takes away from the idea that we will do 200,000 and that will bring down the unemployment rate. >> when we come back we have the push for fuel-efficient vehicles. we'll talk to the president and ceo of hyundai america. he'll unveil the automakers latest offering right here on quack. medicare. it doesn't cover everything.
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we're back on this wednesday morning. the new york auto show is kicking off this week. we find phil lebeau with a very special guest from hyundai this morning. >> thank you, andrew. we have yet another "squawk box" exclusive and unveiling avenue model with john krafcik, head of hyundai of america. let's show people the new 2013 hyundai santa fe. >> there you go.
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>> people will be surprised by this. tell me about the philosophy behind this. >> we replaced every model in our lineup in the last two years. every single hyundai is brand new except santa fe. one of the big things we did with this car. went on a major weight loss program. this is 266 pound lighter than the santa fe it replaces. >> people ill be surprised to know four cylinders. people will say does it have the pick up? does it have the giddy up to get me around. >> the four cylinder which gets 33 miles per hour per gallon. holds five big people. 190 horsepower. we got a two lit terrify turbo charged version with over 260 turbo power. >> you're on a sales roll right now. sales are up. >> we're doing okay. >> understatement of the day. sales of 13% last month.
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you're pretty much at capacity in terms of you're selling everything you're building. >> yeah. >> probably leaving a few cars on the lot, a few sales out there. does that worry you at all? >> this time last year if we had the same discussion and we probably d-right, we found a way through the course of the latter part of last year to add production. this year we have that same optimistic feeling we can deliver more doors our dealer. we think through our dealership, excluding weak sales about 100,000 incremental cars compared to last year. dealers are happy with that. they are working with us to supply those customers with the hyundai. >> in terms of production. since your running in capacity down south is this a case where you're looking at your global footprint and say we shift around production to bring more into the u.s. >> it's amazing. we've been very successful at our plants we have in alabama and georgia in getting incremental production out. we're seeing more of that this year. we have opportunities from our global production base.
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we're a global company. >> john krafcik, the man who runs hyundai north america. with the new 2013 santa fe. by the way, guys they have a little surprise here at the auto show. john can't talk about it. but coming up during their press conference maybe a new model? >> my lips are sealed. wait until 12:55. >> guys, back to you. >> his deal book reporting on some kind of talk between honda and hyundai. >> hyundai would be a merger of the two. >> i only think in the context of mergers. >> you have lebeau say it too. he knows the guy. he said honda too. but think about it. hyundai, honda. >> i know, it's perfect. >> coming up, new place for your portfolio. we'll take a look at investment strategies from private equity players in the energy and real estate sectors as we head to a
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break. take a look at futures. "squawk" returns after this. you know, those farmers, those foragers, those fishermen.... for me, it's really about building this extraordinary community. american express is passionate about the same thing. they're one of those partners that i would really rely on whether it's finding new customers, or, a new location for my next restaurant. when we all come together, my restaurants, my partners,
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welcome back to "squawk box." now time to start allocating
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more of your known hard assets like real estate and natural resource. john goff and ken hersh are here. john and ken also long time partners and friend with richard rainwater. here's what we've learned off camera before we came back. rainwater responsible, got be hundreds of thousands of jobs i would think in the economy over his tenure wouldn't you think? >> i think so. >> both of you guys, you were a cpa who -- >> was? >> all right. but you're working, you're assigned to him as a client of one of the big, i don't know how many there are now but a football conference. how many three, four? >> four. >> so he saw something in you and called you and said come with me. come with me almost like chrysler. >> for whatever reason he developed a personal interest in me while i worked with him on just various assignments.
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this was when he was with the bass family. i worked on all kind of transactions, his personal financial, et cetera, tax issues, you name it. and then when he left the basses, shortly thereafter i got the call of my lifetime. >> you got the call. >> i think he said we're going to do real estate, right? >> not back then. i worked on all kind of things before real estate came up in the early '90s. >> tell the story of our first deal. >> barry and i got to know each other working on a portfolio. this was during the rtc days. and it was -- we traveled and looked at apartments and hotels and you name it. it was a hodgepodge of assets. we had this elaborate computer model. we were both very young at the time. we came up with a bid of $108 million. and amresco said we're not selling it at 108 it's yours at
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112. we spent two days crunching numbers and came to the conclusion we couldn't get to 112. we showed richard all these models and he just set them aside and said guys faits good deal at 108 it's not a bad deal at 112. >> i think we left $200 million on the table. >> at least. classic richard. he didn't care about the details of a model. he was more into the big picture and the fact that we had the within at our back in a recovering environment and that we should be all over it. what was interesting he went with our decision. he didn't overrule our decision. >> how define you >> john phelan, very similar story. a year before john i wrote him a letter for a summer job. i was a first year business student at stamford. i didn't know him from adam. wrote him a cold call letter. the phone call came the next day. and i pick up the phone and he
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said you want the quote? what do you mean do i want the quote. he said i heard you work at morgan stanley. i called a buddy he said you were great. i want to talk to you. that was the quote. and, you know, the fact that he made the call is something i don't think people do today. >> a lot of us run businesses and get people seeking jobs. you both officed with him. did he get 40,000 resumes? i never saw paper on your desk. did somebody hand it to him? >> he was very selective. he had a unique radar where he would pick up -- >> were you in his office where he threw a resume in the toilet. >> he would do something, if it was a personal interaction. if you set the stage by thinking about the way the office was set up it was a series of glass boxes with richard in the epicenter. and richard was -- he had this
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charisma and intense personality. he was funny, engaging and looking for the next deal and the next big talent.>> his magnw people to fort worth, texas. we were all in sort of capitalist offspring. >> he had to be selective at some point. >> when he offered me a job in 1990 he said you can come here, i am not going to pay you anything. i'm like excuse me? i'll give you a piece of the deals. that self-selected flight. people were willing to bet and i had my first kid in my wife's stomach how am i going to afford nothing. i wasn't going take that risk. i wonder what my life had been like any done that. >> he made the call. we got on an airplane. we scrounged for the ticket to get on a plane. there's a certain quality of person who will take that risk and gamble and that's the character at any rate that is
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the optimist or is the kind of person who will take a chance. >> bet even today he doesn't have a blackberry. >> he done have a blackberry? >> no. >> not to bad mouth rimm, he doesn't have a communication device. he's a guy who wouldn't rely on that to talk to people. >> back then he had an incredible rolodex and that was the source of many interesting transactions. >> we have three minutes. we need everything we need to know on real estate and energy over the next minute-and-a-half. >> real estate. very quickly, we have job growth and real estate thrives on job growth. it's not wonderful but it's there. so we have a little wind at our back economically. you got historic low interest rates. that is obviously very helpful and it makes the asset class very compelling right now and i think general consensus is those
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rates are going higher. perhaps real estate is a refuge for inflationary environment which may come. ouf got -- >> there's a $1.9 trillion of debt coming due over the next five years. there's a restructuring still in progress and that will continue. that being said there's a lot of equity on the sidelines and it's much more organized than it ever has been in the past. >> all right. you concur? >> 100%. the capital markets in the u.s. are wide-open. in europe they are pretty shot. so the real chaos in our industry is in europe right now, and europe is fundamentally different than the u.s., has lot was different problems. >> i was going to move on because we got a minute-and-a-half for energy now. richard, would not be buying, would not be long natural gas but buying companies that clean the water from fracking or something. where are you on that? >> yeah. that was barry. richard always said where
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there's chaos there's opportunity. i think richard would be buying natural gas today. and he looked for fundamental restructurings of an industry. what we're seeing in a natural gas business fundamental restructuring. it created more supply less demand. demand is now per could late back up and supply is fining a way to reach a new equilibrium. the natural gas story in the united states s-i think, we're in the first inning in a resurgence of u.s. manufacturing in places like ohio, pennsylvania, place where's this country started. oil was originally discovered in pennsylvania. cheap energy and plentiful energy is going to be, you know, the catalyst the same way it was 75 years ago. >> we've had a few people on say, like byron who is on tomorrow i don't know what the next thing will be in this country. and you worry and you -- what if it's energy. what if we're net exporters in 20 years of oil and natural gas.
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>> we select people too that we see potential in. we're interviewing a lot of people today to come back. will both of you, when we can talk longer would you come back? >> sure would be happy to. >> richard is a gem. i worked with him for 11 years and he deserves every feature and congratulations for what -- >> every guest has said that today. one believable to hear this the testimony als. >> not to be overlooked but all the charitable things richard has done. it's incredible. that has impacted hundreds of thousands. >> i don't think any of this is about money. it's earned success and winning. >> and treating people right. >> yeah. >> the one thing about richard when you think about today when people walk into your office and the time -- there's the book "power of now" he's with you at that moment. totally focused on you like you're the only person on earth.
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you're overwhelmed by it. >> thank you. appreciate it. when we come back we'll have more from our guest host barry sternlicht. today's top stories and view from wall street. we'll tell you everything you need to know before you get ahead of this trading day. "squawk box" will be right back. w i bathed it in miracles. director: [ sighs ] cut! sorry to interrupt. when's the show? well, if we don't find an audience, all we'll ever do is rehearse. maybe you should try every door direct mail. just select the zip codes where you want your message to be seen, print it yourself, or we'll help you find a local partner and you find the customers that matter most. brilliant. clifton, show us overjoyed. no, too much. jennessa. ah! a round of applause. [ applause ] [ male announcer ] go online to reach every home, every address, every time with every door direct mail.
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welcome back to "squawk box", everyone. the futures have been one pressure all morning long. down 118 points right now despite the good number that we got from adp, 209,000 jobs created. but we've seen red arrows all morning long and they are continuing right now probably because of what we heard from the fed yesterday with those minutes indicating we're not looking at any additional qe. check out shares of monsanto. revenue better than expected. the company raising its full years earnings guidance. >> coming up we'll get the latest buzz from wall street. we'll head down to the new york stock exchange. that's coming up next when "squawk box" comes up next.
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welcome back to "squawk box." let's get down the new york stock exchange. carl and jim are standing by. guys we're watching the futures this morning. down pretty drastically. >> we've been watching you guys. you and joe and andrew you must be exhausted after putting together one of the best squawks i can remember. >> i came in early to listen and i don't want to stop with us. i want to keep hearing these stories because great american capitalism stories, really put everything into perspective why we're i think stronger. i think the takeaways were stronger. it happens on a day of a big dow day. makes me feel more positive because you're doing a great job. >> barry, you're the one that brought this all together. >> they were great to show up. >> they were. we've been talking about richard rainwater and that takes us all back as you said gives us a longer perspective on things not just what's happening.
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>> cramer, did i get anything where rainwater was involved? >> the crescent because i thought crescent was very smart. he started in '84. eddie and i started at the same time. what is rainwater thinking and suddenly i got, you know, the big corn dog. one thing that i think is over and over again, i hear opportunity where people don't think opportunity. and i think that people at home really have to recognize that a lot of times you hear us being down beat. that's when rainwater was buying. >> i just, we're at a similar age, jim. the whole disney thing that's all i needed to know. that was like a rudderless -- disney could have -- wouldn't even be a dow component. i just remember these -- i don't know what disney was thinking. this was a miller. buying greeting card companies and real estate firms.
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and then richard rainwater talked to eisner for five minutes and brought him in and then it went from like half a billion dollars to $14 billion. >> i think it was something like a bid for $2 million. one of those moments where a guy saw a brand, saw value. everyone else was saying this could be kodak. >> right. >> kodak. the equivalent of kodak back then. amazing call. >> actually, interest field goal you look at the disney investment. people looked at this and the thesis was very simple. when you go to walt disney you plan your trip, taken your family, took the airplane flight, spent a thousand, $2,000 you won't turn away at the gate if it's an extra 20 bucks. disney made sure when you went in the park the hot dog was $2 not $14. everybody relate to the amenities inside the park.
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disney's earnings growth was propelled by investing in the park and raising ticket prices to the point where if it was $100 there was no replacement for walt wasn't going to go anywhere. i'm going to go to disney. it's best. >> and they hired carl quintanilla la. >> i am a veteran of the disney. worked on the jungle crew for many, many years. >> fascinating. >> what kind of outfit? >> a straw hat -- >> jungle cruise. >> and a gun. i'll bring pictures sometime. >> you were just glad to see me. >> hold on. carl, did you speak? did you have a speaking role? >> i shot at the hippos or the zebra. it was a long time ago. >> sorry. >> i was 10. >> do you remember when you guys went to philadelphia for "squawk"? >> i do. >> was that a great show, oh my! >> for disney? the proxy, the battle? >> stanley gold -- you had every
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single interview. it was priceless. it was priceless. not as priceless as jungle cruise but i remember "squawk" owning that story. that was the first time i realized tv will trump newspapers because they came out the next day and you were at 9:00. >> you were cramer berkowitz then, weren't you? >> yeah. we're just watching hanes. getting this down. you watch cnbc, the only story. >> hanes had mickey and held him up. >> that's right. >> i remember that. >> got in trouble for lynching mickey. >> yeah. >> hey, you guys. thank you. see you in a few minutes. >> nice work. some final thoughts from our host guest and a special live message of todd rainwater. "squawk box" is coming right back. zap technology.
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welcome back to "squawk." we are joined by a special guest this morning. joining us from dallas, todd wateboard member and son of ric rainwater. as we have been discussing all morning, this is a tribute to the legendary investor richard rainwater behind some of the great, i should say -- two things he's great at. great turnarounds, disney, columbia. the people, the proteges including barry and eddie we had on earlier and todd, if you could, do two things for us this morning. tell us about the health of your father and also if you could tell us about some of the work that you're doing to try to combat the disease that has put him in this ill position. >> absolutely. thank you once again for having me on the show and thank you for having the show. i've been watching all morning
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and an amazing tribute to my father. so my father's in great health right now. you know, relatively speaking. he is still up and about. he's still eating, having a good time with friends. traveling. working out. and not playing golf anymore. slowed down a little bit. but as dan was saying earlier, cogniti cognitively, he is all there and we are very appreciative of what we have and trying to make the best of it. trying to live every day to its fullest to be honest with you. regarding the consortium, so basically, in march of 2009 my father was diagnosed with this disease and as you probably have learned over the past couple of hours it is a very rare disease and it's a clumping of a protein and this is what causes the neurological problems. about 20,000 people have this in
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the united states and about 5,000 of those have been diagnosed. it appears like parkinson's but much more like alzheimer's. my father upon learning of the diagnosis got to the local new york city doctors to put together a group of researchers to try to find an effective treatment for the disease. they went out and got bruce miller from ucsf, a neurologist to help them put together the consortium. the first meeting was held only two months later i guess in typical richard rainwater type fashion and may 2009 and 15 researchers there and grown to 30 today so the consortium is basically funded by the rainwater charitable foundation right now and what makes it different is that in this group similar to the way michael milliken structured some of his research groups, they work together as a team. required to share data, be a
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part of monthly phone calls and really has moved the science ahead a lot faster than traditional research in our opinion. >> todd, we want to thank you for being with us this morning. it's been a remarkable tribute to your father. we wish you the best of luck with the foundation and the work they're doing. it has huge implications not just for richard and psp but alzheimer's and other diseases. my grandmother is among those. >> dementia. >> as well. we wish him the best of health and again thank you for joining us this morning. >> thank you so much. >> our guest host is barry sternlicht and how would you like to wrap up here? we want to thank you for bringing this to us today with the guest host. >> my pleasure. together with dan instrumental in putting the show together. appreciate this opportunity to reflect on this amazing man and really the spirit of optimism.
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because, you know, i think the way he looked at this country was just full of great things to do. i don't think he'd be quite happy about a $15 trillion deficit on its way to 20. but i think he would always say there's something to do. always something to do. for young people today, i think young people, there's so many opportunities in this country and the world today. >> he would defend capitalism and free enterprise, wouldn't he? >> unbelievably. unbelievably. the free expression of ideas and follow your dreams and execute them. people talk about in sports. richard allowed people like eddie, myself, dan to follow their dreams in business. >> right. less of a collective vision of everything. >> no. and really the power of the individual. i would agree with that and really an unshackled and that is creating thousands, hundreds of thousands of jobs with industries, investing in companies and investing in ideas and a lot of the interference fr


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