tv Squawk Box CNBC July 17, 2012 6:00am-9:00am EDT
the markets are listening closely for any hint that the central bank is considering more quantitative easing but i wouldn't hold my breath. yahoo! selecting long time google executive marissa mayer to become its new ceo. andrew broke this news yesterday afternoon. mayer beat out ross levinson. she becomes yahoo!'s third in a year. levinson is not likely to remain at the company. shares of yahoo! rising in the after hours. also spain raising 4.4 billion dollars in short term debt auction today. borrowing cost dropping since the government announced a new austerity package. first andrew has some of this morning's other top corporate headlines. andrew, good job on that stuff yesterday. >> thank you, becky, i appreciate that. let's begin with earnings. coca-cola and johnson & johnson, goldman sachs are in the headlines, quarterly reports
coming today, all three will be posting results before the opening bell. also this morning some jpmorgan news. jpmorgan disclosing possible miscondoubt federal authorities. they did that last thursday, the day before reporting earnings. the bank reportedly told feds an internal investigation they found evidence that three london traders may have tried to hide loss in some of their positions. late thursday night jpm decided to restate its first quarter earning results as a result and ceo jamie dimon did not learn about the potential misconduct by some employees until early last week. bank analysts and former cni analyst brad hintz will join us. alcatel warns on profit.
shares dropping more than 15% in early european trading. mr. kernen? >> mood chip's is warning investors to see big banks as riskier than the first flames of the financial crisis five years ago and they probably always will be. the firm says risk premiums for bank debt are highly unlikely ever to return to their former levels. kansas city fed president cautions monetary policy is not a cure for unemployment. george will be a voter on the fmoc next year. she declined to say whether the fed should deliver another dose of monetary stimulus. >> hsbc had in their words a pervasively polluted culture. allowed the british bank to act as a financier to clients to seek questionable funds from dangerous and secretive corners
of the world. including mexico, iran, the cayman islands, curb and sir yorks hsbc and regulators will face touch questions at a hearing today how the abuses were allowed to continue after the bank faced regulator action in 2012. >> let's get a check on the markets. yesterday was the seventh day out of eighth that the markets closed lower. this morning you do see some green arrows. do you futures up by 32 points. s&p up by 3.5. asia also up earlier today and that was the third session in a row higher numbers out of asian markets. oil prices have also been climbing. we'll keep an eye on that. right now you'll see that oil prices are up about 17 cents and this comes just as we had been watching oil prices yesterday up at 1.5 month highs. pull back a little bit at $88.60, pull back up. let's take a look at the ten year. at this point the ten year note
is yielding, 1.482%, incredibly low yield although it has climbed a little bit as prices have come down. dollar has shown some weakness today. a lot of people are saying this is a situation where you're seeing what had to happen after a lot of strength. dollar is down against the euro and swiss franc. euro is trading at 1.2291. obviously the direction has been all lower for the euro. this could be a situation where you see some profit taking. also gold prices, let's take a look. you are seeing higher gold prices up just about $3.40 to $1,095 an ounce. >> did you bring us a present? >> i didn't.
>> this is the power of twitter. >> saw your tweet. these aren't home made. that's for the best. we've have some baklava. for your one year anniversary on the show. >> is it one year? what day is it >> what's today. >> 17th. what day is your one year -- >> 18th? >> we're near there. remember we had that sort of fake week. >> when was the fake week. i remember the fake week. >> you were on for years. >> a week where he was a guest host and we didn't say anything. >> we didn't know. >> what week much that? >> the week of july 11th was the fake week. so we're -- >> so thoughtful. very special thank to you you this morning. >> first real week then if july 11th -- >> july 11th was our pretend
week. >> this must be your -- >> that's not what she said. >> after the "huffington post" wrote the articles and got some comments and i think they got i don't know how many page views or whatever it is. i said after all this, i tweeted after all this on the huf "huffington post" and some readers on the "huffington post" disagreed with me. they wrote three articles on krugman. they were good and fair about krugman calling us zombies and said -- he disparaged the whole network. a couple of questions -- you're asking me a question. i have a nobel prize. just assume and exceed that everything i say is correct. anyway. we'll have some baklava a little bit later. happy birthday.
happy anniversary. >> happy anniversary to all of us collectively. >> do we have chairs today, ann? in the chairs? >> you never want to eat on tv. >> no. but batman is coming out on thursday. >> i'm very excited about that. >> the villain. >> you know who is most excited. >> scott is. they may go to the midnight showing. is the villain is a noxious gas breathing terrorist, the scourge of the entire civilized world. you know what his name is you don't know? >> i'm on to something. >> bain. >> it's a coincidence. >> it's a coincidence. got to be. >> lead story, the democrats are going to say -- >> it's bane. noxious gas breathing terrorist that wants to destroy the world and they are just licking their
chops. even the creators of the character bane are saying he dems are trying to use this. it's romney, destroying jobs, destroying companies, outsource jobs, everything. one thing i saw this morning, eugene robinson has proven beyond a doubt, i guess in his mind through logic that bain capital was -- has proven it wasn't for creating jobs. that wasn't the rationale. it was for creating wealth. but it got me thinking. this great free enterprise system we have in this country and entrepreneurialship which drives everything, what percentage of entrepreneurs start a business by saying you know what? i want to create a lot of jobs. what? normal rationale forgoing into business? >> very rare where you get that. >> it's to try to make a living
and try to create wealth. >> i would argue some of the silicon valley entrepreneurs isn't that they want to change the world. >> what percentage would say the reason i wanted to start a business is to create jobs. >> that's a by product. >> it's a by product. >> one other thing. in this new csr, corporate social responsibility stuff, mumbo jumbo, new companies like thomas shoes -- >> i know blake himself. >> people are out there doing that. >> capitalist. you can do things. this suddenly is so profound. we're actually arguing about it. actually arguing whether corporations are people or not. stupid corporations are not made up of buildings and computers. they are all people. >> i was talking with someone
who happened to be a sister in i forget which order but he was talking to her about it trying to explain how you wanted to have capitalism and how important it was. she said you don't need to explain to it me because in our order we have our own saying no margin, no mission. that's the saying for this entire order of sisters who had gone back through. you can't pay for the missions if you don't have margin. >> starbucks at 50 to do corporate social responsibility. a lot easier than at 8. lot easier as you expand. >> three, four years ago they were ninth position to do that. >> i'll tease something. we'll go the chairs. i think we'll have some view of bane who is worse than darth vader. he has this tube.
>> like luke skywalker, he's your dad and bit off your arm. >> batman comes out of retirement. >> i know we're going off a tangent this is the last episode. what happens at the end? i don't know. >> have you seen the first two? >> have. >> i'm a batman guy. a spiderman guy. >> i think you're more of a robin guy. [ laughter ] >> you know -- >> we were going to dress up. >> i was going to be forced to be robin. i don't know what. i think it is now time for the global markets report. kelly evans is standing by in london this morning. kelly. >> hi, andrew. i hope everyone can bear with me. i'm in a different position because behind me we're still taking the testimony from this latest barclays libor hearing and i can't see what you're
seeing on the screen but i'll try to give you a sense of what's happening. i'll mention july 17th is significant for a few other reasons. i want happens to be birthday not just of angela merkel but of kayla and me as well. let me get straight to it. stocks around the continent are broadly higher. ftse 100 was the lone exception. the tone more positive perhaps has to do turning from a monday to tuesday because as we know in the u.s. monday we've been down seven out of the last seven times for the u.s. index. bonds are always the big story. spain this morning was able to auction off 12 and 18 month port-au-princer at lower yields than last time it was in the market. the ten year not showing too much relief. back up to levels of 6.86% the last time i looked. want to show you the euro dollar which is rallying, joe, unfortunately for your european holiday plans i'm pleased sterling has taken a hit because
uk data inflation has come in. just a quick look at what's going on with barclays we're up 2.3% for the cone the ftse. outperforming the broader market this as the hearings continue and people don't ask questions about where the libor probe guys head from here. >> kelly evans, thank you for that. a very special happy birthday to you. i don't know if everybody caught that. >> and kayla too. a twofer. >> angela merkel. great birthday twin to have. >> we'll see how it all plays out. okay. we'll get back to the story of the morning, google executive, marissa mayer taking over as yahoo! president and ceo and she starts today. one another factoid. she's pregnant. isn't that interesting. marissa mayer is pregnant. it's funny because i was with her -- >> thought you meant patty.
>> not patty, marissa mayer was pregnant. i was with her a couple of months ago and we were at a conference in mexico and people were drinking pina coladas and margaritas and i walked away and was thinking. >> some people don't drink and doesn't mean they are pregnant. we'll get back to -- becky isn't drinking this morning. doesn't mean she's pregnant. can i get a margarita. >> good morning. thank you for being here. big debate. i don't even know if it's a big debate. is she going to turn around? can he had? >> it's too early to say. there's justifiably some excitement. it's bean while since you had somebody with a real product
focus. i think for the many products that google has rolled out her name has been on them. >> here's a question. she obviously is a huge name. she can hopefully bring a lot of talent and the idea is to change the game at yahoo!. however i've seen a number. analysts and other reports out over the past 24 hours that said look, some investors were hoping that yahoo! would be a quote-unquote value play. this is not a value play any more. this is a play -- this is a shoot the moon, go for gold, we're going for it now and that means more risk and you have to be more patient. >> there will be a patience requirement and for investors look took see this thing value for a wind down that probably won't happen as soon. but i think when you look at what yahoo! has there's a tremendous. a tech assets within the organization. last week they hired michael barrett from google. on the product side --
>> when you say ad tech what does that mean? >> how advertisers buy increasingly they are not buying it through yahoo! through other plat foorforms like google. yahoo! has fallen way behind in the space trying to do it all themselves. there's a lot of opportunity. ross levinson is going down that path do look at those other options. possibly bringing in somebody like michael barrett or marissa mayer you have people to sift through those assets and decide what assets to keep and which to pa parse out. >> do they become more competitive with google. >> i don't know if you have to put them head-to-head with google. it's a matter of figuring out what should yahoo! be and what assets will support that growth. >> if you're looking at new products and know where google is, it's amazing they don't have
any nonkpeepts going from google to next day yahoo!. isn't she thinking from the same mine set that google was. >> possibly. iran terms of e-mail, in terms of what the home page is like. i'm sure she will bring a lot of experience from google. so, i'm not clear on the question there if that's a problem or not. i think yahoo!, if you believe yahoo! at the end of the day needs be a content company and ross will bring interest that direction, maybe inevitably that will it heads and there could be a passage where she looks where it could be more than that. >> are they so far behind. people say they still need to merge with someone. in terms of size and scale, ultimately this represents they want to remain independent. do you see them trying to buy somebody, maybe an aol. >> the chances there are slim. when you look what yahoo! has
and aol has, there's a lot of similarities and a lot having premium inventory. i think their course has started to diverge somewhat. for her the challenges at yahoo! are pretty substantial. that's going to keep them busy for quite some time before trying to integrate. >> what do you think about the stock price? >> it's attractive right now. we have an equal weight. we assign very little value to the core. there's whole option in terms of the alibaba asset in terms to convert. i think the company is looking to buy back roughly a quarter -- has authorization to buy back a quarter of the shares outstanding. the risk reward is pretty good and i think with risk coming in it provides a little bit of an option. we'll see. for some investors it's as you said require more patience. >> thanks for coming in early this morning. >> andrew, congratulations on
breaking this news yesterday. >> thank you. crazy little story. i was talking to marisa before she talked to larry and sergei. great story. >> as a cnbc anchor, andrew broke the story. >> how does that work. it's a front page story with your by line. >> he was on cnbc. >> i was on cnbc. >> which andrew ross sorkin broke it the cnbc -- >> i'm going to claim it -- >> cnbc's andrew ross sorkin. >> you have to split the brain. there's a left brain and right brain >> you're ambidextrous at something. >> don't go there. >> wait a minute. you broke it here. >> we broke it on the air and on deal book. >> which came first. >> worldwide simultaneous -- >> which came first. >> virtually at the same time.
had -- i guess we had alice on saying there's no way a qe3 but she was saying, she's a big supporter of the dual mandate. but doesn't think we should be doing qe3. if you support the dual mandate you should be doing qe3. i don't think the dual mandate is that smart, i don't think they should do the qe3 because of the negative consequences. but if you have unemployment at 8.3% that's incumbent on them trying to do something. >> it's last bullet. >> they say it's not. they are lying. they pushed on a string for a while. >> exactly. what more can you do at this point other than let the economy go through its natural progression which is we're slowing down but then over time things will improve. you got a lot of good tail winds coming, cost of oil is coming down. energy prices are down. you see some of those things.
and over time global growth will come back but you keep on doing these artificial, i would say, stimulus that the market will now respond. >> we forget they even gave that statement that want said, you know, i forget, because time has passed, 2014 -- >> late 2013 -- >> 2014. >> that's incredible to say we'll keep rates basically at zero for two more years. >> apartment some point what will happen rates will start going up. >> didn't cost them anything and they probably reserved the right to not change you want. >> what they are really -- if you look forward kind of on the negative side which markets are overly discounting is how much earnings are going to get hurt by europe and secondly the fiscal cliff. quite a few positives in you're view if you're a long term investor the industrials have been killed and i think they are cheap. great dividends. technology stocks that have
cyclical growth are growing, growing at 10% a year but treated as if they won't grow any more. you look at the other side, utilities and consumer staple companies that are at all time highs. you can see where the market is moving towards a defensive stand. if you see any light at the end of the tunnel you can see these sectors and stocks going up. >> what would bernanke say to get the equity markets happier or excited today? do you think -- i feel your pain, i know things aren't great out there. i'm ready, i got my finger on the button, not just yet. >> if he says we'll do something and then all of a sudden what we talked about initially what else do you have to do? >> what can he do other than say i've done everything you're on your own. >> what he'll press is congress get your act together. >> did you hear chuck schumer supposedly planning to press him to say wait a second it's time for you twice to step up dean more spending because we can't
do anything from congress. you keep saying congress has to do it but we have a dysfunctional congress. bernanke the pressure is on you to push them into that position which is amazing to think an elected official will be pushing on the federal reserve which is not supposed to be -- which is supposed to be immune. >> the federal reserve will say we've done x, y and z. >> it sound like a strategy that will backfire. >> if he's being told to do something, you'll say why am i doing to do this. he needs to push back. congress needs to get their act together. everybody is saying that. if you get any type of positive news out that, we get some type, markets will respond much morsetively and bernanke can do at this point. there's not much he can do. >> all right. thank you. i may have a filter. >> we'll hear about it. >> when we come back, yahoo!
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> yeah. i think you're on the block. good morning and welcome back to "squawk box" here on cnbc. >> maybe ask for something else >> you're on block. >> you're on blocks. >> both to wait for the new stuff. >> i'm joe kernen along with becky quick and scoop sorkin, making headlines, big scoop yesterday. what were you doing on the phone with her in the first place?
>> tracking this down. >> tell us how you got wind of it. tell us your sources. >> no. >> a magician doesn't tell how he does his tricks. >> marissa mayer to become new yahoo!'s third boss in a year. levinson is unlikely to remain at the company. shares of yahoo! rising after hours. she's wealthy. she's young. she was employee number 20. employee number 20. >> at google. >> responsible for the page you love so much. home page. search on page with the cool graphic at the top that's telling you something. >> she's apparently with child. she better start saving up. >> we should say that's a patty seller scoop. >> she should start saving up
for college because college is really expensive. it's expensive right now. $5 or $6 billion by the time the kid is in college. most of the country is suffering through drought conditions that compare to the dust bowl year of the '30s. federal forecasters say nearly 60% of the country is in some stage of a drought and 1,000 counties and 26 states have been declared disaster areas. corn prices are not beans in the teens but $7.16 is not usually associated with where corn prices are. >> this was a huge topic of discussion with farmers we talked to out west. also the imf is warning policymakers if they don't shape up the global economy is in for a dangerous slow down. joining us right now the chief of a hedge fund.
garth, you have ideas about potential black swan investing. there's a lot going on. what do you do right now from text yourself against any of the potential huge swings in volatility? >> clearly a lot of risk highlighted by the imf report as well. our general view is the global growth slow down is firing from all different measures. austerity measures in europe, affecting earnings this season. weakness out of china. clearly the fiscal cliff in the u.s. and a lot of the other economic data in the u.s. whether retail sales, employment and earnings are all contributing to this synchronized slow down. the way we like to look at it is in the synchronized periods of weakness, asset markets tend to be very correlated. if you look to protect yourself and your portfolio there's some
ability to do that outside of the traditional equity markets. >> like what? >> such as increasing your exposure from an asset allocation perspective to things like interest rates, to markets like interest rates. if you have the ability to do that to look outside of teen u.s. markets. a lot of markets where there has still yet to be some policy accommodation, some of the emerging markets, increase exposure to european interest rates, increase exposure to emerging market interest rates. high yield bonds are sensitive to growth. decrease high yield exposure in favor of more investment grade. >> what's the chance of a more black swan event versus the usual malaise and concern about things but then potentially the market powering through. >> a couple of months ago the odds of a black swan event if you want to call it that were much higher. developments out of europe post-greek election, post-eu
summit, we've decreased our probability of some sort of systemic tail event. we're more concerned about global growth than we are some sort of, you know, unexpected event that could cause a 20%, 30% -- >> how does that change the scenario if europe is not looking as likely to be the big issue that pushes us off of some sort of a cliff, how does that change your scenario in terms of your investing strategy? >> it means when you look for protection strategies you're looking for protection for more modest pullbacks in the mark, 5% or 10% pull back something like we saw a couple of months ago and not looking for that real disaster insurance that you may have been looking for a couple of months ago. >> we got bernanke speaking today on capitol hill. we've been trying to figure out what he could possibly say or why he would say anything. there was a letter this morning that said the fed is in a
position not wanting to do anything at all. that the idea that we have this election, the fed doesn't want to get involved in this. does that make stones you. >> yeah, that makes sense. i think even absent an election i think they are at the end of their ability to have a meaningful impact in terms of additional programs. we're now up to qe2, qe3, additional measures are harder and harder to get returns on and so since we had operation twist extended, i think the bar is set pretty high for them to do something in addition this early on top of that. now if they wanted to have a more meaningful impact i would suggest that they -- maybe they will start looking at more unconventional type policies as opposed to just buying treasuries or buying mortgages. the next step may be focusing on policies that will not just adjust the price of interest rates but more look to real ways to start getting some credit
easing into the system. >> that would be a whole new ball game. we won't hear that today. >> i don't think we'll hear it today but it's on the menu for down the road, especially if you were talking about it earlier if you believe in the dual mandate they have to do something. doing nothing is not really an option for them. you know, they've shown us in the past that they will go down the unconventional route if needed. >> garth, thank you for coming in today. >> thank you. >> if you've got comments, questions about anything you see here on "squawk" -- what are you laughing about? >> is your life complete now that you're unblocked? is it working now >> i'm officially within the joe "squawk" -- >> but you thought -- he thought that i was tweeting about him and that's why you were blocked. you can go back -- i have 103 tweets as of today. not a single one about you.
>> got to get that song "you're so vain you think this song is about you." >> you think i'm tweeting behind your back. you have 500,000 listening what you say about me. >> if you want to tweet us do so at email@example.com. >> mike tyson can soon be back in the spotlight. tickets are on sale for his one man show "undisputed truth" directed by spike lee.
welcome back to "squawk box". kevin ferry joins us from the cme. good morning. >> good morning. >> so, mr. bernanke, he's going to be chatting up a storm in washington. is there a way to play this ahead of it? what are you thinking about? >> okay. one thing to remember is since thursday morning the s&p is already up about 30 handles.
with some surprisingly weak news. some positive fed statement effect that goes through the market has already definitely in there. the only other thing that i would add as you were discussing with the last guest is that what the chairman needs to do or what i think he will do is highlight that in spite of some very serious situations in europe, financial conditions which is what he's in charge of, here are stable to improve somewhat. so that rarely gives them the ability to think it ball back and say people's fears is about the fiscal situation coming forward. >> what's more important what bernanke says today or coke, goldman, johnson & johnson earnings? >> i would like to believe it's the latter. you know, i meantime will tell. again, you know, what kind of a electrifiedance these people
gi -- guidance these people gifford is more important to the major picture. >> you want to handicap it? >> you mean what are the odds? >> yeah. >> well, i would say it's -- i would say it's, i would go 70/30 in favor of the corporate side instead of the bernanke side. >> okay. we'll take that. kevin that was for joining us this morning. >> really good. >> it really is. >> baklava. >> it's fat free. >> it is not. trust me. it is not. >> quick fooling yourself. >> low-carb. >> no but it's really good. >> no sugar. sugar free. why can't greece export some baklava? i mean -- >> get their way out of the troubles. noo >> no. not always this good. >> should have known. >> arianna, thank you.
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welcome back, everybody. u.s. senate report is concluding that hsbc had what they are calling a pervasive polluted culture that allowed it to handle iran and drug money. this is a blockbuster . you expect this out of a fiction book. >> this reads a little bit like a tom clancy novel. six hsbc executives will be up on capitol hill testifying before a subcommittee on investigations they put out this report, about 330 pages just last night detailing all sorts of alleged money laundering activities at hsbc going back years. take a look here at some of the lights including suspicions of mexican drug cartel money, allegations of iranian financial transactions and questions of terror links in saudi arabia inside this report.
now hsbc put out a statement yesterday staying we will acknowledge that in the past we have sometimes failed to meet the standards that regulators and customers expect. we'll apologize, apologize, ack these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong." i've been going through this report since it was released yesterday. there's a lot in here. i want to read you one e-mail transaction, an e-mail that's between an hsbc compliance executive, compliance officer to an executive at the firm, they'd been going back and forth over whether or not to support transactions with the saudi bank called al raja, an islamist bank the report says has been linked to financing for al qaeda, eventually according to the time line laid out in this report they decided to go ahead and do business with al raji bank and the e-mail says "looks like you're fine to continue to deal with al raji. you'd better be making lots of
money." so that's the sort of thing those hsbc executives could be faced with today. we'll see as the day goes on how they explain the activity over the years. it says it will overhaul its compliance and bring everything in the world up to u.s. compliance standards so a lot of changes here coming for hsbc. >> eamon, thank you very much. >> we're going to run this. ♪ >> that works with that. >> it's better. i am in superhero heaven at home, and it was on this great guy that invented, stanley who invented spider-man there was a contest who was the best batman. adam west i think won. >> did you see christian bale's spider-man in high school? >> you're kidding. how did you recognize him in
are? a. >> this is a guy who made a cameo in his own movie. >> hitchcock, you were staand stanley and the great directors. "batman" opens thursday night. i'm probably going to be up late because if my kids go with my wife, she's crazy, it's summer but she takes them to the midnight openings and then i'm worry until 2:30 and i have to get up at 3:30 so i don't sleep at all. there is a villain in the new batman the final one, gets batman to come out of retirement, he's a noxious gas-breathing terrorist, and we got a shot of him, that's what he looks like right now, but the great thing is his name, drum roll, is bain. his name is bain, and chris lane, the democratic adviser, former clinton aide said it's been observed that movies can reflect the national mood and
whether it is spelled b-a-i-n and put out by the obama campaign or b-a-n-e put out by hollywood the narratives are similar, a past that both are seeking to cover up, both had a powerful father, and both are set on pillaging society. >> it's pretty perfect, plays into it. >> they're so similar. as you know, romney has got a father he's trying to cover up, he's ashamed of that. he's rich, trying to pillage society. for democrats that are pushing the this, the other villain, anne hath away, catwoman, a thief who steals from the rich, "there's a storm coming, mr. wayne, you and your friends
better baton down the hatches because when it hitches you'll wonder how you could live so large and leave so little for the rest of us." that's right out of ok pi wall street but she's a bad guy and the good guy is batman. i love that, that the big 0.0001 sp % is saving society. >> bane. >> can i go with scott and watch the movie at midnight and try to do the show on friday? >> i will tell you what you can do. there's going to be a batman marathon and play all three of the new ones with christian bale, runs nine hours and he wants to go. i can't, there's not enough popcorn in the world but you could do that with your own son. >> i might have to do that. >> guys, we have talked in the past about who is smarter, men or women. who do you think? i'm not asking larry summers. i'm asking you. >> i saw the reports that the iq of women have risen faster than men. that was out yesterday or something, yes.
>> you're right. for 100 years, women have scored lower in iq tests by about five points. now for the first time ever, women are higher. it's only by about half a point. the good news is both men and women are getting smarter but it's just women are getting smarter faster than men and they think it's because of increasing access to education and the world's more complex and maybe women look at things a little differently, it helps them, the more complex the problems get. >> i'd believe it, every single day. >> you guys are both, you have incredibly intelligent wives and think highly of them. >> yes, i'm married to superwoman. >> and i'm smart enough to not disagree with you. i may not be smarter than you but i'm just going to nod and say that is a good story and it's -- >> i was so excited to see it. >> certainly true in all respects, right? >> in every respect. in every respect. we got a minute, let's go through it quick, did you show that piece, front page of "the
"wall street journal"" goldman builds private bank. people are taking advantage of it for the first time. >> crappy business t just shows you how -- >> just get rid of it eventually. >> they talked about trying to get rid of it. the fed won't let them. as joe just said it's a lousy business to begin with but shows how tough wall street is to make money. >> according to my goldman atm machine. he asked for $300, it gives you like $240. oh, sorry, the fees. >> you guys fly a lot and we talk about whether we should go to the gym and be healthy. now you can workout at the airport. so there are now gyms and yoga studios at the airport. >> i would do it if it's a layover. >> anyway that's the story. >> stretch out and get the blood moving. >> i don't know if i could do it. i just want to go to mcdonald's. >> when we come back, bernanke on capitol hill, a new ceo at
the fed in focus, the smartest money minds are here to weigh in on what fed chairman ben bernanke will tell lawmakers on capitol hill today. creating business opportunities, he's done it all. >> it's going to happen again. >> real estate mogul donald trump joins us this morning. and johnson & johnson and coke numbers out minutes from now. the second hour of "squawk" begins right now. ♪
good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. after being down for seven of the last eight sessions we are seeing green arrow this is morning, the dow futures up by just over 25 points. got a lot of news coming but andrew has the top story of the morning. >> yahoo! selecting long time google exec marisa mayer to become the new ceo. it makes her the third ceo in a year at the company, if you include interim ceos it's five. mayer's hiring edged out ross levinson. shares were up more than 2% yesterday on the news. mayer wasted no time and jumping in, she starts today. mayer was one of google's earliest employees, number 20 and the company's first female engineer. we'll have more on yahoo!'s latest hiring in a bit.
as we said in the 6:00 hour, she's pregnant so a lot of news to go around this morning. >> 2% is -- >> 32 cents? >> you think that's not enough? we'll see what happens today. i think there are people who are going to bet on her today. >> maybe so. that's a kick in the rear, not quite, but. a semiannual report to congress, investors are waiting for hints of a possible qe3. steve liesman joins us now more. you're going to do your report because i was just going to tell you, dual mandate, now i think if there is a dual mandate at 8.2, i just don't see why. >> why they wouldn't be doing it. >> i might be able to explain that. you make fun of the name of my band. that's what i was prepared for. >> the man eaters. >> the mazza ballers. we were the moon cussers and we're playing this thursday.
the way you make fun of my band is the bane of my existence. >> did you see pictures of the villain, a terrorist trying to hide his past with a rich father. >> just a coincidence. >> trying to pillage society. >> this is the thing that fuels your psyche in terms of your belief in the world. >> i think a lot of hollywood stuff -- >> there was another one like this. >> it was created in the early '90s. >> fed chairman bernanke is going to come to the hill, the bet is he's going to use the opportunity to express more concern about the economy, lay the groundwork without starting it or providing a tame able to. "we look for mr. bernanke to attempt to buy time and adjust market expectations for further quantitative easing away from upcoming fomc meeting setting the stage for a fed decision in september." retail sales are falling sometime in june, economists are lowing second quarter estimates
to 1 to 1.5%, making it tough to hit the 2.1% forecast that is the consensus of the committee. bernanke emphasized jobs data and unemployment rate is a tenth a point above the 8.1% forecast for the whole year. weekly jobless claims improved. on the economic case of further easing is increasing in the day tax the fed chairman faces a divided board. here's what we see, george saying, will monetary policy put people back to work at this point? that's not clear. dennis lockhart of atlanta saying the fed may need to respond for aggressively. jim bullard saying low treasury yields takes pressure off of fed. bernanke might also begin talking about what new tools the fed could use to stimulate the economy. here is the expectation, the fed will likely emphasize mortgage purchases when it does qe in another round of easing and could extend its forecast for
low rates into 2015. >> steve we'll get more, joined by former new york federal reserve bank vice president dino cose and am i right it's a dual mandate, they have complete cover to try whatever they've got left, is it that they don't have anything left? >> they have flexibility to do more. the question is what is effective. they've done two rounds of large scale asset purchases. the irony is they have just eased according to their own standards, the new twist. >> new twist. >> the new twist they've just done that a couple of weeks ago so they're in the middle of this program and the irony is that the market looks straight through it. >> forgets it was a $200 billion something program. >> at the last minute people were looking were there hints for additional purchases, for more stuff so the market looked through it and shrugged it off
and ignored it. you can see why because in the first six months of the year the growth is about 1.5% so it hasn't delivered the growth that is the ultimate objective. >> john, did bernanke go back to some recent speeches and change a couple of words, put phrases here? it's going to be the same speech today, isn't it? >> he's not going to precommit and i think the september time frame if they do something is more likely, but if you look at what's been accomplished, the interest rate, long-term interest rate abjective has been accomplished. the economic growth object hasn't been achieved, so doesn't it tell us that this isn't a monetary problem, so looking to the fed to deal with this issue, because we have paralysis in washington, on the fiscal front how can monetary policy at this point offset the uncertainty about whether or not we get a
400 to $500 billion tax increase in 2013? >> the fed can control price, and inflation, so if the fed can't control joblessness and the economy, why pretend they can and why have it as part of the mandate again? >> i agree with you but unfortunately the fed does have that mandate. >> i wonder if bernanke and company has failed. if john is right and i think is he, that it's really not something the fed can do something about, because it's really in the first instance a european problem, has bernanke failed to control expectations at the market, given what you said earlier, that they've completely blown past the idea they did a $200 billion practicement? >> you know, monetary tools are not unlimited in their effect. they can't -- you can't achieve all objectives through managing money. and this is what we're finding out. and so you know, bernanke does i think probably need to adjust expectations, what can be achieved through the programs. he also probably needs to talk a
little bit more than he has about side effects and potential costs. there are potential costs, every time we've had these periods of very low interest rates like a decade ago there were costs, the costs came five, six, seven years later. >> does he want to remind anybody of that, while we have so much out there at this point? >> he did a lot, becky. in the press conference last time we talked about it. >> has hinted at it but hasn't given a full speech or a testimony about those costs. >> i think the number three scares bernanke, and when i say that in context of the balance sheet. he's 2.9 now and you start talking about a $3 trillion balance sheet, i know he said theoretically we could go as much or as big as we want. i think he feels like there's some kind of limit to how much he can do here in terms of qe. >> i disagree because i don't think there's any matchups. the ecb went through three and then four for that matter. i don't think he's going to be worried about that. there are political pressures
he'll face if he doesn't do another asset program but it's political pressure, no the an economic one. >> we started at 850 billion but again 850 billion to almost 3 trillion and we still haven't had the response. what does the balance sheet have to go to for people to perceive it make a difference. so if you do -- we sent a path of least resistance was extending operation twist, but to start up a new program and to be big enough to make a difference? what do they have to announce, $1 trillion of qe in mortgages to be worthwhile doing something at all, otherwise it's a case of -- >> it's your bet they don't do anything? what are you putting your money on? >> well i still think that we muddle through throughout it. i'm not pretending everything's fine in the economy, far from it. i just make the point it's not
monitoring. dino talks about side effects and he's right. if we have more medicine that has no benefit but has side effects. >> becky brought up the schumer thing earlier today. >> i think it's crazy. >> schumer is saying we can't do anything so you bernanke have to do something. take that over and take that game and overlay it on what happened in europe. trichet said he'd stay on the sideline until there was movement on the fiscal or political side and to me this is a fascinating game of chicken going on and it's a lousy reason to do monetary policy. >> to me it makes me think it's less likely bernanke will do anything because he can't look like he's bending to political pressure either. >> more to the point, what can the fed do to counter a 4% contraction in fiscal policy? >> bernanke has said nothing. he might do something to counter it. >> has this happened before, by the way? >> what? >> have there been conversations -- >> in the time i've been
covering this beat, which is about 12 years now, the willingness of politicians to talk about monetary policy has gone like this. they used to be very reluctant, they'd dance around the edges, wouldn't comment so much on them. am i right about that, dino? >> you went from actually talking about it a lot, 25, 30 years ago, and then during the clinton era it went down and they didn't talk about it at all. remember in the h.w. bush era, brady was leaning on the get and during the reuben era it went down and almost disappeared and now we're coming back again, in part because of the fed's policy, asset purchases, it's in the gray area, where monetary and fiscal policy are blurred. you can understand why that's happening. >> first bush blamed the fed. >> and greenspan. but then greenspan was seen as this larger than life figure and -- >> couldn't be touched by
politics. >> couldn't be touched and everybody liked the deal as congress leaves monetary policy alone and about the cost and benefits are monetary policy and the non-standard measures, one of the costs was to the credibility of the fed to the political image of the fed and that's been something that's really hurt the fed a lot. >> could i say one thing on the asset purchases, that is something that may have some effect if the risks on fiscal cliff or europe materialize. if you have a downdraft or vob text the market is into, it can help stabilize that, but you can't take a 1.5% economy and make it into a 3%, 4% economy. >> thanks to dino kos and john ryding and steve liesman of the moon cussers. >> e-mail us at firstname.lastname@example.org and follow us on twitte
twitter, @squawkcnbc. up next, donald will join us, politics and business collide when "squawk" returns. listeninr instinct. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. in every way, shape, and form. it's my dream vehicle. on a day to day basis, i am not using gas. my round trip is approximately 40 miles to work. head on home, stop at the grocery store, whatever else that i need to do -- still don't have to use gas. i'm never at the gas station unless i want some coffee. it's the best thing ever. as a matter of fact, i'm taking my savings so that i can go to hawaii. ♪ between listening to the so that numbers...o hawaii. ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions.
9:30 rolls around. >> seven out of the last eight sessions have been down. >> yes, that's right. >> we'll see where it goes. joining us on the "squawk" u.s. in line to talk politics and the economy is donald trump, the chairman, the president and the president of the trump organization, and donald, i know you always listen to the show. were you just listening to the bernanke conversation we were having? >> yes, i was. >> okay, so what do you think happens today when bernanke goes before the hill. there's a plan for charles schumer to say we can't do the fiscal policy so it's up to you to do monetary policy. what gives in this situation and what do you think is right? >> well i think what's right is to let the market keep going the way it is. the fact is that the country owes $16 trillion and we just can't keep doing this. the dollar is going to go to hell, we're no longer the great source and lots of things are happening and lots of bad things are happening with the country, so all of this artificial stimulus it's proven it's done nothing and we've got to get back on track. we have to get back on track by
paying down debt. we're not going to be doing it if bernanke goes wild. i don't think he will. he may do something minor but minor is too much. >> we had bowles and simpson on last week and we laid out their plan. >> we have to do something. we have to get the country back on track, and it's very severe. it's actually much more severe than obama wanted to hear, but we have to do something to get the country back on track. we are way off track right now as a country. >> so why is neither candidate, neither presidential candidate endorsing, if it's not simpson-bowles, some sort of a plan to get us back to the idea where you're going to have to raise revenue, you're going to have to cut expenses? simpson-bowles lays it out at 3:1 in terms of cutting spending versus raiding new revenue. why is no candidate taking this on right now? >> this is a nasty race.
the nastiest race i've ever seen. neither candidate wants to go out there i guess to the extent that they have to, because they're going to be so badly criticized. you look at what's happening, here's mitt romney did a great job at bain, and he's being terribly criticized, incredibly criticized and i can't believe how they get away with it, and you know, when you look at the nastiness, the really viciousness of the campaign, i think probably both of them say let's go down the middle track. you know after the election something's going to happen. >> something has to happen or we hit the fiscal cliff. >> something's going to happen but they certainly keep it on the back burner. >> donald, "the huffington post" has the democrats' latest move is going to go full force for the jugular on the tax returns that romney won't release, he's only released two years. i'm wondering whether he needs to, because the more that they do this now, tax returns are one thing and maybe he's got some offshore stuff, maybe he has a low effective rate or whatever, but what does has that got to do
with whether he's good at turning around the malaise we're in right now? the obama campaign can talk about this. i figure they can do this for another two weeks, three weeks maybe and nobody will be talking about the 8.2% unemployment rate in the meantime, but who enables the obama -- i guess it's the media and all of us that enable that to happen where we totally don't talk about anything substantive except for previous tax returns. >> they're after him, coming at him hard. i said yesterday and i'm being totally serious if they want such, if they want to be so revealing let's really reveal and what in my opinion, what mitt should be doing is saying we want to see all of your records. there are so many records that obama hasn't given, as an example, college applications and records which most presidents, almost every president is given so many different things, i would love to see his college application. >> what's good for the goose is not good for the gander.
>> the amazing thing, nobody brings it up. if somebody brings up the fact let's see your college records, let's see lots of other things that took place in chicago that are all sealed, i mean there's so much information in chicago that's sealed, you can't get it. if they want to play that game i would say republicans play that game. >> it's just a question of you have offshore accounts and -- >> you're right but he's under great pressure to do something, there's no question. >> if it's within the law. >> what would you want to see from the president and what would you want to see from romney, if you do this, you probably have to do it across the board. >> you have to do it across the board. i think romney is under great pressure to do something with the tax returns, whether it's right or wrong. >> how many years back? >> well if he gives three years they're going to want ten years, i mean no matter what he does it's not enough. the sad thing is they look at his existing returns and no matter, you know, you can take a
look at very complex tax returns, you can find hundreds of different things on him, if it's a big business or a big businessman or woman. in obama's case, there was no income, there was no nothing, they're very simple tax returns so he gives years and years of tax returns because there was -- mitt romney was a very successful guy, very complex returns. >> instead of saying, i think it was like $7 million, $4 million or $7 million to charity from romney and no one goes wow, that's great, it's nice to make a lot of money if you can give that money away to charity and some of that lowers your tax returns. >> romney gave a great percentage of his income to charity. obama didn't and joe biden gave almost nothing. >> i heard a smart republican strategist say that he should just release ten years' worth, get it out there and there's nothing to look at. do you agree with that in principle? >> it's a very complex question, becky, because he has complex
returns, and you can take the returns, what are thoetally perfect and proper and you can make him look very, very bad and that's what they're looking to do, whereas in the case of obama there was very little income, there were no deals other than a house in chicago, which we could talk about some other time, and there's nothing to talk about, a very simple return, so it's fine for him to say i'll give ten years' worth of returns but they take a tax return by a very successful businessman and turn it around and make him look very bad. so he's in a very tough position, there's no question about it. what he should be doing is asking for other types of records from obama, because they will be very revealing. >> donald, we want to thank you as always. we've got to run because we've got earnings from both goldman sachs and coke coming out but great talking to you and we'll see you next week. >> thank you very much. coming up, when you think of landmarks to visit, which tops your list? we'll run down a list of must see places in america, that's coming up next. and then two dow components as becky just said, set to
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in st. louis, missouri, the golden gate bridge, the space needle, mt. rush more, the hoover dam, the hollywood sign and empire state building and southernmost point in key west round out the list. can marisa mayer turn things around at yahoo!? up next, strike up the band and put on your marching shoes, wither' ready to start the earnings parade, goldman sachs, coke, johnson & johnson set to report within the next few minutes. "squawk" is coming right back after this. no problem. you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance.
welcome back to "squawk box." we're looking at some of the headlines, fed chairman ben bernanke will appear before the senate banking committee this morning and will talk to the house financial services committee tomorrow. the consumer price index is expected to rise 0.1%, according to consensus forecast. the core rate is seen up 0.2%.
and corn and soy bean prices remain at record highs as the drought in the midwest continues unabated. forecasters say there's little if any relief in sight through the end of this month, sparking some fears of food inflation, this drought is the worst since 1956, and we have seen some incredible spikes in corn prices. they are near record levels. >> okay, as we await the earnings of goldman sachs, johnson & johnson and coke let's talk more about that big story, reaction to the appointment of marisa mayer as yahoo!'s new ceo. paul meeks, good morning to you. your quick reaction before we get going, paul? >> i was a little bit surprised by the choice, obviously this is someone who is a senior at google and had been one of the earlier employees, however it seems to me that her career, no offense to her, had been a bit on the slide since larry paige came in, in april of 2011 as a
ceo. >> you take this as a positive or a negative then? >> i would like to know more from the chairman of the board of directors how they came to make this choice. obviously a press release was issued yesterday, but not without enough details, in my view. >> and from my understanding and the reporting i did, this was with the support of dan loew, the activist investor at third point and the entire board. does that give you any sa solac make you feel better or worse? >> dan loeb is there as an activist and investor, looking to shake things up so obviously that is a blessing in that regard. >> when you think about what you want to see out of yahoo! and what she can or cannot do, what is that? >> well, you really need to see them make some sort of a comeback in display advertising.
there are other early entre into the other internet space is game over by now. if they can regain some share and display advertising that's make or break for the company in the next couple of years. >> were you a fan of ross levinson, would you prefer he be named, he was the expected successor? >> i think he should have been given a chance because he seemed to be at least in the last couple of weeks or months doing the right things. he showed some leadership in closing that deal with facebook. he showed some leadership in closing that deal with alibaba. i thought it was his job to keep. >> people in the valley were surprised by you but said it was a huge coup for yahoo! bring potential engineers andtal don't the table and try to reignite the company and put a new face to it. you seem to be a little less enthusiastic. >> i'm a little bit less enthusiastic because of the trajectory of her career at google in the last, let's call
it two or three years. if she can with the brand name because we know goingle is a fabulous company, if she can, as you referred to, bring some talent with her, that remains to be seen and would be a nice coup. >> is there an argument to be said yahoo!'s seen better days, there is no opportunity. you're looking at me like i'm crazy but that's the question. >> is there any question they haven't? >> but the question today in an odd way some argue that bringing her on may give them an opportunity. look i saw people yesterday saying this could be not apple but there's a sort of apple-like chance. >> there's a consensus yahoo! has been written off for five years. >> that's the question, is it toast? >> no, i think yahoo! has a chance. they have some nice content, they come from a nice heritage, however, this he really haven't shown any game in the last couple of years. i wouldn't say they're toast, they can never come back but boy, it will be tough, i think tough for christ himself to come around there and turn around
that company. >> wow. different question then. is this the kind of company you would have preferred to see broken up, sold for pieceses as a value play? cy group with a report saying we considered this a value play and now all of a sudden it's a growth play which is a much higher risk proposition. >> i don't know if you could say until you get the new team on board to even construe this as being a growth play. right now it's a value stock, trading at an incredibly low price versus its assets. however, we've had that value situation for many years. what is the catalyst? we're going to have to identify some sort of a growth catalyst even for this valued name. >> what do you think a fair price would be? is it there? >> no, i don't think it's fair. over time when i last delved into this name you can just sell the company in pieces and get something between $20 and $25 a share.
much less for what microsoft offered a year ago in the low 30s. >> paul, thank you very much for spending time with us this morning. we appreciate it. >> thank you. >> by the way we should point out cnbc and yahoo! have a base lins to share and co-produce editorial content. >> we have a beat at $1.78, compared to $1.16 also an revenue. >> 6.282 i have over here. what do you have? >> on revenue? 6.63. >> beating 6.282. >> that is correct, yes. i thought you were saying it's 6.282. no it looks like a beat across the board. i want to get down in here and try to look at the investment banking business, which i imagine is going to be off, by the way, now -- >> let me tell you about comments lloyd blankfein is making in this, during the second quarter market conditions
deteriorated and activities for corporate and investor clients were lowered giving continued instability in europe, probably not a huge surprise but lets you see a little bit about the firm's perspective of what was happening there during that quarter. they also talk about net revenue in investment banking. $1.2 billion, that was 17% below a year ago. it was 4% higher than the first quarter of 2012. >> and you see the futures popping or at least appearing to pop on this news. by the way we always talk about compensation for better or worse with goldman sachs, they were saying today we have accrued $2.92 billion for the second quarter of 2012, a 9% decline compares with the second quarter of 2011, that comp. ratio which people always look at in terms of net revenues for the first half of 2012 now standing at 44%. >> that's exactly where it was before, that was the expectation that it would be at 44%, it stayed right there. >> trying to think what else, get down in here. >> dividend, 46 cents a share to
be paid september 27th, but again, it looks like a beat across the board and this is in line with what we've seen from many of the other financials to this point. wells fargo, jpmorgan, citi. >> i have to look for goldman instead of coke. waiting for coke at 7:30, but nothing yet on coke and j&j should be within the next seven minutes. >> right. >> or so. when you said you were looking for something, and i thought you were going to say, i was going to give you the comp. numbers but you were looking for investment banking. >> i was looking for the investment bank part of it. >> i would have said i'll bet you're looking for the compensation. you love those compensation. >> i'll admit i was not looking but as i was going down i saw the comp. numbers. >> normally you stop and look at the comp. number. you have an interest what the fat cats are paying themselves. that's what people do. >> people are interested in what they're getting paid. >> what the blood suckers are taking out of society for the good of themselves. >> your words, not mine.
>> like bain, the villain. >> in terms of underwriting it was significantly lower compared with a year ago, that's principally because of a decline in industry-wide activity, net revenue and debt underwriting were higher compared to the second quarter of 2011, and so we'll continue to take a look at this. >> did we focus on the fixed income commodities? >> no. >> $2.19 billion, that's 37% higher than the second quarter of 2011 and they say that's reflecting higher net revenues and mortgages commodities compared to what was a difficult market making condition in the second quarter of 2011 and we talked about market making and the volcker rule and all of that. >> more big earnings to come this morning. we'll take a quick break. will ben bernanke signal a new round of easing? what traders think, right after this. and later we have some breaking economic news, we'll get to the latest read on inflation with the june consumer price index. "squawk" will be back with reaction to goldman numbers right after this. i'm freaking out man.
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to $1.19 estimated. the metrix that people use for coke are volume, case volume, and worldwide estimates were for 3% and the company actually did 4%. so that's pretty good. north america grew 1%, and that is a little bit shy of the 2% estimate. i would imagine that europe might be disappointed. they were looking for 1.7%, although -- >> i just see international volume was up 5%. you're right, rurp down 4. >> versus supposedly down supposed to be 1.7. >> india was up 20%, russia was up 9%, china up 7%, brazil was up 6%, that's where you see the strong international growth coming in, 20% of india.
>> other than that we'll look for coke has been finally breaking out to some multi-year highs after being one of these blue chip stocks that peaked at 40 times earnings in the blue chip bubble of the late 90s. >> coca-cola, i'm not sure if you mentioned this, but coca-cola, like many international companies is going to get hit by the currency changes. second quarter revenue was up 3%. if you look at a comparable currency neutral net revenue which strips out the currency conversions it was up 7% so strong growth, but it would have been even stronger if it weren't for the dollar at this point in the currency conversions. >> and that is a 7 6% yield. get thoughts on what traders are expecting to hear from ben bernanke today. ben liechtenstein is here at the cme with more. you share a name. >> good morning. and many other things, intelligence levels as well.
>> yeah? well we've always said that. we've always said that idiot bernanke. no. tell us what you expect to hear from ben today? >> well, i think the market right now is really expecting to hear something optimistic. i think that again considering all the dismal type data we've been receiving coming into this, there's a lot of anticipation there's a possibility we could get some sort of insight or some sort of news to some sort of easing, some sort of stimulus activity, again, we're looking at the jobs data we've been receiving, absolutely disappointing, 80,000. look at the retail sales data we received yesterday, extremely disappointi disappointing, down 0.5%, a third lower number we've been seeing and if you remember back in 2010 it was the retail sales numbers coming in poorly that actually spurred some of the or that finally spurred that quantitative easing so again there's a lot of traders thinking this might be the data we've been waiting to receive in order to start that quantitative easing again, if you look at the
bonds right now, they've been seeing that 1.52 handle, up above levels from last week more importantly and this is something becky was looking for about a year ago and i noticed, realized, no, i'm talking about the dollar, becky, when are we going to see the stock market gain strength in addition to dollar strength and that's what we're seeing again, chalk it up to some weakness or some uncertainty amidst european crisis. for the most part with the dollar levels holding up above 83, testing the 84 level or near test of the 84 level with the s&ps holding up above 1,300, these are the levels we need to hold. >> we have $1.30 on johnson & johnson versus expectations of $1.29. the actual reported number was 50 cents a share, so $1.30 is excluding items and the revenue number was just slightly below at 16.5 billion versus estimates
of 16.69 billion. the company is forecasting full year 2012 numbers now of $5 to $5.07, and that is versus expectations of $5.14. >> as a result the bid/ask is well below where the company closed yesterday, 66.81 to 67.45. >> you ask yourself are they using the 50 cent number to get to the 5, the 5.07. they're using the 1.30, which is a penny ahead but that looks like you would then have to think that third quarter and fourth quarter there's going to be a couple of pennies below where wall street is right now. >> it says the company's guidance excludes the impact of special items and reflects the negative impact of recent currency movements. >> so it's a currency thing. >> partially offset from the sense of acquisition they talked about before. >> yeah so that's another dow component.
>> currently. >> this is down more than coke is up. so we'll take a look at the futures next time, it should reflect the johnson & johnson report, too. >> pharmaceutical sales, $6.3 billion for the sec. quarter, up 0.9% versus the prior year, but yeah, currency is going to be a big issue. >> kind of funny because two of the bluest of the blue chips, j&j and p&g both in recent years have, you can almost feel it, lost a little bit of their lustre, you see with acman with p&g and weldman leaving j&j because of the recalls. is there anything bluer? ibm, j&j and coke and maybe at&t. >> are you arguing they're no longer blue? >> i'm not arguing, they're not the deep, deep blue without chinks in the armor. proctor & gamble but that guy is under assault, the ceo. >> it's hard to keep prices up
at the levels. >> right. and j&j, i mean weldman, so much pressure on him he finally is leaving, although you don't know why people retire. i get to a certain -- how many yachts can you water ski behind, gordon? how much money do you really need to make? you need a lot. >> if i remember, what was michael douglas' answer in "wall street 2"? in "wall street 2" he's asked what's your number? >> i haven't seen a movie so bad since "caddyshack 2." jackie mason, i love jackie mason but there hasn't been as bad as "wall street." coming up, reaction to the goldman sachs numbers. can you think of a worse sequel? >> i'm thinking. >> in the history of -- >> "jaws 4" in 4d was bad, sorry, "jaws 3" in 3d. "jaws 4" followed them to the bahamas. >> broke into sea world, that
can happen at any time. >> by the way, the answer to what's your number? >> yeah. >> more. >> more. more. more. at the top of the hour we'll finally see, will we finally see some stability in the executive suite at yahoo!? we'll speak to a top ranked analyst about the big scoop yesterday, marisa mayers moved from google. "squawk box" is coming right back. ♪
jpmorgan manager mike weinstein is standing by with more on the johnson & johnson numbers. it laid out it out for us maybe the third and fourth quarter might not be quite as good as what wall street is expecting, because is it currency? >> it's all currency, joe. the operational results for the quarter looked pretty much in line with what we were modeling, i think what the street was modeling. that's more of a headwind in the second quarter and they lowered the full year guidance which we were expecting them to do because of currency but it was by more than people were expecting and that's why, and
that's why the stock's off a little bit preopen here. >> we don't follow it as closely as you do, mike. where are we? i was making the point as maybe three, four, five years ago the bluest of the blue chips i think, even warren buffett, it has, the recalls have taken their toll to some extent, right, and weldon's leaving. where are we with new management and is the stock or the company going to regain some of that tarnish, you think? >> well, i think that i think a lot of that activity is still forefront, but i really think that with the promotion of alex gorski, the ceo took over in april, you'll see some cultural changes take place at j&j, and i think that the old opinion if everybody had a j&j of being this high quality product leader category leader across so many parts of health care, i think
that's still very much there, and that will be restored over the next several years. so i have every confidence in j&j. we just upgraded the stock you might recall about a month ago, and it was the first time rerecommended j&j in about three and a half years. >> it's not the culture of j&j is not fine, it's not bloated. they don't need to go in and make some larger changes to any divisions, pair divisions, there's no blow to bureaucracy, nothing like that? >> well, i don't think -- i certainly don't think they made significant cultural or strategic changes. i think that they're running as large as j&j. there's areas of improvement, and it doesn't turn overnight. you will see growth accelerate in the second half of the year? you'll see revenue growth
accelerate and get back to a level they haven't been at in the last few years in part because of some of the head winds you were mentioning. you'll see signs of performance improvement the second half of this year and into next year, that will give investors their first glimpse of okay j&j is back on track. >> mike weinstein thanks for your time today. when we come back in the next hour, senate and banking committee member bob corker and what he'll ask fed chief bernanke on today's cearnings. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.
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goldman sachs, the latest of the big investment banks to report. we'll talk with brad lynch, former cfo at lehman brothers. ben bernanke headed to the hill to talk monetary policy. senator corker will tell us what he expects to hear. breaking data on inflation, consumer price index numbers for june due out at 8:30 a.m. eastern, we'll talk inflation, the fed and the markets with pimco's mohammed el aryan.
the second hour of "squawk box" begins right now. >> welcome back to "squawk box" here on cnbc. we are first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin. u.s. equity futures are right back to where they were, on coke and goldman they went up a little, and then j&j, back up around 37 points or so. there are some big numbers from companies today. >> let's walk you through some of the numbers, major companies reporting this morning, goldman sachs reporting earnings of $1.78 per share, versus estimates of $1.16, handily beating revenues and beating the forecasts, although ceo lloyd blankfein says that market conditions deteriorated during the quarter. coca-cola beating street expectations, reporting second quarter earnings of $1.22, now that's x items versus estimates
of $1.19. worldwide case volume beat estimates. volume drop in the european market was larger than anticipated and johnson & johnson reporting $1.30, a penny above expectations. here is what you have to watch the medical devicemaker's full year forecast reflects negative impact of currency issues and we're going to be watching how the dow reacts as a result of that. also today fed chairman ben bernanke is headed to capitol hill, offering his semiannual monetary policy report before the senate banking committee, the markets are going to be listening very closely of course for any hints that the central bank is considering more quantitative easing and banking committee member bob corker will join us in a few moments from now and as becky was talking, we were talking all morning about what senator schumer may be asking today, this idea that he may be pushing him, ben berna e bernanke, for more stimulus. >> it's odd to see the separation of church and state
between the fed and congress, but it's always interesting to see the senate give some push like this. so it could make for some fun stuff happening today. >> a little theeter this morning? >> that's right. we've been talking about a story andrew broke yesterday, yahoo! selecting long time google executive marisa mayer to become its new ceo. mark andressohn shared his thoughts with julia boorstin yesterday. listen in. >> it's a signal from yahoo!'s board they want yahoo! to become a product leader and innovator again. if they wanted somebody to do sales and content they have a perfect guy with ross levensohn. >> we'll have more in a few minutes but joining us is john forte and also mark mahaney of citigroup investment research. john, we start things out with you. how much does this turn things on their head in silicon valley? this was a pretty big surprise. >> big surprise and i talked to
a lot of people yesterday about this, almost universal excitement from the vc community, the entrepreneur community about what this means for yahoo! because marissa mayer really has been so deeply involved with dogoogle's succes over a long period of time. the one note of caution i heard from several people was, will she have the time to really get this job done? is it too late for yahoo!? this board is relatively new in its current iteration. will they have the patience and fully support her? she has the chops on the product side. she knows how to be the public face of a company. it's a question of whether she'll have the time to figure things out. >> marc, how much patience about the board have at this point? you have an activist board. >> you've had almost a complete turnover in the board, 9 out of the 12 members are new or at have been there within less than a year.
change is necessary, stot the stock's salvation implied no growth. there's been almost no free growth over five years so something dramatic needed to be done. it's impossible to describe this as anything but dramatic. there's a lot of challenges ahead for her but she's got a decent a shot as anybody we've seen as ceo in the last three years. >> decent shot, some big surprise was needed. we got a big surprise and yet the stock reaction was a gain of 2%. is that almost disappointing to see a reaction like that, not more of a pop? >> no, i think that's probably the right reaction. she's going to have to prove herself as ceo of a very large company. there's a couple of major assets that are part of yahoo! asia's stake in yahoo! japan, her ability to help negotiate the deals is far from proven so there's a lot of things that need to be done and also one structural issue, yahoo! remains a premium display advertising company in a world where facebook and google's own
display ad network are undermining prices and that's a negative issue for yahoo!. >> what would be a real coup in terms of a first quick step, something you'd like to see accomplished sooner rather than later? >> this is a big unknown. she has great product expertise, what product could yahoo! develop that would dramatically reverse the kind of slow bleeding away of consumers to yahoo!'s site? i don't know what that product is. hopefully marisa has some ideas right off the top, but it's hard to look at the site and say what's actually missing. there could be some tweaks here or there but what's going to turn the users back towards yahoo!? i think that's a tough bet that she can actually come one that easily. she may have some great ideas and we'll hopefully hear something tonight on the earnings call. >> mark you sound skeptical. what do you think a fair price for the stock is now? >> somewhere not too far away from here, $18, $19. we could see some upside here. we see more upside with other stock. frankly, there have been surprises in terms of the stock. we thought the stock would have traded up more on the alibaba
deal but there's so much skepticism about the name and it's a real hats off to marisa for trying to take on this kind of challenge. it reminds me of tim armstrong trying to turn around bayowa. it's a bold new board and i give them credit for that. >> mark are you happier to hear she's taken the job rather than ross levensohn? >> this was a more aggressive bet. ross could do certain things extremely well, manage relations with advertisers, those are the people that are going to be bringing in the money. he has some very good organizational chops. those probably are a little bit clearer than marisa's. it's hard to know what exactly marisa has been doing. she's done a lot of stuff on the product side. in terms of running a large organization that remains to be proven. we're indifferent between the two. >> now that they're taking clearly an independent approach where they want to grow the business as opposed to run it as
a value play, do you expect them to seek acquisitions? do you think they have enough scale and size to make this work by themselves? >> yeah, sure we've got the scale and size. the problem is the scale and size has started to, has been undermined a little bit over the last couple of years but it's been a flat business. you just raised one question, what about m&a strategy. marissa is known for the segat acquisition. it's hard to identify what the acquisition is and a problema has has been unable to buy attractive assets over the last couple of years because they've preferred to be sold to google or facebook. >> has that changed now that she's in charge? >> i don't think so. >> i would jump in here. i think that could change. number of the vcs i talked to i asked specifically that question, does this improve
yahoo!'s potential as an acquirer. they said yes, mayer herself has investments in a number of hot startups, known to really care what's going on in the ground level. something i point out also, this isn't an issue of an operational thing easy to fix. there are a number of secular declines yahoo! is struggling with them, yahoo! mail, people aren't using e-mail clients in the same way they used to. >> hey, i'm still yahoo! mail. >> this is a long -- >> you are a yahoo! mailer? >> marissa needs you. this say long-term finx here. >> jon, mark, thank you. cnbc and yahoo! have a business alliance to share and co-produce editorial content, just something we need to point out to the viewers, too. >> that's new for us. it's a good thing. >> i know it is but before i was
saying -- it's history, that was a stupid move, i meant just the perception. it's tough for yahoo! to get back. what does that mean? >> it means i have a private yahoo! account. >> why do you have a private e-mail, things to hide? >> oh the things i don't tell you, joseph. >> i have a gmail account. >> why? why? what is that for? >> so that if you're trading dirty pictures, you know. >> oh my god, wow! ♪ >> it's all kinds of things you can do on a private e-mail account you wouldn't do on your work account. ♪ >> i have no other -- >> i need to think about that. >> i have no other -- >> mostly i do it because it saves everything i ever need, i can save pictures and all stuff on it. >> gmail to me sounds girthy, g spot, g mail, g-string. ♪ anything g, is there anything g? >> gnews. >> g things are usually not rated g.
anyway. >> i have pictures of little kids. you have unlimited storage, as much storage as i've ever needed for all of it. >> geez. coming up looking for signs of more easing, fed watchers are on alert as ben bernanke heads to capitol hill to deliver his, you know what, semiannual and comes quickly, it scares me, delivers the semiannual monetary report to policy. life is flying by. senator corkler tell us what he wants to hear. and more of cnbc's interview with netscape co-founder marc andressohn, he weighs in on the social network's ipo. still ahead, we'll break down the goldman sachs results with brad hintz, senior analyst at sanford bernstein, former cfo of lehman brothers. [ male announcer ] what if you had thermal night-vision goggles,
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welcome back to "squawk box." weak employment and manufacturing data weighing in on the economy. ben bernanke will testify on capitol hill today and tomorrow. senator bob corker is here to tell us what he expects to hear from the fed chairman and in previous interviews bob, i guess you'd like to let a few chips
fall where they may and we went over some of the fed's previous action and i guess i had forgotten, they actually told us they were going to keep rates at zero for like until almost a hereafter. there have been some extraordinary steps and it's amazing they're still thinking what else can we do here to help. >> yeah, of course i'm a single mandate person and i think -- >> i guess i am, too. >> the fed is losing credibility right now, when people wake up in the mornings wondering if bad news means good news because it's more money coming into the market, most people understand the fed is the biggest lender to us today, far greater than china. we're in a place that is unhealthy and i hope the fed will say congress it's up to you to do your job and solve the fiscal problems of our nation.
put in place pro-growth tax reform, do those things that are going to make our economy strong for the long haul. i'm not doing anything else has fed chairman. do you your job and our country will be fine. that's what i hope he'll do. i doubt that's what he will do. numbers of people will be pressing him for more quantitative easing and by the way, when he came in to talk with me personally about qe2, he talked to many other people about it, he really was concerned about deflation at the time. that is not where we are today. we are on the upper end of where we want to be as a country as far as inflation goes. this now i think we're pushing rope and i think it's time for the federal reserve to settle down, quit being so distortionary and quit being the center of attention and calls congress to do what it needs to do. >> so how would you get rid of one of the mandates? is that something we'd ever do? i guess we got some other things. it would be nice to have a budget, maybe nice to do
something about this fiscal cliff, but sooner or later, we just heard, we had some fed watchers say well the fed just realizes that they can't do anything that actually will create jobs and they can't do anything that will actually fix the economy and they can do price control. they can do the inflation side of the mandate, if they can't do the other one, why don't you get rid of it? you could do it. it would be an act of congress. >> i have a bill that does just that, joe, and i don't expect it to pass any time soon, but i've been out there for almost two years now a bill to create a single mandate. i think the fed in some ways might welcome that, so they wouldn't have this bipolar mandate they now have. obviously the european central bank both have price stability. the dual mandate puts them in an odd place. unemployment is unacceptably high. the best way for that to be
dealt with is for us to do fiscal reform we need to do here in our country and this sugary approach leading into an election to me is not the way to do it and again, i really do think that they are hurting their credibility, and i think what they're doing, they're acting as, they're keeping congress from having to do its job, and i wish the chairman again, i don't know if he plans on being chairman after this, i wish he would, you know, tell congress to start acting responsibly, acting like adults and deal with the issues this nation faces. we're in an incredible place if you look at where we are as it relates to energy, technology, pharmaceutical breakthroughs, we are one fiscal reform deal away from really being able to focus on being a great nation. we have so much going for us right now, and the only impediment is us here in washington, and i think the more
that the chairman and the federal reserve continues to do these things, that basically it alleviates pressure from us. i'm more optimistic about our country than i have ever been. i do believe at some point in the near future, we are going to do the fiscal reforms that need to take place and i think the feds actions, the hyperactivity, lessen the sense of urgency. regardless of that we'll deal with that over the next six months to year and a half. >> senate you raised the question, i wasn't going to go there, you don't know what ben bernanke will want to do next. is he the right man for the job and if for example there's a new administration next year, who would you like to see be the fed chairman if it is not mr. bernanke?
>> the next person coming in, i'd love to see us pass that and turn that into law and put the pressure back on congress to act as i just mentioned over longer periods of time, but you know, i don't know, we've had a lot of people, i don't know that i want to throw out a name. there are lots of people i think would focus on price stability, john taylor is a name that's mentioned often, but i just, i don't know that i want to weigh in. i'm not actually -- i think bernanke is under tremendous pressure because of us and i know today he's going to hear from both sides of the aisle, very different things. he's going to hear our side of the aisle. i'm sure talking about them being hyperactive, chuck schumer understands this morning i understand is going to be pressing him to do more for employment, and so the dual mandate does create a problem, so i don't know if i want to weigh in on who the person is,
but certainly the next president will make that decision, and it's my thinking that actually the chairman doesn't want to go beyond that. i doubt that he does so it's likely that we'll have a new person, that's bob corker saying that, not him. >> all right, thanks, bob. senator, we appreciate it. all right, good luck today, take some nodoz. >> no kidding. you know, these aren't that important anymore, joe, because the fed is out there so public now, which i'm glad they are. these hearings aren't that important. >> we're going to watch every moment anyway, try and look to see if it tells us anything for the markets. when we come back, julia boorstin will talk tech with marc andressohn ins aspend. coming up at 8:30 a.m. eastern, the government's latest read on inflation. we'll get consumer price index numbers for june. by the way, guess what 110th birthday we are celebrating? we'll talk about that when we come back. self. jim twitchel is this true?
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the new ceo of yahoo! is marissa mayer. she had been speaking with yahoo! with this for about the past month. >> this is a big task for somebody with no strong ceo background and i think you can see it in the stock's reaction aftermarket. >> clearly this is a trophy hire for them. >> she is an engineer herself, hopefully she'll be able to bring that technology prowess back to yahoo!. top names in technology are gathering in aspen for the fortune brainstorm tech conference and cnbc's julia boorstin joins us now more. julia, good morning to you. >> good morning to you, andrew. i spoke to legendary investor marc andressohn yesterday, he's invested in facebook, among many other companies and he could not comment specifically on facebook because he sits on the board of the company but he ended up
revealing quite a bit about what he thinks about facebook's ipo and mark zuckerberg's controlling stake in the company. >> facebook clearly was ready to go public. facebook will be i think a very successful public company. in my view when you have a ceo like mark zuckerberg, bill gates or larry ellison, the right thing to do is get behind that person and give the person the rope to be able to go execute the strategy. >> as for the weak, po market he attacked investors for creating a hostile environment, one that's hurting entrepreneurs, making it harder for them to raise funds and hurting investors limiting their access to the fastest growing companies. >> it's a hard time to go public. it's a hard time to be public. it's unpleasant and difficult in the united states to be a public company, to be a public tech company so as a consequence many of the most interesting new companies are either not going public or going public a lot later. >> and he said when it is time for companies to go public, he advises them to think twice
about the nasdaq. >> i think at this point that would be something they should look at carefully. i think the nyse has a good argument to be made that they're at least as good a place as nasdaq. for a while they should be very cautious because you'd think the electronic exchange would be good as trading stocks electronically and you'd be mistaken. >> i'll have more reports throughout the day and find my entire interview with andressohn on cnbc.com on the blog. >> before you go, general sentiment out there on the news about marissa mayer taking over at yahoo!? >> as you could expect, people were buzzing about it. it was the talk of the conference here. people were shocked and a number of people i talked to said why is yahoo! switching strategy again? they made it pretty clear they wanted to focus on media and content and going in this other direction by hiring mayer, they are showing they're all about
product and not at all about media. lot of people expressed concerns that yahoo! will suffer from not having ross levinsohn and his team. there's the assumption by the folks i spoke to here that levinsohn and everyone who works for him will leave yahoo!. people really like mayer and wish her the best and were optimistic what she could do for yahoo! but there are concerns that the company's been shifting gears too many times in the past couple of years. >> okay, julia, thank you very much for that. we'll see you very soon. coming up, we've got breaking data on inflation, we're minutes away from consumer price index numbers for june. as we head to a break, look at the dow futures ahead of all that data. so anyway, i've been to a lot of places. you know, i've helped a lot of people save a lot of money. but today...( sfx: loud noise of large metal object hitting the ground) things have been a little strange. (sfx: sound of piano smashing)
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rick santelli is standing by at the cme in chicago and steve liesman has rejoined us, back on the set, right next to me. you didn't have any baclava? >> i did, it was very good. >> rick, you're too far away. the numbers please. >> unchanged, goose egg on month-to-month change on cpi, pretty much spot-on with expectations, strip out the all-important food and energy, also exactly as expected, up 0.2. if you look at the year over year numbers on headline, up 1.7, that's same as last time, a little hot on expectations, and if you look at ex-food and energy, it's up 2.2, exactly expectations but 0.1 cooler than our last look. pretty much i don't see the landscape changing changing on cpi and at least down here, traders have separated commodity
volatility, whether they go up, whether they go down, with what they suspect will be a long-term inflation scenario many years down the road and that's been their stance. today we have a lot of data, we have treasury international capital flows, you have industrial production capacity utilization, ben bernanke, i believe geithner today. there's going to be a lot of things. everybody down here enjoy that um-hum, um-hum, op. ed in the "journal" they took the um-hums off but we read it on friday. back to you. >> let us get to steve liesman. >> sorkin, where are you flying to? where are you going? >> what are you talking about? >> you're going away next week? >> no, i'm here next week. i'm off on friday. >> anybody flying? nobody's flying? >> montana on friday. >> you guys are not helping me out. i'm trying to make a point about the data. >> go for it. he's flying, i'm flying. >> you're flying so airline fares down 2.5%.
>> he was looking for a segue. >> i was looking and i spent way too much time, folks, i'm sorry. all the declines we see here in this report come from the energy sector. >> okay. >> okay, and that was a long way to do it. housing utilities down 0.3%, transportation overall down 0.7%. we did have a 0.2% decline in commodities, and again that airline fare is down 2.5%. overall year over year where are we? we are at 1.7 on the headline and 2.2 on ex-food and energy, just a little bit above the fed's target of 2%, and sort of trending downward. when i looked at the producer prices that came out last week and i looked in the pipeline, what kind of pricing pressure was, there wasn't very much, when i took out food and energy. the only wrinkle, rick has been reporting we've had with the drought situation some pricing pressure on foods that have been there and it was certainly there
last year in 2011. the good news here when it comes to inflation is that when it zeros out no, change at all in the headline, then the wages you get are the wages you keep. it's not eroded by inflation so the government reported this morning, let me find that number, that average weekly earnings for all employees on private non-farm payrolls rising 0.5%. now, they're up only 0.6% year over year. why? because they've been eroded by inflation in the past, but now, the gains that we get are the gains that people get to keep at least when inflation remains at this number, and we did have some level inflation data in europe, and rick, i just want to point out that, you know, kos made the same point you made which is that you cannot dismiss the inflation fear in the future. it's not a reality right now. certainly with what's going on with bank lending and with the circulation of money. it's not moving around. it's not an involitionary threat right now but i know and i'm almost certain that it's something that is on bernanke's
mind when he thinks about additional qe right now. it's a potential inflationary problem down the road. >> yep, and the issue always has been with inflation, it's two-fold. first of all when you plant the seeds, unlike corn with the drought, you're going to see inflation grow down the road, and i think that the generalized economic communities hub russ with the notion that once they see the plants growing, they can prevent the crop of inflation from coming in i think is crazy and it's another one of these deals where you put off decisions you don't want to deal with now and then at the time it will probably be a new fed chairman, a bunch of new fomc members and they'll look at the inflation and start from scratch. you probably won't show that until we see the excess reserves move into the economy at large, which means -- >> we should be so lucky to have that problem. >> well, i don't know. you know, i think you'll have a digital move higher in interest rates and a lot of inflation, so i think that we have a special
brake, emergency brake that's an automatic stopper to some of the good things that will happen down the road because in many ways these programs have mortgaged our economic futures. >> thank you, rick, steve, thank you. break a leg. oh, it's only tuesday. i'll talk to you tomorrow. cnbc is preparing for a one-of-a-kind event this week, it is called delivering alpha. this is a gathering tomorrow of the world's most powerful investors and thinkers. we're going to be bringing you inside access that you can't get anywhere else. pimco's ceo mohammed el aryan is a member of the advisory board and joins us from newport beach, california. how are you? >> i'm fine, how are you, becky? >> i'm doing great. mohammed you've been a friend of "squawk" for a long time. >> absolutely. >> you don't forget your friends. >> never. >> never, even if you were to become prime minister of egypt, which is being speculated right now that you could be chosen, there's a lot of debate taking place in the country, you could
be chosen in something of an ala mario monti decision or choice to come in and head a new government in egypt. if you were called, how would you respond? >> so becky, first, i have no idea where this rumor is coming from. i haven't been approached formally nor do i expect to be approached. if i were to be approached which i don't expect but if i were, i can tell you that i would not be a candidate. there are many more qualified people out there and i think at this stage in egypt's history in particular it is very important that the candidates include people living in egypt and that have gone through in person the revolution. >> but you do have a lot of thoughts about what's been happening with the arab spring and very specifically with egypt. what do you think the right move, the right direction for that government is right now? >> i think that they need to quickly get the economic situation under control. the economy is in such a
situation that it alone can undermine not only the objectives of the revolution, but the revolution itself. so they need to get moving on that, and they need to get, to move also on social issues. it's a difficult situation, and becky, it's not just egypt. i was in europe for a while. you know that. i was on the east coast. it's amazing how economic and political issues are interacting to make the challenges really difficult. >> we've been talking this morning about ben bernanke headed back to capitol hill, and we know that chuck schumer is planning on pushing back, trying to say ben bernanke has been saying for a while this is a fiscal problem. it's the senate and the congress's responsibility to come up with some sort of a plan on how to act next. schumer expected to turn the tables and say we can't get anything done from a fiscal perspective because of the discord in congress because of the election and say it's the fed's responsibility but mohamed, that's a dangerous game to play to start having the congressmen and senators trying
to call the shots for the fed. >> absolutely. it's dangerous for many reasons. one, it's wrong. most people recognize today the benefits to this unusual activism on the part of the fed declining and the costs and the risks are increasing. if you look at a cost/benefit equation there's a limit to what the fed can do, and certainly a limit to what the fed can deliver. second, it's wrong to shift the emphasis from where things need to happen and you and i have discussed this for many, many months, we need action on the fiscal front, a mix of stimulus and long-term reforms, we need action on the housing front, on the credit side, on the infrastructure side. bernanke cannot address all that so i would hope that congress would step up to its responsibilities rather than kick the ball back to the fed. >> you know we've been talking about this inflation problem. rick was just talking about it, too, this is something we've been trying to figure out for a
long time as well, but when does that really come home to roost? is there some sort of red flag system we should be on the lookout for to know that this is for real, that the bond market really means it, and that you can expect to see higher interest rates coming back? >> yeah, i think it's on terms of inflation it's green for now but i suspect it will be yellow pretty soon down the road and the reason for that is we're not getting the real economy to react. look at the data of the last 24 hours, horrible retail sales data, really horrible, and inflation is contained. however, nothing's being done to promote the real economy and that's a real issue. i feel csorry for bernanke. the data should be more active but there's a recognition his policies are less effective and this is really important for the markets. the markets should not bet on outcomes that the fed cannot deliver. the fed cannot deliver on its own a growing economy and growing revenues internally. what the fed can deliver is a
certain yield curve and a certain volatility, but not outcomes and it's important for the market to make that distinction. >> mohamed, it's andrew. i want to go a different direction on you. i don't think we've had the opportunity to speak since the libor scandal occurred. much of your world revolves around libor. your thoughts on its significance and whether this is really a criminal problem. >> andrew, we're following it clo closely. it's critical there be trust and confidence in the benchmarks that play an important role in the marketplace. in generally and we have even more news this morning, we got to recognize the banking system has lost standing and reputation, that it will not function the way it functioned, that has certain implications for liquidity and implications for how credit is allocated. >> mohamed, are you surprised, a lot of people say we've known libor has been manipulated forever. you've been in the mix of this
business for a very long time. >> we take whatever the market gives to us. what we find striking is that regulators have been talking about this for four or five years. that's really striking. >> hey, mohamed, there's not going to be any stimulus, and we all want congress to do some but the fiscal cliff that's coming up would it help the fed, would it help the economy if we were to agree on a one-year extension or something that gets past the election for both the sequester and for the expiring bush tax cuts? i mean, if you were the president, would you say, all right, i'm going to go ahead and just extend all these things, just to make sure that that happens before, so that's not looming and right in front of us? that maybe congress could do. there's not a lot of bipartis bipartisanship but he could do that. >> our baseline, joe, is that you get an agreement to postpone
not for a year, call it three to four months and happens in the lame duck session after the election. >> not until after the election. he'll stick to his guns, blah, blah, blah, over 250, and then he'll appease his base. in the meantime neither party -- the democrats recently said all right, we'll let you take the economy down. unless you let us raise taxes on 250 and above we'll let the fiscal cliff happen so it's brinksmanship again but the rest of us are at 8.2% unemployment, not the rest of us but there are a lot of people that are at 8.2%. they should do that, shouldn't they? >> joe, this game of chicken we saw it last year during the debt ceiling debate and saw the consequences of of that and seeing it again today. the game of chicken is dangerous for the economy because people plan on the basis of the future so businesses are going to stop investing. you've seen what the consumer is doing. the consumer is retrenching and the rest of the world is slowing. we are in the midst of a synchronized slowdown so this game of chicken may make sense on both sides politically, but
certainly doesn't make it for the economy. >> okay, mohamed, i'm looking up the mets. 46-43. joey votto got hurt after the reds got back in first place. thanks, mohamed. hang in there. >> great to see you. coming up goldman sachs the latest in the big banks to report. up next we'll talk with financial whiz brad hinz, equity analyst at bernstein and former lehman brothers cfo. we'll hear from him after the break. duff & phelps finds auto
goldman sachs beating estimates with its second quarter profits. sanford bernstein equity research analyst brad hintz joins us with more on the numbers. brad your quick takeaway, good? bad? how happy are you? they're still falling in the second quarter. >> oh, yeah, you know, the street brought the earnings estimates down, we brought our earnings estimates down. they beat the reduced estimates and beat them in some interesting ways, right. their investment banking business was stronger than anticipated, largely on debt capital markets. this historically is not a strength of goldman sachs. debt capital markets up sharply. their prime brokerage was up, you know, that as the hedge funds are still engaged, still operating in the market but the equity business, the overall equity business down
sequentially, fixed income down sharply as everyone anticipated. the key thing they bought in 50% more stock than what we had anticipated. they bought in $1.5 million worth of stock. that's good. they're returning capital to shareholders. remember, all of the regulations are bringing down the returns of the trading businesses. that's where all the capital is. they seem to be adjusting their business mix for that. >> you saw the front page article in "the "wall street journal"" today, they're getting into the private banking business. we were discussing earlier on the show that in some ways that reflects how bad the banking business or the investment banking business has become. >> well, remember goldman always had a high net worth retail business. this will be an ancillary business to that, so if you think about it, that wealthy executive who has lbo and his company has a potful of money being run by goldman, goldman doesn't want to see the money go
to northern trust when harry passes away and it goes to wilma. >> i think the question is, when you look out 12 months, 24 months, 36 months from now, what do you see goldman at? what does goldman look like? >> goldman's -- this is very much like goldman in their ipo, in 1999, goldman said we learned from the russian crisis not to emphasize trading. we're going to be more of an investment bank, more of an asset manager, and we're going to hold down our trading business. well, they did that for a couple of years after the ipo and then trading took off. now the regulators are forcing them to do the direction that they did at the time of the ipo. so the company will generate fine roes. the revenue growth rate will be slower going forward because trading isn't going to be as strong a business going forward. next 12 months are going to be tough for this stock, largely
because it's going to take a while for libor in europe to work its way through, and unfortunately, goldman is trading as if it's an honorary european bank. the cross correlation of goldman with the european banks is 0.91. it's not fair, it's not right to goldman but unfortunately it's tough to make a short term bet on goldman. it's fine to make a long-term bet on goldman. >> you made the comment that their investment banking seems to be resilient. are you surprised, given all of the, i mean we've talked about occupy wall street and all the stories about goldman sachs. does that mean anything in terms of the client relationship? >> no, that is not true. we see no change in terms of their market share in equity underwriting or m&a. the clients look through the occupy wall street. that would affect your retail businesses or some of your discretionary trades, say in equities or in fixed income. >> i don't know if you saw the tough story over the weekend in
the "new york times" and sunday business section about a client they had gotten in some trouble with. >> well, we've seen these problems occur again and again, and you know, when, after the a scandal, we didn't see merrill lynch's investment banking business go down on credit suisse's go down. >> what's your price target on the stock? >> 170. this is a very good, long-term play, but if you're looking for this thing over the next 12 months, be very cautious. >> thank you for joining us this morning. when we come back, we have the street view of today's earnings reports. we'll head down to the new york stock exchange right after this.
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let's get down to the new york stock exchange. carl, melissa, jim and david join us this morning. we've been watching these earnings coming out and jim, i know you've been talking about currency. what do you make of the ability to overcome that with better than expected growth? >> i'm blown away that coca-cola basically takes away all the
upside. what a remarkable company. and you've got a 5% hit. it doesn't matter. j&j, i come back again and say new ceo. this number's irrelevant. don't put too much emphasis on what number he does. this is all go forward. >> was this the new ceo of kitchen sinking it for the year? >> i think he set expectations low enough that anything he does is going to drive the stock higher. what a buy this is. >> hp, david, and now, yahoo! which we'll talk more about today with marissa mayer. >> fascinating choice on their part and we'll talk about the challenges as she takes over that company today. >> today, and the earnings and andrew, you told me last night you're expecting her to make
some appearance on "the call." >> could be exciting and interesting to hear. >> so much happening. >> i know. >> and ben bernanke. >> oh, yeah, we forgot about that part. david, anything from goldman sachs jump out at you? we kind of kicked through the numbers. >> in some ways, it's the larger theme which you were discussing. the changing nature of the overall business and profitability of the business. the move more aggressively into private banking. it was not a great quarter. numbers had come down, but at the end of the day, it looks pretty good, but fixed income currencies commodities, down. expenses down sharply. that's kind of the world we're living in now when it comes to the big banks and goldman figuring it out before the others. >> i thought this was a direct hit on east hampton and south hampton properties. to me, this is your chance if you're not an investment banker,
go up to nantucket this weekend. there's going to be for sale signs. >> is that what you're going this weekend? >> come on. have some sympathy. >> we've got to go. carl, worst all-time sequel? >> worst all-time sequel. electric boogaloo. >> number one, staying alive. >> which i forgot existed. ♪ i want to win [ breathes deeply ] ♪ this is where the dream begins ♪ ♪ i want to grow ♪ i want to try ♪ i can almost touch the sky [ male announcer ] even the planet has an olympic dream. dow is proud to support that dream by helping provide greener, more sustainable solutions from the olympic village to the stadium. solutionism. the new optimism.™ ♪ this dream for couples?
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