good morning. another golden quarter for goldman? they're expected to post results before the opening bell. plus, an upbeat tresh resect geithner storming the middle east for american investment and the dollar. and it's a long way from manhattan's upper east side. bernie madoff is sent to a federal prison in north carolina called butner, as "squawk box" begins right now. good morning, everybody, and welcome to "squawk box" right here on cnbc.. i'm becky quick along with joe

kernen and carl quintanilla. our top story today takes us inside earnings central. goldman sachs reports second quarter opening results before the opening bell today. the financial powerhouse is s expected to post earnings of $3.50 a share on revenue of $10.7 billion. meredith whitney upgrading shares of goldman early yesterday before joining us on "squawk box" to explain why. >> it's a bearish call, but a bullish call on the stock. >> on the stock. >> just as you were talking about, you'll see a tsunami of debt issuance. where you think goldman would be a pure play equity trade, it's the number one underwriter of build america bonds, a top underwriter in munis, playing heavily in the mortgage-backed market. i think in the fist quarter, they played heavily in the markets. >> whitney thinks goldman sachs will earn well above estimates

that the street the looking for. rallying almost 78% since january. guys, her estimate was above $4.20 a share. >> was she talking $to next year? i can't remember what she said about 2010. >> it's hard to blow your ordinary person own horn. you shouldn't do it as a news organization, but -- >> but -- >> how important was meredith whitney yesterday? >> i was at the gym yesterday and i told her this.. i was in the locker room and packing up and this guy looked at me and said, that whitney has some pull, hey? she was she was the talk of the market yesterday. >> we're not tooting our own horn, anyway. she was the talk of the news. >> it was on -- she's on our show, she's on for an hour. she went into all the details. the goldman call was one thing, but it was followed up by her comments at length in quotations about jpmorgan, about bank of america, about mortgages. >> futures were below fair value

before she started talking about that. >> this then there was a bit of a baths at 9:30, but it was settled with a 185 points gain. did you see aig yesterday? up $2.50. so now all betts are off. maybe that was sideways. maybe we don't need anything worse than sideways.s. >> she was talking about gains of 15% perhaps for some of these stocks, 15% gains for some of these financials. >> but then things could come in and you could say, stuff didn't pan out. >> some people saying we're already there at unemployment

rates. >> but did she mean 13% real or 13% on government numbers? where would you be on real unemployment? are you talking about 18% or something? >> 16.5% now. you mean with the part-time -- >> adding everybody back in. >> meantime, goldman sachs executives reportedly sold shares in the company after the collapse of lehman last fall. while the bank was benefiting from $10 million in t.a.r.p. money, the ft says goldman partners dumped more than $691 million in company shares during the eight-month period for which figures are available. at the same time, the investment bank expanded its public float from $395 million to over half a billion shares. the goldman spokesperson says partners receive a big part of stocks and are in an effort to diversify their holdings. a surprise? maybe not.

>> i know that a lot of lehman guys wish they had had the opportunity to sell some of those bonuses they got in lehman stock as they're still wallpapering the walls with some of those stock certificates. goemdman will dominate the headlines today and there will be a lot of -- you know, you'll see a lot of commentary on wow, goldman is making a lot of money again. capital y58istic system, profits, pay taxes to the government, that's how the government operates. profits, revenue. >> people will be happy if goldman -- >> yesterday win saw saw yesterday in the "new york times," goldman set to start making big money and set to pay big bonuses again. when things are going well, that's what you hope happens. >> umtd rather have more people see goldman doing well rather than seeing it collapsing. >> not too well, though. >> within reason? >> you think mac tiebbi wants

goldman to do well? >> probably not, the rolling stones author? >> rolling stones wants to -- >> stick to music, is that your advice? >> market-safe music. goldman sachs -- it's not the only major company. also on the agenda is j&j. this afternoon after the close, we get another dow component, intel, along with yum brands, which got a boost. remember when magic johnson talked about jacko? he had his own grilled chicken and jackso had a bucket of kfc. >> i missed that. in the flurry of coverage, i did not get to that. >> i did, too. >> i saw the actual quote. and magic was funny since then.

there's been a fair amount written about it. >> remember when they put that coupon for free grilled chicken at kfc on their website and they didn't have enough chicken for all the customers.s. if you're going to put a coupon on oprah's website, make sure you have enough chicken in the fridge. >> jermaine invited magic over and michael and they had a full time gourmet she have. magic was getting grilled kicken. when michael sat down to eat with them, they delivered a bucket of chicken. you saw david novak's piece in the times over the weekend, too? >> oh, that's right. >> in other corporate headlines today, lender cit group holding advanced talks with the government about receiving emergency federal assistance. ailing cit wants help through a program that would guarantee its debt. so far, the fdic has been resistant to these.

they're citing concerns about backing cit's debt if the company should fail and worries about its expanding temporary liquidity program beyond the original purpose. but a lot of big questions about who would be lending to small businesses, cit group for years, since the company was founded in 1908 has been lending to small businesses that couldn't find money elsewhere. >> steven ratner, did you see this? >> yeah. >> did you see the picture of this? >> it's not a bad picture. >> no, it isn't. whoa! his head so big.g. it's like it's too big for his body. we said that when he was on. he looks like a wii character. >> he's a very smart man. >> that's why he's got such a very big head. anyway, he's stepping down as head of the u.s. task force. ron bloom is going to take over day-to-day operations. the start of the winddown of the

auto panel. rattner doesn't plan to rejoin quadrangle.. the investigation into rattner and quadrangle has reportedly intensified in the coming weeks. >> they were very careful in the journal to see that one is not related to the other. >> supposedly. >> this is a guy who does deals and he did the negotiation of the deals. >> gm came out of bankruptcy. >> the deal guy. there was conjecture he was going to move up in the administration and now he's return to go private life. can you connect the dots? i don't know. >> looking at the pictures, though, i don't see it. he sat right here and i don't remember him having -- >> ho oh, no. i got some comments. >> don't show me.

>> he's just a very smart -- he's a big-brained chsh check out the big brain on steven. >> meantime, the treasury secretary says aggressive efforts to counter a global financial crisis are starting to work. speaking in saudi arabia today, geithner acknowledged the dollar's role to help spur a recovery. the secretary treasurer is on a mission to reassure the gulf states that the u.s. wants their investments and that their u.s. dollar assets are safe. somebody yesterday called him the biggest bond salesman on the planet right now because he is one big road show. >> yep. but people still want our -- you know, there's huge demand still, and lucky for us, but these options are okay. nothing -- you know, the worst has not come to pass in terms of, you know, not enough demand

or interest rates many go going up. hope it doesn't. >> bernie madoff has a new home for the next 150 years.s. the convicted swindler is joining about 150 other inmates at a federal prison in butler, north carolina. he will be joining our well known inmates including john rigas. scott cohen has made his way to the president and he joins us this morning with more. scott. >> good morning, becky. as of a few minutes ago, the u.s. bureau of prisons website still has bernie madoff as being held at a federal penitentiary in atlanta.a. but we've been told that is the transitional stop on the way here to butler, that this will at least initially be his first home in the federal prison system. it's a complex of prisons. there's a couple of medium security units, a couple of low security units. one of the things they have here in butler which has a inmate population of about 4,800 as of today according to the bureau of

prisons, one of the things they have here that will be useful is a medical center that is highly regarded in the federal prison system because one of the initial concerns that they will have for bernie madoff as they get him into prison life is his health. and i can tell you, having sat fairly close to bernie madoff at his sentencing a couple of weeks ago, that this is a man who has had a lot of life drained out of him, perhaps rightfully so according to victims and everything else, and the concerns will be his mental and physical health as they get him acclimated to prison life. butler, because of this, may not be his ultimate home. they may be doing evaluation here. but other sources have said this will be his home for the foreseeable future. by no means is it a club fed. it will be a life where he can earn 12 to 40 cents an hour

doing things like cleaning out toilets, doing grounds keeping, things like that and most likely the length of his sentence will start out in something like a medium security facility maybe with a chance down the road of getting to lower security. but neshlry, again, they are going to be watching him very closely, not just for his security, but also just to make certain that he can get into this system and can survive to the extent that he will for this life sentence.e. >> scott, probably too early to conjecture about his accommodations specifically at this point? >> well, what we know in general about the prison is that there are two inmates to a cell cell, bunk beds, they wake up about 6:30 in the morning and at work by 7:00 a.m. there's generally some time outside, depending on where they in the prison yard, things like that. they do their work.

there are visiting hours that are thursday through monday as well as federal holidays. if he's in a medium security system. if ruth mad yau comes down here to visit him, her visits will be limited and you visit in a multi purpose room with all the other inmates and all their visitors. it's not all that pleasant. >> i would imagine not. i don't know how you got there so quickly, scott, but thank you for that report. check on the markets on this tuesday, we all know about the action yesterday. nikkei snapped a nine-day losing streak. did you see the vix? biggest percentage drop since march 10th, the day that the whole rally began. we'll get ppi later today, retail sales and, of course, the big numbers, j&j. what did you say was after the bell? >> intel. >> and yes, ma'am, as well. >> and yumm, as well.

oil has a little bit of a bounce here with that burst of confidence, up 76 cents. inventories today and tomorrow, we think they'll be down for the sixth straight week. that ten-year note, we were talking about the bond options have been relatively successful. people are still talking about 3.37% being at a technical levels. i don't know if we'll get a dollar board. we can let that go. already. let's talk about our task force. christian sentin along with ned riley, guys, it's good to see you both. ned, let me ask you, with the goldman news, albeit on light volume, did anything significant happen yesterday? >> well, what happened yesterday is what's been happening all along and that is the leadership

in this market is in the right place. everybody is looking for the reflation trade to lead us out. i strongly believe that those that will leads precreeding the downturn are not those that will come out of the box and lead again. technology stocks have been up this year. this contour of recovery is going to be different than the last one. everybody is looking to the consumer. granted, it's 17% of the economy. but the tech sector has been the leadership if you look back. so me, that implies more cap spending. consumers will follow as soon as we get the employment situation better. >> but the goldman news yesterday, the upgrade, at least, and the reaction to that does not have you whistling sunshine necessarily today?

i don't know about sunshine. i think joe stated it best. goldman stands to make money. i mean, look at the recovery right there. this analyst isn't early in the call, either. you can see back there, $80 a share. now it's up to $130 or $140. the stock price indicates what analysts do a lot of times rather than anticipating what's going to happen. like the whole financial sector, i'd like to invest in the slfs. >> christian was we were just talking about financials. some argue goldman is unique with that they changed their business model quarter to quarter and if you're leaning on tech, looking at dell's comments yesterday, that's not all that heartening, is it? >> no, it isn't. i think yesterday was a fakout. the financials were under, had been oversold for a while.

goldman is essentially trading, a hedge fund.. it's about 10, 11 times earnings. there is no way they couldn't t have made money. so i think it's just in a trading coming back into that secondary. >> so if yesterday was the fakout, when do we get the reality checks?? >> it's not in financials. they're getting their capitalization up again. it b a great trading opportunity. in the next week or two, we should be looking at nokia, ge later this week, freeport next week, pat pillar, these are the global stocks that will tell us really how this economy and recovery is doing. and the answer is not very well. which is why the markets have been sideways for the best part of a month. >> ned, would you go along with

that? are those going to be the flash points for those types of companies? >> i guess i have some disagreement, and that is that those companies that were mentioned like the caterpillars and the rest are late cycle stocks, anyway. but i do believe that we have to look to see what is sustaining decent rernings this period of time? still i'm looking for the sceptership out of this. the most important part of the market is that it was with stand the data building the foundation for the major bull market for the next two to three years and that would be auto sales issuing up a bit better, housing sales doing better. the key element here is how do we look today versus how do we look three months ago? people saying, yeah, we've had a 25% rally. yeah, but we've had at least a

25% improvement in financials, housing and a lot of other sectors that were just about going down the drain, as one would say. >> it's amazing to me, christian, how you can have people like ned and many others who still hope for some kind of structure bear market over the q next two, three, four years and others say that the consumer deleveraging will be so overwhelming that we will be lucky to live through it. >> this cycle, this economic cycle, this market cycle is like none other. the last eight recessions, the gnps have bounced out about 5.5%. this is looking at 2% maximum. the only green shoots are going on overseas.

the large industry industrials, consumer staples, that is where the rallies will be made. knot in the traditional sectors. >> we'll see what happens today. christian, ned, we'll talk to you later. thanks. >> thanks a lot. coming up, from drugs to computers, what you need to know about this morning.. first as we head to break, let's take a look at yesterday's wie winners & losers. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most

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dow component johnson & johnson is due out before the opening of the bell. joining us now with his expectations, matthew dodd, medical supplies and technology, analyst at citi. matthew, so eps is going to be down. and this will be, what, the third quarter that revenue will be down year over year? >> yeah. good morning, joe. so you brought me on for the honor of saying this is probably going to be j&j's worst quarterly performance in the

last ten years. the revenue will be down about 2% organic. as you pointed out, the earnings will be down, as well. >> organic, what's revenue going to be down total? >> 8%. because currently saying about 2% out. >> and it's due to risperdol and what's the other drug? >> topamax. >> yeah. you have two drugs the that went generic this quarter. the economy is having a bit of an impact across the board. and then you're also seeing a sluggishness in some of the other pharma products, as well. >> where does the economy come into play with the consumer stuff? i would think most of that is inelastic, isn't it? i'm using probably more than ever. >> yeah, but some people are using different brands of ap powder. their consumer brands in the u.s. did drop more than expecteded in the last quarter so there has been fallout in

consumer. also in the devices segment, you're seeing areas like diabetes, meters and strips. people are using the products less. contact users are extending their contact use. even in pharma, you see a bit of an impact. it's not heavy. it's probably a percentage point across the board on the sales growth. that is in addition to what we're seeing from the generic hits. >> there's really no such thing as inelasticity in everything. you can migrate to a cheaper product or use less or just about anything i can bring up, you can figure out a way around it during a recession, huh? that's true. so is all of this already in the stock? >> it really is. if you look at the expect age, the bar is extremely low. i feel they can beat the quarter. then what beam are looking for is a recovery. this should be the worst quarter and it will get better from here. particularly, people are getting focused on j&j's pharmaceutical pipeline, which they have not been known for the in the past

and the visibility has improved on that drat mattockly. >> thanks, matthew, for that snapsh snapshot. we appreciate pipt. >> thank you. when we come back, get the latest on the top stories. plus, we spy the trading trends you need to know with kevin ferry. he has the bird's-eye view. hi, may i help you? yeah, i'm looking for car insurance that isn't going to break the bank. you're in the right place. only progressive gives you the option to name your price. here. a price gun? mm-hmm. so, i tell you what i want to pay. and we build a policy to fit your budget. that's cool. uh... [ gun beeps ] [ laughs ] i feel so empowered. power to the people!

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good morning. welcome back to "squawk box" here on cnbc. we're someone else. >> where are we? >> i don't know.

i'm joe kernen along with becky quick and carl quintanilla and in unfamiliar surroundings.. >> yeah, but this is new. it's earnings central. we're in the middle of the earnings season. >> it involves change.. it involves putting on these mikes that are wireless. it involves walking over here. it involves sitting on a very hard chair without one of those doughnuts, which -- >> the chairs are uncomfortable. >> the chairs are uncomfortable and i find myself sliding around. >> i like them because it makes you sit up straight. but it is cold over here. >> now we're like local news, i'm region i'm christine johnson. what is that? the other guy chris -- i don't know. this sit this far apart. >> that's because it's cold in here. >> our top stories today takes us inside earnings central. goldman sachs reports second quarter results before the opening. the financial powerhouse expected to post earnings of

$3.54 a share. revenue of $10.7 billion. meredith whitney upgraded the shares of goldman yesterday early on before joining us on squawk and then she exchanged why. >> it's a bearish call, but a bullish call on the stock. >> on the stock. >> because, you know, just as you were talking about in california, you've got most of the states under funded. you're going to see a tsunami of debt issuance and where you think goldman would be a pure play equity trade, it's the number one underwriter of build america bonds, a top underwriter in munis, playing heavily in the mortgage backed market. i think in the first quarter they played heavily in the agency market. >> we keep pointing out that goldman is down 8% during the last year, as if that's a negative. but i think it's the only financial that's only down 8%. and you can see it from that because it's up 78% since

january. and there was a chance to buy that stock i think in the '50s and it's now 150. >> does it go as low as 50? >> 47 i think was the low. >> if you bought it there and you own it now, you've made $100 per share. >> not bad. >> tripled. >> b of a is -- >> 200%. that has, too. you saw barrens taking the victory on their call. >> there's other earnings news today, as well. csx posting best than expected profits beating the call by 10 cents. i think freight volumes were down about 21% when you were looking at some of these numbers. the shares were called higher on news on these after hours trades, though. >> because they may be bottoming out. >> and coal has been down sharply in terms of what they're transporting. >> you would think. but the dynamic is the same. shipments, volumes down like

alcoa, but cost cutting made it better than it otherwise would have been. >> buffett told julia last week, that those rail lines, that's one of his favorite metrics to watch because you can see what's moving around the country. >> then there's dell, warninging of lower second quarter gross margins as demand shifts towards cheaper computers while the prices of its components are going up. the comments after the close did send shares lower. it does expect slight see subsequential revenue growth. it's holding core with analysts in texas today.y. you've got higher component costs. the pricing is still tough and the mix of products, like you were saying with j&j, people are migrating to cheaper computers. >> the contact lens one was the one that got me. >> yeah. >> you can stretch it for three weeks instead of two weeks, right? >> i was thinking, what about alcohol? >> you could trade down. >> it's probably the most

inelastic of -- >> remember proctor & gamble, they said people will trade down and it's trading down, though, within the proctor & gamble family. >> everything is elastic. >> remember we saw that cocaine index? it was closely tied to futures markets. >> that's why drugs are such a good business. >> shares of take two, slammed nafr hours trading pass company delays a game launch and cut its outlook for the next two quarters. the video gamemaker dieding to hold off on releasing bioshock two, one of the company's most lily anticipated games. is that a chemical weapons attack or something? >> watch your own dirty bomb. >> or anthrax release into the vents and the -- >> subway. >> toxic avenger. >> take two's ceo also -- >> airborne toxic event.t. >> great event.t. >> noting he's seeing caution among retailers wary of holding

too much inventory. >> standing by at the cme this morning, kevin ferry. kevin, you don't really talk like a pirate any more. >> is my voice getting better? >> no. we like it. it was one of our favorite e things. we wanted back. >> kevin, we were watching this raltly from yesterday. wig turn on the markets yesterday based largely on the footballs. is this a real turn for you or is this just a temporary respite? >> it's healthy for a couple of reasons, but we would like to see maybe a pullback. if the market were to correct today on the economic news as opposed to the earnings news, then see if it holds in against 890 in the futures, i think that's important support to say that the market is trying to dig in more authoritatively. >> how are you going to know if the market is trading on the economic news or the earnings? >> we've got ppi, retail sales, those type of things.

if the headlines shake and the market goes down and holds, i think that's the best test. if it doesn't go down there, then there's no way of telling. so i think the really interesting thing that we saw yesterday, becky, was that that was the first significant up day in the equity markets that did not correspond to trouble in the bond market. spot rates for a host of bonds, whether they be five-year notes or ten-year notes traded very well considering that move. so forward markets into the futures and things do still yields when the stock market comes. but i thought that was a very stabilizing effect. so when you talk about this thing having legs, that will be the other part that we mentioned today. >> carl mentioned that the vix was down substantially. does that play into the same idea that you were just talking about? >> from the standpoint of the vix, i think you have to watch because the flip side of that

thing declining means that we could be going through some very calm waters. in other words, just the doldrum in the markets and we don't quite see that just yet. there's still plenty of volatility overall from a trading standpoint as opposed to maybe a statistical standpoint. so i think it's healthy. it shows an uptick in people's confidence when the vix comes down. but that will determine whether we're going to do something significant into the end of the summer or just sit around and watch. >> yesterday we saw a little more volume. did we ever get that sell in may and go away or are there still a lot of active players?s? >> well, it was a nice uptick on a day like yesterday because the volume had been low, especially in the decline. but i think that overall, people were trying to doubt that theory of the seasonality of the market because we were sitting around near the highs back in june. so now the market has come down finally and people have to rebalance.e. i think that what you saw yesterday was behind the scenes was a rebalancing of people.

the early heavy crowded trade was concentrated in commodities, natural resources, and especially energy. and so those sectors saw money actually come out of the trade and move somewhere else. >> kevin, look into what t happens. the financials went to these unbelievable levels. they bounced back quickly and that was what gave us that 30% or 40% bounceback.. but then the commodities took over and that failed, it seems like. and yesterday was the first day that the financials reasserted themselves. i wonder whether that was a bounce from those being sold after that initial move or whether there's legs here. are they the leaders, the financials? >> well, i'll tell you, the amount of money that they're able to make in this configuration, joe, is enormous. >> good. they pay taxes on that, don't they? >> i think it's good, absolutely. we have stated from the start that these people have to be put in a capital position to do the heavy lifting. and i think what meredith was getting at yesterday was the

revenue was not necessarily cobs traited on what the headline or the tabloid journalism would have you believe, in other words, some kind of crazy conspiracy theory. these are core businesses. there's dislocations in the treasury market that don't get arbitraged away any more because the balance sheet knot being applied to those trades. these are core businesses. the curve is in the shape where they can do better. it just takes time for people to realize it. >> kevin, thank you very much. it's good to talk to you this morning. >> okay. well, i'll see you for the number for rick. >> what number is it today? >> ppi and retail sales. >> you wanted him to see it, pp again. >> kevin, thanks.. we'll see you in calm hours. folks, if you have any comments or questions on anything you see at squawk, e-mail us squawk@cnbc.com. we'll get to the news making headlines outside the world of business when we come back. taking its rightful place

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kernen, quick, quintanilla. >> although it sounds like joe has a problem with change on that set there. >> are you surprised? >> you know, i've always known him to be highly adaptable. >> when i'm forced into it, john. when i'm forced into it. you're hesitant. you don't like change that much, do you, john? >> you know, i'm a stability guy. i'm like you in that respect. >> it's an age thing, i think. >> is that what it is? >> as opposed to us youngens who we're always up for change. >> all you care about is change, change, change, change.. >> joe sounds like one of those chankky senators on the judiciary committee. >> he does. he sounds like -- i won't name any names. hey, roll call says this is all but certain, right? lindsay graham says she's going to get it unless she has a meltdown in front of the committee.e. why are republicans seeming to raise any flags at all in that

case? >> it's basically politics. we were subjected yesterday to hours of tiresome bs from the senators about, well, is judge sotomayor going to favor some groups over others or is she going po to be influenced by other factors? it is ridiculous because basically every human being, every judge brings their life experience to bare on the bench, right? and the problem for the senators is we think people who agree with us are neutral and people who have other opinions are sort of bias. and that's what was playing out yesterday. we know the outcome and they're trying to figure out how to vent for their conservative base without permanently crippling their party with his panics who are becoming increasingly important. that's the balancing act. she's going to be confirmed.d. she's not going to have a meltdown and we're going to play this out for a few days. >> setting that aside, then, the

president is obviously coming back to a stimulus that some argue need redefinition. he's going to speak in new york this week. he's going to speak in michigan. is he going to say anything new about either the way that money is delivered or about a new round of money down the road? >> well, he's going to -- no, i don't believe he's going to be talking about a new round of money. he's going to articulate a new goal for community college graduation. but basically what the president has to do right now is have a patience strategy and say, we're continuing to try to shovel money out as soon as possible it's appropriate and it's going to have an effect but it's going to have an effect over a longer team frame than some people recognize. their problem, of course, as we've discussed before and they've got unemployment rising. it's 9.5% nationally.. it's higher than that in the state of michigan which is more important for democrats, for labor unions and for the auto industry.. and he's got to figure out how to get the american people to hang with him.

at the same time, he's trying to push congress to get moving on his priorities, including health care. that's why he had the speaker of the house and the senate majority leader over to the white house yesterday afternoon to push him. >> the rnc keeps sending out talking points quoting the president from january.. in his words, of the of the money we're investing as part of this plan will get out the door immediately. now they're accusing him of moving the goal posts, saying this is not an immediate delivery of money, this is a two-year plan. did he change expectations? were they too high to begin with? >> well, did he change expectations? i think everybody thought that the unemployment rate was not going to go so high so fast. and their argument is, well, the recession was worse than we thought. we didn't know what the fourth quarter numbers were. they always said, we're going to spend it as rapidly as we can. some of it is going to go out the door immediately and others would not. and, you know, i don't know exactly what the metrics are for

saying whether it's -- they've met their previously articulated timetable, but suffice it to say, they're spending it as fast at they can and they're hoping for some results. i think one of the crucial things, carl, is going to be when we get the thrd quarter growth numbers, what are those? is it, in fact, positive growth, are we static, or if we find that in the fourth quarter that the economy slank rather than grew, then i think you've got a real political problem for the administration. >> yeah. you've got to get through the summer, i guess, even as all these questions are being asked in the interim, john. we'll talk to you later. >> you bet. >> john harwood. >> washington. time for a check on the business outside the world of business. monica novotny is with us. >>o, i feel for you.u. change is hard. >> thank you. >> it's not -- you know, it's not fun. >> is this a way for making up for that whole thing between you two. >> yeah. there's a difference between

change, monica, and flip-flopping, in your case. but thank you for trying to be nice. you've got a ways to go. >> okay.. i'm just chipping away at that. one step at a time. >> weep trying. keep going. >> okay. we'll start with the president who has tapped dr. regina benjamin as the nation's next surgeon general. in announcing her nomination, president obama said benjamin will add critical insight to the push to reform health care. one of the brat packers has her own brat pack now. molly ringwold just gave birth to twins. carl, i'm going to have to go to you on this.. the pretty in pink jokes, the breakfast club jokes, too easy. you've been at this a few weeks, right? almost a month now. what's your best advice?

>> go to work. >> i have noticed you've been putting in longer days. noticed putting in longer days. >> earnings season is huge. >> you're the last to leave every day. >> i think i saw carl here at 30 rock at the end of the day yesterday. >> you guys needed help answering phones and i try to be a team player. >> yeah, yeah. >> anything to avoid changing another diaper. >> i have a little -- can i show that, carl? >> i think we can push in on that. >> do you have your own? >> look at that. isn't that cute? >> the new twins in the nicu. thanks for sharing. >> i asked. i said, can i? >> very nice of you. the girls are doing great. >> that's what we want to hear. >> and carl's not sleeping. >> and carl's not sleeping, right. coming up at the top of the hour, he is well known from the halls of congress to boardrooms across america. steve forbes is our guest host. he'll be with us for the next couple of hours. the world's(announcer) leading companies

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take a look at futures on this tuesday morning. we're waiting on goldman numbers. people are, i guess you could say, on pins and needles. overnight in asia and europe, they really did take advantage of the bounce we saw on wall street. yesterday the nikkei closing up for the first time in nine, ten sessions. when we come back, we'll get top stories, along with a man who

needs no introduction, steve forbes. we'll get his answers, solutions to our country's biggest financial problems. all the verizon shareholders are going to sell it it. that's when to pick up ftr. a viewer asked us about wr grace. we came back and said it looks good as a post bankruptcy play.. no hurry to buy gra. businesses more efficiently,

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playing the goldman game. >> i upgraded goldman last night. >> the white shoe firm set to report quarterly results. what will those numbers say about the state of the financial crisis? we have your cnbc edge on how these results should shape your investment strategy. and goldman isn't the only big name company to make a splash in earning central. dow component and consumer r products giant, the biggest health care company in the world, j&j results quarterly result. we'll bring you those numbers. secretary treasurer tim geithner says the recession is easing. is the still plus program finally providing water for the green shoots? finance committee ranking member and and carolyn moloney will

weigh in. halfway to the baseball season. but is major league baseball hitting profits out of the park? how the business has changed and what the league is doing to get fans to come out to the ballpark. the second hour of "squawk box" begins right now. ♪ good morning. welcome back to "squawk" here on cnbc. i'm carl quintanilla along with joe kernen and becky quick. futures in line after that big bounce on the dow yesterday and that burst of confidence sparked in part, you could argue, by meredith whitney upgrading goldman to a buy on this very program 24 hours ago. goldman sachs is in the spotlight today as we await its quarterly numbers in the next hour or so. let's go to earning central where becky is at the command. >> hey, carl. we are 90 minutes away from the goldman numbers. this time around the financial powerhouse is expected to post

earning. $3.40 on revenue of $10.7 billion. meredith whitney upgrading goldman early yesterday. joining us is dick bovai. dick, you've had a buy on this stock for some time. what is it you see that you like here? >> well, i think that goldman is one of the best managed companies in the industry. i think that's one of the critical issues. secondly, it has bet in place the systems. more people are working in i.t. at goldman sachs than traders or people in investment banking. its put the systems in place to take advantage of what's going on in the markets. third, i think that you've seen a complete shift in where the financial markets are going. in other words, six months ago you couldn't do any deals of any type anywhere. and now, you know, the junk bond market has opened up, the equity markets are opened up. we're doing a lot of business in a wide variety of fixed income products. currencies have been strong, commodities have been strong.

just about everything that could have gone right in this quarter for goldman has gone right. >> not to mention municipal bond offerings. that's one area meredith whitney was looking at, thinks that's going to be strong recovery the next year or to. what do you think about that business? >> it's not that big relative to where the real action is at goldman sachs. goldman sachs makes most of its money on equity offerings. and equity offerings in the month of may are believed to be an all-time record for the industry. i don't know if that's correct but it was very, very strong. in addition, goldman trades everything. it trades governments. it trades corporates. it trades a wide variety of products and all of those markets have come back strongly. you know, most municipalities are not allowed to borrow money. they're supposed to have their budgets in sync with, you know, even. i don't know. i see a whole wide variety of areas getting stronger. i think, you know, the third quarter for goldman will be weaker than the second quarter because on the seasonal basis,

you know, activity slows down in the summer, but in the fourth quarter i would expect to see merger and acquisition activity pick up pretty strongly, which is pretty much dead right now.. i think we'll continue this game into the first quarter next year, when you'll get a raft of corporate refinancing. so i think goldman looks pretty good. >> dick, let's take a look at the stock over the last three years. the boom days in 2008 and back too earlier over the last year, at the end of last year, you were talking about a stock closer to $50 or so. where do you see this stock headed considering it's trading at $1.50? >> we put a buy recommendation on this thing in april, you know, with $1.15. our view then was that we would go to $1.50.. then about a month and a half ago we raised that target to 200 and we think it will get to $200 by the end of this year. we think that, you know, that's just a weigh station on the way to the all-time high of $250, you know, by the end of next

year. so i think the outlook for this company is extraordinarily good. >> are there going to be pullback as long the way or do you think this is almost a straight shot up? >> no, no, there's going to be a lot of pullbacks. even today you're going to see that goldman is going to take a major hit over $1 a share for paying back t.a.r.p. it's going to take a billion dollar hit on the commercial real estate portfolio.o. it will have to pay that special fdic assessment because it actually has bank deposits. it's going to take a hit because it's, you know, fair value accounting on its liabilities is going to cost it money. so it's not a straight line forward for this company. >> you're looking for earnings of bz 3.66 lining up with the street's of $3.54. short-term trading, after a gain yesterday on the stock, it would have to jump a high bar to push higher again today? >> i think so. you know, usually when a stock moves up as rapidly on

expectations and the number, even if it's way above what people expect, you know, people start saying, well, this is not sustainable. this can't continue. earnings are going to be down in the next quarter and they take a little profit off the table. but i think i would be buying into any profit-taking that occurs today. >> all right. dick, thank you very much for your time on what i know is a very busy morning for you. good talking to you. >> thank you. >> joe, back over to you. >> for the next two hours we'll be talking the economy and politics with our guest host, steve forbes, ceo of forbes. steve, good morning.g. >> good morning, joe. how are you? >> i'm well. i guess as a disclaimer, you have called your magazine a capitalist tool. you are likely to defend, in some respect, capitalism, free enterprise, the private sector. you don't probably like high taxes. you'd prefer low taxes. you'd rather cut spending than raise taxes. you may have the opportunity at some point to live -- or to level some criticism against the

current administration. i just want to warn our viewers. it's not the end of the world. we have howard dean. we have ariana huffington.. we have both sides. we talk these things over. you don't need to hyperventil e hyperventilate. you don't need to change the channel. it's just someone talking, right? it's not the end of the world. would he given the president a chance. we want him to do well. but steve may say something, just don't write in. please, don't whine and snivle -- >> go to squawk@cnbc. >> with that caveat and disclaimer, in the journal it says jason owes an apology to michael boskin who wrote president barack obama would raise income taxes. mr. fuhrman was in the obama campaign and said it was wrong.. now if you add in what rangel is proposal and everything else, we're well above 60 if. >> if you live in a stated like new york it probably goes above

that. >> how high do you think we'll go, given the kind of programs that we're considering? >> i don't think it's going to go that high. i think already now they're getting push back from the voters who are recognizing. here we're doing this massive spending. we haven't touched titlement reforms. where is this money coming from? how can the economy do it if you're piling on newer, more taxes. they're also talking about a value-added tax in addition to all of these taxes.. this is a formula for a big republican -- >> well, they have not carried their fair share for the past eight years. if you watch the wealth move to the high income bracket, you've seen the dislocation -- >> try to keep a straight face as you play devil's advocate. >> i need to with you, don't i? >> the top 1%, top 5% of income earners in this country are playing a higher proportion of taxes than ever before. we know when you raise tax rates you not only hurt the so-called wealthy you smash medium and

small businesses, so you raise the personal rate you're not only hitting the rich people, you're hitting people who provide jobs, the backbone of this economy. that's not a formula that i would want to go into an election with. >> hasn't the argument moved, though, from -- i know jobs are our main concern, but eventually it's going to be about filling the government's coffers, period.. and whether or not job creation survives that, we'll see. but at some point the government's going to need cash. and you can't get that from people who don't make a lot of money. >> well, right now you don't get it if you don't have a vibrant economy. people are the economy. and they haven't learned yet t what ronald reagan learned, what john kennedy learned, is when you lower tax rate, lower the burden on people, you create more wealth and you also create more better paying jobs.s. and they're going to have to learn that the hard way. sadly, the tuition, we're going to have to pay for barack obama's economic education. it's not just going to be 40 or 50,000, it will be hundreds of billions of dollars.

>> two wars, one's winding down, the other one seems to be winding up. we have a lot of stuff that needs to be paid for, steve. taxes got to go up. they got to. >> no. what you do is reform, things s like social security reform, health care n positive ways so in turn from liabilities into assets. you don't have to raise the retirement age on social security to 97. you can put in personal accounts for younger people to create a more vibrant economy when they retire. on health care, joe, we don't have free enterprise in health care today. we have a crazy hybrid system that is not working. government control is not going to work, so why don't we go in the opposite direction, like an upcoming guest is going to advocate, where consumers control the dollars, not the government, not the insurance companies. radical thing. >> that 60% doesn't include a cap and trade provision either, i guess. >> well, in england they've put in a version of cap and trade.. it's cost the typical family $1,300 a year. we've got a worse version coming

along. >> chances in the senate, in your view? >> zippo. that's the thing -- >> al franken. >> this administration -- >> why -- >> well, some of them are coming up for re-election next year. and already you saw in the house, they could only pass that thing with seven votes when nancy pelosi and others are whipping them till their backs fall off. >> and it's a toothless < according to true environmentalists, a totally toothless bill anyway. they're mad they think the president is backtracking -- >> that's why they're coming along, saying, i'm just a country boy. this would be destructive, put on a lot of added costs, added expenditure and for what purpose? just hurting the economy.y. this does not work. you have india, china out there and carbon dioxide, why are you going to wreck the economy over that? you want to deal with c particulates? go ahead. do something real. don't ruin the economy over a theory. >> what needs to be done with unemployment. people are worried. you're talking 1 out of 10

americans out of work, according to the official numbers from the government. >> here's the thing. we have had a very severe recession, first and second quarters. we should have a real "v" upward. we're not. we're going to have a sluggish economy, at least short term, precisely because of uncertainty over health care, uncertainty y over cap and trade, uncertainty over unionization legislation, massive tax increases, especially in small businesses. >> is it that? is it that or uncertainty -- uncertainty about the new normal, is what a lot of people say? when you look at business, we were writing loans, spending money we never should have been spending. we have to bring back in there fr that. are we ever going back to business as it was a couple years ago? >> i hope not a couple years ago when the federal reserve was misbehaving in a major way in terms of printing too much money. we never could have had the housing bubble we had if they hadn't printed so much money in the early part of this decade. i hope we go back to a strong and stable dollar.

this administration doesn't get that. george bush didn't get it. amazingly, bill clinton understood the need for a strong and stable dollar, as did ronald reagan and john kennedy. until they get a strong and stable dollar, the federal reserve gets the credit system working again, which it hasn't done with small businesses and consumer loans, and until we get this uncertainty about these massive tax increases and regulations out of the way, you're going to get sluggishness. that's going to hurt us all. including their revenues. >> country officially with a trillion dollar deficit as of june. these bond auctions continue to be relatively successful. people still talk about a secular bull market in bonds, unless the ten-year gets up to five and change. why has the bond market not taken this as seriously as you appear to be? >> well, i think short term the bond market still is going, despite the recovering junk bonds and some other areas. the markets are still going with government guarantees. so it's more of a default position. but when you have the prospect

of businesses needing capital, you have massive tax increases coming and the fear is the federal reserve, eventually, what is it going to do? is it going to print money or let the government pay a real price for those borrowings. we don't have a fully market yet. securitization is not working yet, amazingly. >> steve will be with us for the next couple of hours and he'll be weighing in on other stories we're focusing on. let's tell you about a couple new corporate news stories. cit is holding advance talks with the government about receiving emergency federal assistance. they want to get help through an fdic program to guarantee its debt. on far the fdic has been resista resistant. they're citing concern about backing debt if they should fail. there are a lot of questions about what would happen to small businesses who go to cit for their lending purposes. not to mention, cit taking over

$2 billion in t.a.r.p. money. >> meantime, steve rattner is heading down from the u.s. auto task force. they're reporting ron bloom will take over day-to-day operations. sktd tim geithner says rattner will return to private life and family in new york. but reports say rattner does not plan to join its former firm. investigation into rattner on a corruption probe has intensified but reports out this morning try to walk people back from coupling the two moves, the quo quomo investigation and rat. tner leaving. speeding in saudi arabia today, geithner acknowledged the dollar's role, meaning the united states has a special duty to help spur recovery. gosh darn, it we're trying. he's on a mission this week to

reassure gulf arab states that the united states wants their investments and that u.s. dollar, that it is a safe asset. >> we have cit coming up later today. any comments or questions about how we're all 10 years old -- >> they didn't listen to me either. >> really? people are writing. you want some more? >> can't stand -- you were criticizing the obama administration again. >> i criticized the bush administration, too. >> you did. >> i'm an opportunity critic. >> and clinton and reagan got it right. >> kennedy and reagan. >> he said, clinton, reagan and kennedy. >> on the dollar. the address at the bottom of your screen, squawk@cnbc.com. futures are hanging into a tight range as we await goldman numbers around 8:30 eastern time this morning. we'll see if we get any fireworks on that. when we come back, the festivities in st. louis under way for the 2009 all-star game.

the home run derby last night. tonight the fight for home field advantage in the world series. we'll go inside the business of baseball. later on, bernie madoff settling into his new digs where he'll spend the rest of his life. we'll take you to madoff's new home in north carolina. ú time for today's aflac trivia question. on this day in 1968, what major league baseball legend hit his 500th career home run against the san francisco giants? oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh

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now the answer to today's aflac triyeah question. on this day in 1968, what major league baseball legend hit his 500th career home run against the san francisco giants? the answer, hank aaron. for the next two hours we'll be talking economy and politics with steve forbes, ceo of forbes. steve, i have to get into this with you. "business week" worth $1 because it looses $10 to $20 million, i guess, every year. mcgraw-hill would like to get rid of it. it's not even worth $1. when did you sell what was

reported to be a 40% stake in forbes to elevation partners? how long ago was that? >> it was in the summer of 2006. >> summer of 2006. it was reported it was $300 million for a 40% stake in forbes. now, i remember when trump wrote part of the deal. he sold some resort to merv griffin and made a big joke about how much merv paid and how he got the better of him. this probably makes that look ridiculous. you got -- as terms of timing, you sold 40% of forbes for $for 300 million to roger mcnamee and bono, basically. what is it worth now? >> we've taken a hit like all media companies but -- >> the websites? >> what attracted them was the website where we have 20 million unique visitors a month.. we're making investment -- >> $100 million? >> i wouldn't sell it. neither are they. ere very clear, and this is what we liked about them, actually, they were not just spreadsheet people. they were looking to the future.

they like the idea of going into the new areas of media, new frontiers. so they're looking at three to five years. and we think around the world there are huge opportunity. question just launched with a partner forbes india, which is off to a great -- >> it's timing. they got unfortunate timing.g. you got incredible fortunate timing. >> well-being long-term they  will make money.. and they took -- >> you're still smiling. $300 million for 40%. you got a very good deal and as a seller, you were in the right position. >> and they will get -- >> i know, i know, i know. 40% -- he sold -- he got 100% of what the company's worth for 40%, basically. >> we know about the history of forbes and the legacy of your father. is there a point at which the family's commitment to media will clash with a business model that is so challenged it eventually loses money, maybe? >> well, we think that media has a future. and we're like everyone else -- >> publishing? >> publishing, too, working

together. our readership, our page circulation's actually at a record high, amazingly enough. we're getting hit on advertising. our market share is up but the market's taken a real hit. on the website we think there are huge things.. we just launched forbes women, going after executive women. we think there's a future there. we're grappling with the new models, constantly changes. but we went through the depression. we heard the stories of our grandfather, not being able to cash his own paychecks. we've been in other businesses, like in real estate in the 1970s. we do various things but our focus is always on entrepreneurial capitalism and we'll figure out a way to do it one way or the other. 92 years we've done it. i won't be around for the next 92, maybe unless j&j comes up with a miracle drug but it won't be national health care that will get me another 92 years. >> exactly. j&j maybe will announce something. there's a lot of red wine. i know you're trying there anyway, right?t? but a lot of red wine,

supposedly -- >> and calorie -- >> but you don't get nearly enough. >> one of my brothers owns a vineyard in france, so, yes, we're covering all bases. >> we will have more with steve in a moment.. when we come back, though, we are getting ready for goldman sachs. also dow component johnsson & johnson will give us their numbers. and where congress stands on bailing out commercial lender cit. we'll hear from both sides of the aisle. committee member jeb ehnsarling and care lynne moloney. we know why we're here.

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dell warning of lower second quarter margins. the comments after the close sent the shares lower. dell does expect some slight sequential revenue growth. the world's number two maker of pcs holding court with analysts in texas today. when we come back this morning, breaking news from the small business world. how that segment of the economy's doing. and it doesn't even exist yet, but still no shortage of

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we have the futures this morning after yesterday's big gain showing a little bit of a gain today. the nfib is out with small business optimism report. optimism down but labor market imprufg. i'm going to say that again. labor market improving.g. tell us how. you found some silver lining, though? >> yeah, there was some. the optimism index did go down a point, not very much so it kind of moves sideways after having a nice gain over the last couple months. we did see an increase in the percentage of our firms with job openings, they're having some trouble filling. and an increase in the net percent of firms who plan to create jobs.s. that is, to increase total employment at the firm, which leads us to forecast of unemployment rate over the next three months around 8.8%, which is a little different than

president obama forecast.. we think 10% won't be attained now and that's good news. >> you're kidding me? >> hard to believe, isn't it? >> yesterday we heard the "t" word, overused to say it that way, but 13 from the possibility of low double digits. low to even medium double digits. you're saying we might not even hit double digits at all. >> right. i heard that forecast, and i guess if you pay attention to banks, you're still depressed, but looking at the real economy, you know, it's not -- it's not going down. it's moving up very slowly. but, you know, you've got stop falling before you can really y rise a lot. and some of the labor market indicators looked really good. we're still cutting prices like crazy, but not as bad as we were before. so that's good news. that will help bolster profits a little bit. obviously, we're having a little bit of trouble with credit.t. people don't want to pay us very fasting and, being, we're not paying very fast either. so we go both ways there.

credit markets got better. we had fewer people saying credit was hard to get and only 5% said credit was their top problem. >> well, bill, what happens if cit goes under? >> well, that would be painful. cit lends money to hundreds and hundreds of manufacturing firms and thousands of retail firms, small firms. if they go under, i think most of the firms can probably refinance, but even that business interruption, if you will, is very costly to small firms and to some that would be the death nail. the cash flow would be interrupted. then you have business problems. some will go by the wayside if that happens. that's a big company, a big lending, kind of generic, main street, factoring, inventories, those kind of things. we would notice them if they went down. >> is the ffib calling for the government to help them? >> we're not saying anything in

particular about it. we would certainly like to see cit not fail. i don't think we're lobbying heavily on that issue. we're leaving that up to the policy makers. >> bill, steve forbes here. >> hi, steve. >> how are you? >> i'm fine. thank you. >> you say there's not much of a problem on credit. is that really true, that the small businesses now can easily roll over plains? that they don't have to pay user rates to get their credit now? that securitization is now working again? that consumers can buy again? because they can get credit?t? but this crisis is really over on the credit side? >> well, no, it's not over but it's getting better. we found no problem of a credit crunch on main street. we had -- for example in 1982, 35% of our firm said credit was their top problem. today it's only 5%.%. that's the highest we've seen in ten years. so that hasn't been a problem. certainly, credit has gotten titder. if you look at -- go back to

2003, only 3% of our owners said credit was harder to get this time than the last time they trade. we got up to 14% now. but that's typical.l. that happened in the '80s, expansion in the '90s. we saw that bump in credit availability in terms of a wall street crunch. that didn't happen. >> we have to go, bill. in a word, was there specifically anyplace that stood out for where there's job openings? >> well, you know, pretty much across the board. >> really? >> yeah. we saw increases everywhere. we saw a big difference was geographic. we saw really bad news in the mountain states, the east south central state, but all of the other regions had more firms planning to increase employment than to cut it. and even, of course, in construction and manufacturing, those were the leaders in terms of of job creation plans. so construction's probably seasonal but the manufacturing news was good. >> bill, consumer confidence has tracked well over the past three months and people always point

to the way americans watch the stock market. does it work the same way with small business? are they watching stocks go higher and that in and of themselves makes them feel better about their business? >> any good news is helpful these days.. i think they watch that. of course, our business owners are consumers, so a part of that's going to -- you know, there's going to be a high correlation between those two. >> bill, thanks for your time today. >> thanks, joe. >> see you later. >> from how the recession is hitting businesses to the steps leaders are taking to fix that situation, congressman carolyn maloney and jeb hensarling join us this morning to talk about, among other things, whether or not a second stimulus package is -- i guess even really being debated. congresswoman, congressman, good to see you both. >> good to see you. >> i'll begin with you congressman hensarling. is this really something you're talking about, a second package? >> i don't think we ever had a first economic stimulus. we had a big stimulus package

for big government costing american taxpayers $1.1 trillion, almost $9,000 a family. clearly, it has failed. we've seen the failure of obamanomics. unemployment has gone to the highest in a quarter century, almost half a million lost month alone. we heard yesterday the deficit has reached $1 trillion for the first time ever. if we really want to stimulate the economy, we'll give tax relief to small business, the tax -- the job engine of america. and we'll zero out the tax on job creation and investment, the capital gains tax for two years, and we'll quit having washington meddle in this bailout mania of taking over corporate america. that would get the economy moving again. >> yeah, i -- i don't want to have a debate about the nature of taxation. i wonder, congresswoman f you can zero in on this package that we have in place and tell us whether or not it is time to give it a grade of some kind,

knowing that only 10% has been spent. >> well, first of all, you have to realize that president obama inherited a financial mess. we were losing 700,000 jobs a month. we are now improved to over 400,000. still bad but we are digging our way out of this financial challenge. without the stimulus, we would have lost more jobs. and we've only had it in place for roughly five months, going on six months. and so we need to get that money out into the states and into infrastructure projects. in the senate, they cut out of the package $40 billion focused for states and localities. that's one of the areas that is losing the most jobs. >> you will agree that the delivery of that money to states has been hampered in some way by red tape, right? and that some states are using it to fill their own budget gaps. it's not gone exactly as planned, wouldn't you agree?

>> it depends by the state pip know in my own state, we are pushing it out the door and into the ground, saving jobs, creating jobs, investing in the education, health care, infrastructure of the future. and investing in infrastructure for the may. may i ask mr. forbes a question? >> oh, go ahead, please. >> i tell you the concern in congress right now is cit. it's a major company. and what would the impact be if it failed? personally i think it should be saved because it's pushing money out the door, into our economy and into small businesses. and what i hear in my district is lack of access to capital. they can't get -- even good businesses that have never missed a payment can't get credit, can't get loans. we're con fronting a possible foreclosure on commercial real estate that can't refinance. so -- >> congresswoman, i think the

question, and i have the same question, should really be directed to the federal reserve, which is actually tightened money in recent months. has not done very much to get the securitization market working again, which is central for small businesses and for consumers. and on the cit, fdic has been dragging it's feet.. it's given guarantees to general electric and yet cit is left hanging out there. i think you see real inconsistency with the government. the federal reserve has dropped the ball. fdic has dropped the ball on that one. in terms of the stimulus package, i would love to hear from both of you on how can we have this new stimulus package, perhaps, massive increases in spending, we can have massive increases in entitlement spending, how is the economy going to survive the massive increases in taxes or borrowing? where does this leave the economy in the next few years? >> the economy can't survive

this.. already, if you -- it would take us 60% increase in income taxes just to balance the budget over the ten-year budget window the president has given us. he has proposed a budget that creates more debt in the next ten years than in the previous 220, tripling the national debt in just ten years. you cannot bail out, borrow and spend your way into prosperity. japan tried it in their lost decade. it did not work. >> congresswoman, there's been talk of a value-added tax. would you support such a tax to plug the deficit? >> there is not serious debate on the value-added tax. we have not -- it's not seriously being discussed in the democratic caucus. it may be in the republican but not in the democratic caucus. my one question to you, mr. forbes, if t t small businesses can't get credit and cit is not giving them credit, it will be more of a downward spiral on our economy. >> oh, i agree on that.

that's why i'm very critical of the federal reserve and secretary geithner and not getting the securitization market working again. abraham lincoln, hero of the president, liked to call generals who weren't performing to have the slows, bernanke and geithner have the slows. i hope you put pressure on them to get going and get the credit marketing working again. instead of talking, let's have doing. >> sounds painful. we're going to stop it there because we do have earnings coming out in the next few minutes. >> thank you. >> we'll continue to have the conversation. thank you for your time. when we come back, we'll get numbers from johnson & johnson, and counting down to goldman's earnings. the stock upgraded yesterday by meredith whitney, a special guest on "squawk." as we go to break, take a listen to what she told us 24 hours ago. >> i updated goldman last night, this morning. >> first buy you've ever had at whitney advisers on a bank. >> it's a bearish call but a

bullish call on the stock. most states underfunded. you'll see a tsunami of debt issue answer. where you think goldman would be a true play equity trade it's actually the number one underwriter of build america bonds, a top underwriter in munis, playing heavily in the mortgage-backed market. in the first quarter they played heavily in the agency market. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience. right now, 1.5 million people

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at any moment we are expecting a report from johnson & johnson. the street's looking for $1.11. it looks like $1.15. sales fell. we had an analyst on earlier looking for an 7% drop. 6 percentage points seen in currency factors with the dollar. we'll also be looking to see if we can get some type of outlook for johnson & johnson.n. the year is at 451 so beat by four cents this quarter. we'll see whether they -- and it makes a difference because 4.51

compared to last year. that gets them up to at least flat year over year. it looks like domestic sales fell 6.7%. total sales, $15.24 billion. there's generic competition and topamax and the overall economy which hurts most of the consumer franchise. i think -- i don't think -- i don't think the usage of baby powder goes down but we heard that they switched to less expensive. >> you haven't changed. >> i will not change brands. it's like putting on sishlgs the real stuff. not the cornstarch. joining us -- i don't know whether mike uses baby powder. jpmorgan health care analysts. any surprises you've seen, got the stock down fractionally, mike. is there something in there that's troublesome? >> the market's still digesting

the news. i think it looks like a decent quarter. joe, this is actually their trough quarter for j&j. they'll have the major impact of two major drugs going generic. this is probably the worst quarter the company will have. they managed to be on the bottom line and it should get gradually better. >> there's a line saying they're confirming their earning guide an. 4.51 is where the street is right now. >> go ahead. >> yeah. that's actually relatively good news because they're absorbing the dilution from elan last week and the biotech acquisition last week. they're absorbing the dilution from the two deals. >> the combined impact of their declines was nearly a billion dollars. >> the bid ask is up about $2 -- i'm sorry, a little lower. now it's $58.56.

>> sorry, there was a weird -- >> yeah, 80 cents. so this could have been worse? what are you saying? they might have said something about the year? >> no, this is pretty much what we were expecting. it's a little better than the street. they beat on the bottom line. tom line is a little better than the street was forecasting as well. >> right.. >> and i think people are looking forward because they have a relatively strong pipeline. they had a deal with two major drugs going generic. as i said, the one quarter which they'd feel the hit from both. now if the pipeline plays out, growth should start to improve over the next several quarters. >> can you see anything about the overall economy in terms of their consumer business? can you make any macro statements? >> no, not yet. and it's actually -- their business isn't great for getting a read on the overall macro picture. you're not going to be able to read how listerine did -- >> whether devices, whether some people -- some are easy to put off. you don't need a hip immediately. but some you need being diabetes, right?

>> well, actually, joe, you do see people in places like glucose monitoring for diabetes, you see people putting that off. >> really? >> you see the impact. >> we talked about that. nothing is inelastic, it doesn't seem. we came up with crack, cigarettes, or something. mike, we appreciate your time, the quick read on these. we'll see you soon or talk to you again soon hopefully. >> take care, joe. now it is up almost $1. >> it's $58.60. . these are definitely reflecting -- >> they were at session highs right before. >> very good. >> good job. still to -- >> e-team, is that what we are? >> earnings team going through the numbers. >> let's just go with it. >> we like it. embrace. we are the q-tee-team. >> a shot of you running into a building. we have heard from j&j,

goldman sachs out later this morning. when we return on "squawk box" we have more from our guest host steve forbes. we're waiting for numbers from goldman sachs, expecting them around 8:30 eastern time. we'll get you the instant reaction. stick with us on "squawk box." we have the premarket info you need. d#: 1-800-345-2550 "i'm rethinking everything...

tdd#: 1-800-345-2550 including who i trust to look after my money." tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "the dust might be settling... tdd#: 1-800-345-2550 that's great, but i'm not." tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "i guess i'm just done with doing nothing, you know?" tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "oh, i'm not thinking about moving my money. tdd#: 1-800-345-2550 i am moving it." you must be looking for motorcycle insurance. you're good. thanks. so is our bike insurance. all the coverage you need at a great price. hold on, cowboy. cool. i'm not done -- for less than a dollar a month, you also get 24/7 roadside assistance. right on. yeah, vroom-vroom! sounds like you ran a 500. more like a 900 v-twin. excuse me. well, you're excused. the right insurance for your ride.

this travels with me. i am over at the earnings desk. i was actually going to use my telestrator. he's the leader, i think, this guy right here. there's a little backup singer. the beluga whales. there he is again. awesome. lease take a look at stocks to watch. johnson & johnson reported $1.15 and a bit of a relief maybe for the full year guidance, the revenue was above expectations. that was a four cent beat. it was known that both topamax and toparil would hit the generic market.. you just heard from mike weinstein.n. earlier we heard down $72. even throw you're looking at the overall economy being weak and

the generic competition, that the stock itself at $57 may have been representative, you know, of a good entry point, at least so far this morning it looks like that is the case with the stock up about $1, if you split that bid. the first call for the year, the estimate is $4.51. and at this point, the company said it was comfortable with $4.45 to $4.55. there it is. i'm just checking, playing with this a little bit. try down here, hit this one and then -- yep, all right. let's see. this is really great. this is value added, folks.s. that's an arrow. csx reporting 72 cent from continuing operations versus 62 cents. you can see, though, that the stock is indicated up maybe 50, 60 cents. this is a transportation bellweth

bellwether, obviously. transportation was 2.2, basically in line with expectations. finally, let's check out dell. except sequential increase in revenue, although modest -- i'm talking dell at this point, although modest margin pressure at this quarter. the consensus is 12 .56 billion compared to 12.34 billion reported in the first quarter.r. we're slowly getting into earning season. we have literally hundreds and hundreds of reports to bring u you, which is why we set up this new area, which allows us to do some things different, but some things remain the same, carl, the animal orchestra. i hope you enjoyed it. >> is there any way you can color that out completely, just arrows until you can no longer see or hear them? >> the animal orchestra? >> yeah. >> see if you can color the whole thing. >> yeah. >> take your whole hand. oh, that doesn't work. >> lean up against it. there you go.

even more breaking news on the way. goldman sachs just half an hour away. two big economic numbers. retail sales when "squawk" continues. fidelity, traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center. and fidelity gives you free research from 15 independent firms, with accuracy scores... to help you decide which analysts to trust. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.

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earning central on "squawk box." the first of several financial giant about to report. goldman sachs on deck. >> you never feel like you know how goldman makes money because they change every quarter. the next couple of years it's going to be debt market focused. >> we have instant reaction and snap analysis you can't afford to miss. "squawk box" begins right now. ♪ right here right now welcome back to "squawk box" on cnbc, first in business worldwide. good morning again, everybody.y. i'm becky quick long with carl quintanilla and joe kernen. our guest host is steve forbes. let's take a quick look at futures this morning. we have seen futures picking up through the course of this morning after what we heard from dow component johnson & johnson. that stock is indicated to open

high higher. that's helping futures out along the way. dow futures out about 43 point above fair value. let's get to carl who is monitoring all of this from earning central. >> people want to believe goldman is happening in a good way. expected to roll out second quarter results in half an hour's time, 8:30 eastern time we'll be looking for that number. goldman looking for bz 3.54 a share, the trading platform, obviously, a big deal. the proprietary trading, their fixed business, fixed income currencies, commodities. that may have eased but their equity business, all the secondaries done over the last couple of months, that will be a boone to goldman's earnings and a lack of exposure to the consumer. financial analyst dick bove gave us his take on the stock in the last hour. >> we put a buy recommendation on this thing in april, you know, when it was $1.15. our view then was that it would go to $1.50. then about a month and a half ago we raised that target to

$200 and we think it will get to $200 by the end of this year. we think that, you know, that's just a weigh station on the way to the all-time high of $250, you know, by the end of next year. so i think the outlook for this company is extraordinarily good. >> yeah, with the target of $250, at least a long term target of $250, you can imagine it is a good outlook. we know the low hit right there, $47 and change back in the doldrums, the dark days of mid-november. beck y i think we talked yesterday about where buffett may have come in with his warning, somewhere around september, right around here. >> around september 20th. in fact, i think it's a little down. he bought it and the stock immediately popped. right at that dip. the day after he bought it it jumped $10, before running into a little trouble. >> we've seen the nice run goldman has had. we'll keep a close eye on what goldman says in half an hour's

time. johnson & johnson posted $1.15 a share, revenue above consensus. some international business, worldwide consumer down, device down, pharma down 8.7 but obviously tight cost controls managed to make the stom stock at least a winner in the near term with the bid ask at $58 -- $52 to $58.70. here's a dow. we talk about the dynamics that took place in the last earnings season. here was right where earnings season began to start, after the end of the first quarter. you can see the market anticipated what was going to happen over the next couple of months because, to a large degree, those banks posted better than expected numbers, wells fargo, citibank, bank of america. we'll see if goldman can start that dynamic happening again in about 30 minutes' time. >> carl, we'll be following all

of this. other stories, goldman sachs executives reportedly sold shares after the collapse of lehman brothers last fall. while the bank was benefiting from about $10 billion that it took in t.a.r.p. money. this is according to some sec filings, the financial times is taking goldman partners dumped more than $6 91 million in company shares. that's up from about $470 or so from the same period a year earlier. now, at the same time, the investment bank expanded it's public float from $395 million to $309 million a share. they say the partners receive bonuses in stock. also, lender cit group holding advance talks with the government about receiving emergency federal assistance, ailing cit wants help through an fdic program that would guarantee the company's debt.. so far the fdic has been resistance to this. they've been citing concerns

about backing cit's debt should the company fail. talking about worries out there about expanding its temporary liquidity guarantee program beyond the original purpose. as we heard from carolyn malone y the congresswoman, she would like to see the government get involved. we had bill from the nfib who said small business is very concerned about what happens here as well. >> it's in all the papers today. steve rattner stepping down as head of u.s. auto task force announcing ron bloom will take over day to day operations. the start of a long-planned wind down. secretary geithner says rattner will return to private life and family in new york. they say he does not plan to rejoin his former firm. new york attorney general cuomo into rattner and his firm has reportedly intensified in recent weeks. let's turn to our guest co-host, steve forbes, ceo of "forbes."

normally you're against bailouts but with cit you're for it? >> i'm not for a bailout specifically. >> the guarantee -- >> what i am for is if they're going to do it to ge they have to do it to cit. i think what the fed should do and should have done has been much more aggressive on what they promise to do in terms of buying mortgage-backed securities and these other packages -- >> that's not my question. >> to, it isn't. >> i want to talk about cit. >> cit never would have been in this trouble, never -- >> without the securitization -- >> if the federal reserve had gotten the securitization market again. which geithner and bernanke said would happen earlier this year. the federal reserve balance sheet it has shrunk, which is why the gold market has not popped the way people expected it to do. >> the government thinks it will pull out of some programs by october and let them stand on their own two feet.

>> that's fine in terms of not buying treasuries. banks have more cash now, three times as much cash when lehman brothers went under in september. in terms of securitization, that's not working yesterday. >> you have people on the fed's case to talk about exit strategies. people think bernanke may lay it out in front of congress next week. isn't the balance slinking part of that process, showing we do -- >> the federal reserve has got to make a distinction between buying treasuries, this program of buying long-term treasuries is uselel that's damaging because it will raise the did he have have deficit. in terms of getting the market working, securitization market working, one last push. they should have done this three, four months ago. we wouldn't be here. >> the fdic could be on the hook for -- i don't know what cit has got out there. even with the ge capital, some of the guaranteed debt, i think it's -- >> $400 billion. >> not that ge has issued at this point. i don't know. i saw it, 5 or something.

45 or something. you don't think the fdic needs to look at the risk inherent in guaranteeing that and that a cit could certainly -- they could view that as a riskier guarantee than ge capital? number one. the fdic, they're worried about how much money they have in their fund. i mean, doesn't sheila bair have a right to protect the fdic -- >> everyone knows that if the fdic has to do something, the treasury department will be will to back it up, the federal government -- >> sheila knows the treasury's going to be behind her, why does she act like it's her money, then? >> she has the right to be careful. we're not asking her to waste the money. >> so you say give the fdic guaranteed, cit, do it. >> if they've done it to ge, which has a little worse capital balance sheet -- >> but they have all of these other --.

>> but if you're there to try to get the capital markets working again, with cit and ge and thes others, if you just -- it's like a natural disaster. you go in, you throw in the food, you throw in the medicine, you throw in the temporary shelter and then you pull back. part of the problem with the federal reserve is nobody knows, nobody believes they will pull back. in terms of cit, ge, securitization market, they should have done this three or four months ago as aggressively go in, get the thing working, pull back and say when the pulling back and why the pulling back. >> through all of these different programs, the treasury set up, that's the way to kind of keep these markets afloat and keep things operating as normal, even though they've been given this great shot? >> the velocity really hasn't come back. if they would just lay up, they're not going to finance the deficit. that would be a good thing. no more buying long-term treasuries. that wob a good thing. part of the market isn't working. they'll focus on that.. they'll pull back with certain -- >> the journal -- >> hit the accelerator on one

and the brake on the other. >> i think they can multitask. they've only been in business 95 years. >> the journal makes a point that the obama administration will definitely help cit because they need to get unemployment down by 2010, by the election. >> by the fall. by the fall. >> and this it too important for small businesses. >> this is part of their problem. they pick on companies instead of getting the market working again in items of the credit market. cit wouldn't be in this mess today if the securitization market was working. if they did what they promised three, four months ago -- >> european cdos have every cdo in europe has cit -- >> every cdo? >> that's what its in the journal. just ripe with -- >> the market lends to small businesses but nobody else is willing to lend to. >> right.

>> and that's despite the good news from federation independent businesses, small businesses are -- >> like restaurants? >> they make small business loans. >> would you at least -- >> we made tons and tons to franchisees. >> which is part of it. >> dunkin' donuts. >> would you say with commercial paper they have a track record to continue on? they can get this ride if they put their mind to it? >> the fed can get it right.t. they should have aggressive moved on mortgage backed d securities last november, which they promised to do and never did.d. and on these other securitization market. they should have done that three or four months ago. and they didn't do it. that's what's amazing, is you have an emergency, deal with the emergency and then pull back. jpmorgan could have told them that. >> just like being around my family's table. we have two different conversations. >> and another thing -- >> no. >> a lot more with steve throughout the rest the program. in the meantime, bernie madoff has a new home this morning, the convicted felon behind one of the biggest scams ever.

joining 3400 other inmates at a federal prison in north carolina. our scott cohen is there with details on what his life may be like from this day forward. scott, good morning. >> reporter: good morning, carl. there's a website where anybody can monitor the location of a federal inmate. as of this morning, it still has bernie madoff at a federal penitentiary in atlanta. atlanta, we are told by sources, is a stop on the way here to butner, which is madoff stopping place. if madoff shows up here and we can figure out it's bernie madoff, by golly, we'll show it to you. he's to be here for at least the first day of the rest of his life. we're not sure how long he'll be here.. one prison expert says that madoff may be here primarily for

a mental and physical evaluation. there's a very well respected prison medical facility here. they need to figure out where he is healthwise at 71 years old as he begins this life sentence. butner is actually a complex of prison facilities. there's a couple of medium security institutions, low security institutions and as well that medical center. the total population now, about 4,800 inmates, 4,874 according to the bureau of prison website. for madoff, the first step will be, again, as we said, evaluating his health and experts we've spoken to suggest that he will be under some pretty close watch, even more so than a normal prisoner coming in here just because they need to see where he is at emotionally and otherwise. if he winds up in the general population here, he will be able to make anywhere from 12 to 40 cent an hour doing various jobs, whether it's plumbing, cleaning

out toilets, gardening, that type of thing. he will live in a cell with a cellmate, bunk beds, a toilet. they will get up -- or, you know, aroused to wake at 6:30 or so in the morning, work by 7:00 and occasionally visitors on the weekend if ruth madoff decides to make her way down here from new york.. >> it sounds like it's awfully noisy where you are. from the chopper shot, i see that the prison has a baseball diamond at the very least. what's the likelihood, knowing what you know about him and about whoever's representing him at this point sorkin or whoever, about the possibility that he gives an interview from prison in the near future? >> reporter: ira sorkin is, indeed, still representing him. hard to say. of course, it's the interview everybody wants. you know, bernie madoff has not been talking to investigators, even though that might have helped him get a lesser sentence. we'll see if he talks to any journalists in the near future.

i doubt it will be the near future, but you never know. >> i know a lot of people are trying, including us. scott, we'll talk to you soon. scott cohn joining us from outside that penitentiary in north carolina. we're waiting for the next big report, that is goldman sachs, they're on deck. expected to get their numbers in 15 minutes or so. we'll get the numbers in the instant analysis. breaking economic numbers on the way, retail sales, ppi also coming out at 8:30. the biggest shrub sluggers in baseball going yard at the home run derby. is the business of major league baseball knocking the ball out of the park? darren with the hits, runs and errors. one four star hotel.

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goldman is out, it was up 8 bucks yesterday so it's hunched on this blowout number we're seeing here. if you take out the t.a.r.p. expense for repaying it, it was $5.71 versus expectations of $3.54, including the -- so that's a nongap number, $5.71, nongap. $4.39 is the gap number versus a year ago, $4.58.

end quarter revenue above, $1 billion with 20% return on equity. second quarter net revenue and investment banking of $1.44 billion. that was one of the things that people were looking as improving because there's been some investment banking activity going on as well.. but this is a trading firm and people are expecting better results. this is even above what meredith whitney said yesterday. >> even when you consider that they paid back the t.a.r.p., even after they paid back the t.a.r.p., they did better than a year ago. >> yes. >> i mean, that's just incredible. >> last year was -- we were in the middle of the mess. we just hadn't hit the meltdown. >> the meltdown moment. i guess this was after -- after the bear stearns -- >> remember how many -- it was a period of months where we just kept -- shoes kept dropping. it's tripled basically, from its low. it's more than tripled.

a lot of people -- i think it was cramer with erin saying, who doesn't know they're going to beat, and therefore, do you ned necessarily buy after an eight-point move the day before. "fast money" guys. >> you hold back the gains from yesterday instead of giving back. dick bove said he would sell after yesterday's gains and go ahead and sell on this number, but this is keeping that stock, the bid ask, right there, where it was yesterday. you could hold onto those $8. >> be interesting to see whether morgan stanley and lehman brothers -- oops. we always used to do morgan, lehman and goldman. i guess we don't be. >> different world. >> won't be reporting on -- we'll see how bear stearns -- oh, maybe not. we will see, at least -- >> there's some comment from lloyd blankfein as well. he says, the our second quarter reflected a combination of improving financial market conditions and a deep and diverse client franchise.

he's talking about improving financial market conditions. i wonder what that means for other guys trading in this area. >> interesting total staff. the world is that wall street's laying off people in droves. down 1%. >> they're probably rating people. steve, you're going to see some people mad that they got some government help and now making a bunch of money. you'll see that's bad because they'll pay bonuses. isn't is that where the government derives profits? >> government is very much your partner, and more in this country than any other developed country in the world. >> would they be happy goldman is doing well or angry goldman is doing well? >> goldman's doing well. the key thing is in terms of the whole economy, when is that going to be doing well? when this-s this credit market going to be -- >> that's the disconnect. the goldman guys getting big bonuses -- >> there's a hole in the doughnut, right? >> 10% unemployment. >> and they better be careful, because in this country, when you succeed, people come after you. you already see the piece on -- in "rolling stone" and others,

they better watch out. no one's invulnerable, no one masters the universe -- >> you read the "rolling stone" piece, because you get "rolling stone" at home. lifelong reader. >> let's take a look at what to look like. joins on the "squawk" news line is jeff hart, managing director at sandler o'neil. i'm not sure if you've been able to go through the numbers but the company coming in, goldman coming in with earnings even when you exclude the one-time preferred dividend pay back of t.a.r.p., you're looking at $4.93. what do you think of this? >> these are very strong numbers. we we kind of knew they were going to be strong so i don't think strong numbers surprise anyone but this is above and beyond what most were expecting. the real story seems to be revenue strength. you figure the consensus is looking for something in the 11.5, 12 billion -- >> closer to 10.6.

>> we came in at 13.8. i was looking at 11.6. the noncomp expenses are pretty much in line.. they paid out, you know, just under 50% of revenues and comp. that's what they always do. but you've got fixed income trading at a record level. that's unusual because last quarter was fantastic and usually you get a seasonal slowdown if nothing else in the second quarter. he can wi equity trading was strong, debt and underwriting was strong. i would underline equity trading, underwriting business was ahead of expectations. >> is that something you think morgan stanley can repeat? do you take a look at this and think a lot of people will be doing better or is this goldman-specific? >> i think this is good news for the industry in general. i mean, goldman is not the only one out there benefiting from the market conditions we saw here. i wouldn't expect anyone else to expect goldman-style numbers here. this is good news for the other players in the industry, but i think this will also show by the end of the quarter that goldman is the leader. >> we've been watching that bid

ask bounce all over the place. just a moment ago it was a little below where the stock closed yet. again, this is on an $8 gain yesterday. what do you do with this stock today? >> i don't think a beat like this really surprises people a whole lot. actually, the whiser in number, if you say that, was higher than the consensus. the real story is what are you going to do for an encore?e? >> jeff, did you -- did you know what the t.a.r.p. expense was going to be? what was your number and did you include the t.a.r.p. expense in it? >> yeah. my number for the quarter was $3.43. it did include the t.a.r.p. expense. >> okay. so everybody knew about the t.a.r.p. expense. >> yes. >> the number we had at -- >> $4.93. >> at $3.54 everybody was -- that consensus number was including the t.a.r.p. expense? >> yes. goldman very clearly articulate what had that expense's impact would be. >> so everyone can then look at the nongap and the gap and decide whether it was above or below based on whether they included the t.a.r.p. into their estimates. >> right.

just a quick answer, you know, what do you do with the stock here? if can you look out a year, i think you'll be happy on goldman sachs, its the leader. after the run it's had, given these results, and you have to figure the third quarter will be pressure, i do not think you need to buy it at $150. >> when you say look out a year, what's the brains you're expecting? >> well, it all depends on what the market delivers to us. if we're in an improving economy and better capital markets environment, you could see $180 plus goldman sachs stock. if the market remains tough and the economy remains tough you're probably going it see goldman hanging out in the $145-ish kind of range. i guess the gee is, if you're bullish on the economy you buy goldman here. if you're not quite as sure, you know, you can lose a lot of money in goldman but you may get a lower entry point if the third quarter is as weak as it usually is from a seasonal perspective. >> thanks for your time. we appreciate it. >> thanks, bye. coming up ngs more breaking economic news from the economy -- really? retail sales today?

>> and the ppi. >> "squawk box" will be back.

take a look at shares of goldman sachs. again, we just heard from the company. came out with numbers that were much better than had been expected. you're talking about difficult luted earnings per share, $4.93 after the company paid back dividends of $426 million

related to t.a.r.p. street was only looking for a number well below that. you're talking about $3.58. street expectation. again, that stock was up sharply yesterday which is why you see it hovering in the bid ask right around that 4:00 p.m. closing price yesterday. it was up $8 after meredith whitney raised her rating to a buy and got people talking about it because meredith whitney has been very bearish on all of these banking stocks and all the financials across the board. this is the first buy rating she's initiated since moving to her own company. now, again, take a look at goldman sachs. you'll see the tick by tick there. we just talked to jeff harte who said he was expecting strong numbers but this was stronger than most people were looking for. it was stronger than meredith whitney was looking for, too. jeff harte says goldman could see $180 over the next year. we talked with dick bove who said you could see a stock that sees $200 -- >> or $250.

>> jeff says if you're bearish on the economy you could talk about a stock around $145 a share. steve, you watched these markets very closely. does this come as a surprise to you? >> on goldman sachs? >> on goldman sachs being able to move and maneuver. >> no. they're ripe with a tom wolf novel with what they're doing and their competitors have gone down, lehman, bear stearns and the credit markets have been revived. rite aid has again able to get junk bonds on tlut. the credit markets are reviving. i just don't think it's as thorough as it should be. the fact government could issue more debt, getting their balance sheets back in order, no surprise at all. >> we've been watching the future this morning, which are well above fair value. earlier through the course of the morning we've seen goldman sachs number, right in line. johnson & johnson indicated sharply higher after it came in with earnings better than expected, too. take a look at the dow futures.. you'll see right now up by 51

points. the breaking news doesn't end here. we're counting down to the government's retail sales report. also, it's the producer price index to get more on this we head right down to kevin ferry, who is standing by to give us those numbers. >> big number on ppi, up 1.8%. up a half a percent, year off year still good, down 4.5%. retail sales, 0.6. let's see. retail sales a little more in line but a big number from the ppi sector. >> kevin, you've been watching these numbers also on goldman sachs and johnson & johnson. what's the flood on the floor as these numbers are coming out? >> quite good. they pushed the futures up on the news and it was even a little better than expected. let's see. bond are off a little bit with the ppi news, but i think overall the market will try and like these even with this ppi

figure.. they don't really believe it. they have to look at it outside of gasoline. i haven't seen that information yet. >> that seems like a big shift incentive from last week. >> not just a shift in sentiment, beck y but also a shift in the structure of people's portfolios. i think they'll roll things around, move things out of the energy sector, into the broader economy, even the narrow blue chip stuff i think will be a big key today. >> excellent job filling in for us down there with rick santelli on vacation. kevin, and we'll talk to you again soon. we have ppi a little hot as mentioned. . that's the most since 2007. retail sales up, a couple months in a row, we have retail sales positive. >> a lot has to be because of gasoline.. look at those numbers again. if you were looking at chain store sales, they were disappointing last week. when you include gasoline back in, gasoline prices have been coming back down but over the course of a month, it was on a

terror for a while. >> we saw oil go from 30s to 70s. we'll talk about the need for stimulus, health care reform and we'll talk baseball with darren after a short break.ud to look after my money." tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "the dust might be settling... tdd#: 1-800-345-2550 that's great, but i'm not." tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "i guess i'm just done with doing nothing, you know?" tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "oh, i'm not thinking about moving my money. tdd#: 1-800-345-2550 i am moving it."

there it is to center field. the deepest part of the park. it's gone! and prince fielder -- >> you have to love that. the all-star break is finally here. st. louis, the center of the baseball world. our sports business reporter joins us this morning to talk about that and a lot more with a special guest. >> yeah, baseball's all-star game back if st. louis for the first time since 1966. joining us is baseball's president and coo, bob duchlt puy. give us a business update. compared to last year it's off 5.5%. when you look at that number and consider other business met ricks, what do you think? >> i think the business of baseball was good. all-star was sold out weeks in advance, espn sold out last night with the home run derby. one of the highest rated shows of the year.

and the attendance numbers, a little better than the number you quoted, right around 5%. when you consider the smaller capacities and the two ballparks in new york, our fans are hanging in there with us, the clubs have worked very hard to sell tickets. we have good pennant races going into september. we could even do a little better than that. i think the business of baseball is very good. >> you've talked about ratings, they've held steady for about the past nine years. what is president obama throwing out the first pitch potentially do to the viewing audience of tonight's game and how would you describe obama's relationship with major league baseball and is that different from his predecessor, george bush, who was once, of course, a part owner? >> it's a huge enormous with president obama, with the trip he just completed, is coming to st. louis to join us for the all-star game. we are thrilled about that. i'm confident that viewers nationwide are going to want to see him throw out the first pitch. and join us in the celebration of baseball here in st. louis.

>> you can even bet on that first pitch, believe it or not. albert pujols, the hometown star in st. louis. a chance to win the triple crown in a long time. he's made a big deal about being clean, saying he'll give every dollar he earned back if he tests positive for performance-enhancing drugs. how important is it for baseball that a guy like albert pujols stays clean?? >> well, it's important that all of our players are clean, darren, and i think our fans recognize what commissioner selig has done to clean up the game. in 2003 when we did the survey testing, over 100 positive tests. now we're down to one or two a year. and so the commissioner continues to fund research to find the components, albert pujols is a wonderful role model and has been phenomenal throughout the process here in st. louis. we salute him for all he's done. >> thanks for joining us this morning. have fun tonight. >> thank you so much. sorry you're not here. >> darren, thank you very much.

we appreciate it. by the way, we've been telling you about this earnings news. johnson & johnson is the other big report of the morning. mike huckman is monitoring the health and consumer products giants from the earning conference call desk. he'll be checking in with us on any developments as they happen. it looks like he's busy listening and typing. >> or taking catalogue order. >> 411, information, city and state? you're listening? dominos, sn yes. >> avoiding a slide into socialism. some key republican leaders are putting up the regular flag, including our next guest, the chairman of the steering committee, senator jim demint.. check out futures. lost a little ground since the peak of the session after goldman handily beat the street, and so did j&j.

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unemployment continues to drive higher.. and the banks are not prepared for double digit unemployment. so that's going to be a -- you know, an issue for them that doesn't go away through the next, you know, year and a half. >> sobering comments from financial analyst meredith whitney yesterday on "squawk" giving her thoughts on where unemployment could be headed over the next four, five yearss as the president and current administration prepare to move forward with major health care overhaul some key republicans are warning about a slide into

national socialism. joining us is the chairman of the steering committee and author of "saving freedom" senator jim demint joining us from the nation's capital. good to have you on the program. >> good morning. if anyone wanted to know what centrally planned, politically managed economics looked like, you can see it now in this administration. >> i can see that's the take you're using in this new book called "saving freedom: we can stop america's slide into socialism." you say americans have an abusive marriage with the federal government and they want out. what do you mean by that? >> this is not a partisan bashing of the federal government. it's just pointing out that americans have become increasingly dependent on the government and as we do the government grows and continues to spend and borrow and basically pushing out our prosperous economic system. we see this in the jobs report, in the economic report, and i've been meeting with business leaders over the last couple of days. and they're just pulling their hair out at the policies right

now that are making it almost impossible for them to grow and create jobs. >> when you say americans are having issues with the government and the way they are, i guess, extending this social net, what do you say to those who have been out of work for -- we have now at this point the median length of unemployment is 18 weeks. the longest since records were -- started to be kept in the 1940s. they, like i would imagine and enjoy, having jobless benefits. those come from the government. >> yeah. well, we should have those. that's a temporary dependency on government, but it's something we pay for. i was a small businessman for years. i paid a ton of money for unemployment insurance and never used it. that's not an exampmp of socialism. >> it's not? >> what is it-s when the government owns and controls a large part of our economic system. when they own our largest auto companyings and insurance companies, they own our banks, they control our education

system, they've almost taken over all of our health care system. you can just go down a pretty long list now that the federal government is in partial or complete control of. the only word for that is socialism. some folks think that's too strong a word but it matches the definition that's always been used for socialism. >> are you recommending in the book that americans instigate some kind of revolution of some kind? >> no. i'm advocating they get more informed, that they understand the difference between policies that lead to more freedom and policies that lead to more dependency. it's just time for americans to become better educated, more informed, more engaged in their government because this country is our people. it's not our government. and the people are responsible for what goes on here in washington. saving freedom just gives them an action plan on what they can do at the local level or federal level to begin to turn this thing around.. i think we're in the 11th hour. i'm afraid that this new majority and this new

administration is about to push us off the cliff.f. but they -- they're not the only ones responsible. if you look at the book, you'll see that i criticize republicans about as much as i do democrats. >> senator, steve forbes here.. good to see you. one critical area, of course, is health care. quickly give us -- we don't have a real free market health care system. what are several things that should be done to get real free markets in health care, get control -- prices under control, real productivity we see elsewhere in the economy? >> if we allow health care to work more like a part of our free economy, we'll see that the costs go down and more importantly, we'll see people healthier. the part of health care that works the best now is when people have their own health insurance and can make their own decisions with their doctors. the part that's not working is the government part, medicare, medicaid, tricare. some of the people who get those benefits think it's working but it's creating trillions of dollars of debt and it's

shifting the cost over to the private sector.. you know, my plan for health care is just to be fair to people who don't get their insurance at work. and we can give every family in america $5,000 a year to buy health insurance and we can pay for it by just taking back the t.a.r.p. money as it comes in and spending it on health care rather than spending it on some new government program. >> and what about some reforms like allowing consumers to shop across state lines and buying health insurance? what are some of the other things that should be done to get real free markets in health care? >> steve, that's an excellent idea you and i have advocated for a while. people can only buy health insurance from companies that are basically licensed in their state and that creates single-state oligopolies of insurance companies where it's not very competitive. if i could buy health insurance anywhere in the country the price would get more competitive. if you could use a health savings account to pay for an insurance premium, which they don't allow us to do now, small

employers could put money in health savings account to help people pay for their own health insurance.e. if we did something about these privilege louse, wasteful lawsuits and did more to encourage the health care industry to disclose their prices so that consumers could shop more and ask what things cost, we've seen that work, steve w health savings accounts where people are shopping with their own money, prices come down relatively quickly when consumers are asking what things cost. >> if all these things are so important, senator, why has the country voted the way it has? why are republicans at such a disadvantage now, being the minori minority? >> well, too many people are dependent on the government. i think the last election a lot of people voted with their hearts rather than their heads. and there's a lot of buyers remorse out there now. that's what saving freedom is about, to help people who want to know what's going on, take a look at what's happening in the capital, why it's happening and what they can do about it. right now i think a lot of americans don't understand the difference between the government running health care and free market health care..

they think if it's free market, that they won't have a chance to get health care. the fact is, the government's doing everything it can now to make it hard for an individual to own their own health insurance. if we just change the bad policies here, you'd find more and more americans who have their health care and the plan i introduced, the heritage foundation, says that in five years, over 20 million americans who don't have insurance would have it and we could do it at a fraukz fraction of the cost of what obama's talking about.t. >> it's going to be interesting to see how that takes place and what happens in november of 2010, senator. interesting book. it's called "saving freedom." appreciate your time. senator jim demint from south carolina. coming up, i'm headed back to -- >> earning central. >> earning central. but our old friend bob seller says i look so thin. he can tell how -- all you people that write in that i'm fat, you just take a look coming up because i'm going to talk

about j & j. the camera adds weight, the shirt -- i am not fat! i'm not fat! i'm going to stand up, go over there and prove it. we'll talk j&j, goldman, it's not about me, but i'll talk -- >> but i'm not fat. >> but i'm not fat. plus, art cashin. and he's not fat.

back at earnings central. let's check out goldman sachs. goldman sachs today reported $4.93 versus expectation of $3.48. revenue, 13.76 billion versus an estimate of somewhere around $11. i'm going to show you a chart because the stock is up from 47. down 8% for the year. i'm over here and now we're having chart problems. it's okay. you can just focus on me, if you like. but we're going to try and get a chart up. initially closed at $8 at about

$1.49. initially trade up above $1.50. down to $1.48. we'll see what happens with goldman sachs, which also talk about the outlook for the year. at this point, unclear whether they're going to be beat expectations for the year by the same amount that they beat in this quarter.r. return on equity was up 23% or so. maybe we can get a john son & johnson chart. we're not going to have anything. you're going to have to look at me. $1.15, 4 cents ahead of expectation. guinn $4.55 versus expectation of $4.55. the band ask right now on j&j, $58.39 to $58.54. finally, intel coming out after the bell, estimate for earnings is 8 cents a chair and the revenue estimate is $7.284 billion. there you can see those two

numbers will be important as well as the outlook. let's bring in art cashin into the conversation. this is the first real day. these are a couple of important companies so far, j&j, goldman, intel later. i want to talk to you about that, and about whether or not the performance of the financials makes you think that the recepaul buchanan or consolidation makes us move higher again. >> your hologram is really svelte, nice and thin. >> thank you. >> if you recall, when you had mike hollen on guest hosting, i said i hoped by the close of business on the 14th, we would know more where the markets are going to go. we're on the verge of demonstrating the head and shoulders by turn out to be a failed negative which could turn out to be a souper rally, but

it's too early to tell, this is going to be a very volatile week and will tell us a lot about the future. >> did you notice the financials yesterday? is that the leadership we want? they bounced initially when this market started recovery from 666, whatever you want to use, but then commodities took over.. now it's financials again. do they need to be the leaders, art? >> on a selfish basis, i would like that to happen, but i will tell you rarely is the leader of the next bull wave the leader of the previous bull wave. and the financials were clearly the leader of this previous wave. we shifted to the commodities and resource kind of stocks that the fed was being effective and we were see seeing inflation coming in. we're become on a deflationary phase now. we'll see if the financials can continue, but on the longer range that's not necessarily the leadership you need. >> all right, art. today is the 14th. you're talking about this week basically and what happens.

it could either be good or negative things. >> right, but it will clear the air, i hope, joe, it will clear the air very well. >> very good. art, good to see you. >> when we come back, we'll get a final word with our guest host steve forbes. don't go away. today there's a way to save more for retirement,

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