a cure for the summertime blues, quarterly results from general electric, bank and america and citigroup, all before the opening bell. business america's triple play as "squawk box" begins right now. ♪ all summer long we sang a song and then we strolled ♪ >> good morning, everybody. welcome to the hamptons. this is "squawk box" on cnbc.

i'm becky quick along with joe kernen, who is back at headquarters today, ha ha. carl is not here. he's out missing this, as well. but we have a packed show for you this morning. we are live at sag harbor and we're here because this is where the world's most powerful people come every summer. this summer is different because of what we've been watching. what's been happen in the economy and in the markets. we're going to have some of the biggest names joining us today on the show. our lineup includes ron baron. he's going to join us later this morning after he drives over from his hampton's pad. we'll be talking to doug cass. he'll talk financials with us. and our next guest is someone people know well, don peebles. don, thank you for inviting us out here today. >> it's great to have you. >> it's great to be joining us

and talking to you. we've been talking about the how the hamptons is different this year. there's a lot of things that happen in the economy that have an impact here.. >> first of all, the real estate market out in the hamptons is very, very quiet. the top end is essentially dead. sales in every market are down 15% and as high as 5%. more importantly, it's a nicer place to come and relax now. it's a bit more subdued, less attitude and more humility. so it's all kind of relaxed. so you see a noticeable difference here. places like the beacon are very busy, but many of the restaurants that were extremely popular last summer and summers gone by, now you can just walk by. >> so low keep hamptons is the message this time around? >> low key, low keep. >> don will be with us for the next few hours.. we'll be talking about the economy and some banks, as well.

joe, we have a lot to talk about this morning. but right, we'll accepted it back to you so we can talk about what's happening with earnings.. >> hold on. hold on. earnings -- >> somehow i knew this plan was not going to be followed along by script. >> has done got an ifb? he's got one of these ear pieces. >>? >> yeah, he does. >> i'm all set. >> they will they still only have one road that leads out there, don, it's got all that traffic on it and -- did you ever hear the saying, go west, young man?n? that's what i do. >> well, look, i love the west, too. my wife is from kol sxl and we have vacation homes out there, as well. but there's still no place like the hamptons. so they've got all these back roads.s. >> me yesterday afternoon, i was thinking i was so smart, 12:00, no, there were traffic jams aalong. >> we don't want to show a lot

of conspicuous consumption. we've got vacation homes out there, too. so if you've got it, flaunt it, that's what i say. and he does. what else was i thinking about i wanted to ask you about? was that camera on a boat at the time of the show, becky, and it was moving across?? >> it was. it was. >> they happen shooting you from -- >> from a moving boat. billy is out on the boat with a camera. how did it look? >> it looks really good. all right. they're telling me to get to earnings. i will get to earnings now. >> i know. you're breaking plans. you'll come back to us in just a minute. >> i know. that's a first.t. we are waiting for reports from general electric, bank of america and citigroup, all dow components. we'll bring you the numbers as soon as they hit the tape, complete with instant analysis. on the economic front, we have important things, too. june housing starts, building permits, both due at 8:30 a.m. eastern. right now, we're going to look

at a live picture of cit group's headquarters.. well, we will when we can tell the shot in new york. in new york, the company is scrambling to secure financing. we talked about this yesterday, would a bankruptcy be necessary after the bailout the company was trying to craft fell apart. the lender could be forced to file as soon as today if they don't raise from some private sources, but they're still drying. we'll see. a developing story out of indonesia overnight, bomb blasts ripping through the jw marriott and the ritz carlton hotels, killing nine people and several others were wounded. also, we're not just watching for earnings to come later this morning. there were some late yesterday that were of note.

like ibm and google with out with better than expected results. its full year guidance.. raised nice move. a couple of weeks ago, it was ready to break above 100. google shares under pressure despite beating earnings. they beat slightly, not like the old days. a sluggish economy and the slump in ad spending taking a toll on revenue growth and the price of its search ads. a while ago, that company's revenue was growing at 39%, 40%. i think they managed three. so it's been coming down and down and down. we have a duo of analysts ready to break down both sets of results for us. covering google is tate maran. you know, rob, we're looking -- a lot of these technology companies have said the same things, it seems like.

they're managed very well, like ibm, they managed to beat because of cost cutting and a shift in, you know, markets. but they're still saying things are sluggish. that's one thing we've heard from all of them, no? >> yeah. well, ibm was another company doing that and they did it in a big way. ibm crushed their earnings fed by sort of 15%, but actually only made their revenue number. so it was ibm's specific cost cutting and margin improvement.. >> this was the biggest revenue drop in the last three or four quarters year over year. i mean, it started dropping a little. it was down 13%. admittedly, a lot of that was currency, but still down i think 7% if you factor out currency. some people think it might be the bottom of the revenue drop. do you?? >> yeah. i actually do think.. i think in terms of year over year decline, this was probably the bottom. i think things can start to get better. all you can really say for sure is it looks like things have stabilized and should start to

get better. currency should be less of a hit in q3 and could start to help in q4. >> they got out of -- they sold to acor. i remember that deal. that was the deal when they got out of the pcs. and that really helped, right? >> no. they sold to lenovo. >> the chinese company, whatever it was, lenovo.o. and now that looks like a really smart move because that's the weakest part of technology. >> yeah. well, in fact, if you look at what ibm has done for several years now, it's almost like they've recognized it's tough to grow a $100 billion company. so what they've been doing is divesting the high volume, low margin stuff, the pcs, printers, and building up the higher margin services. >> well, they continued to talk about corporations being tight fisted and bill business being slushish as things are put off. how were they able to do this?

hardware was bad again, right? hardware has been sort ooh a weak point for years and years. so it wasn't hardware. what was it, was it services? >> well, again, keep in mind. the revenue was no better than expected. hardware was the weakest. hardware looks like it might improve in the second half. services held in better and software held in better still. but basically, the beat was with ibm specific cost cutting, margin improvements, with revenue not being any better. >> you know, we've written off ibm so many times in the past 15, 20 years because of the death of the mainframe or whatever, they continue to sell something every quarter to the tune of 25 or so billion dollars. >> yeah. >> and it's mostly, you're e saying is it annuity type stuff? is that what we need to look at for ibm long-term annuity type service contracts? >> a lot of that sort of -- half of their business from a heavy

knew standpoint and two-thirds from a profit standpoint is recurring businesses, maintenance, outsourcing, mainframe software. that's really where ibm gets its stability. it's low growth stuff, but it holds in really well. but to your point earlier, people have been underestimating ibm. all year it's been fascinating where street numbers have been below ibm's guidance all year long. yet here they come along and they raise their numbers. so it is -- i think this should prove to people that ibm is executing on the company's specific stuff that they can do. >> well, the stock has been at 100 for -- i guess so is the s&p 500 for 10 or 12 years. should you buy it where it is? it's not expensive if they earn 10 bucks. >> i think they'll do at least what they're gooit guiding to this year. i think they'll do about $11 in 2010 if things the get better. >> what multiple does it

deserve?e? >> a low double digit multiple. i think if you put a 12 multiple on 12 next year, that's 100 bucks.s. >> is it a china play at all? >> it's a china play in as much as every u.s. tech company probably is a china play in a way. that's where the growth is. >> yeah. >> china is -- >> you know, you've got technology as the sweet spot. and it seems like it's almost the cream of the crop. you get a 2% yield. everything else, if you don't like everything else because of the credit crisis, these tech companies may be a place to park some money. i don't know. >> yeah. i think tech overall is holing in better than most. within the enterprise, ibm is -- because ibm is my one positively rated ebter price stock, that's it. >> i appreciate it. let's talk google now with

complain moran. there are some people that thought they may not be. what is the word you used, anemic? >> well, i would say it wasn't a beat in terms of the operating performance. really? >> yeah. the operating performance was in line with expectations 37% revenue growth. 13% cash flow. the beat only came on the bottom line and that was driven by a lower than expected tax rate. so in terms of the true operating metrics, it was really just an in-line quart he, which i think is slightly disappointing given the recent run in the stock. >> but is it the company's fault or the internet ad market and the weakness there because of the economy? >> well, it's primarily driven by the internet ad market and the economy and unfortunately, the xhen gary from google

indicated last night that trends thaib have stabilized, but fought improving. so this should linger on for some time now. >> we've heard so many times about the promise of internet advertising that, you know, it's growing 40% or whatever. i don't know what it's growing now and it's still only 10% of total advertising. is the story still intact? >> well, internet is stealing share from traditional media. that part of the story is intact. but the growth part of the story, at least during the current recession, is not intact. we forecast no growth this year in internet advertising with advertising in general down almost 10%. so it's doing better than radio, tv, newspapers, but it's certainly not excelling. >> all right. speaking of some of those other outlets, google has tried to do

some stuff recently, but most of the growth here came from their traditional business, right, those ads they put next to the stuff when you search for things. are any of those initiatives bearing fruit? >> not really. you know, google is still relying completely on its core search business. they have tried to diverse tie to some extent into other forms of online advertising, also mobile advertising, but those aren't material scattered showerses because and they're not driving growth because we're not seeing ghoulel. going is still on the shelf. you're a real downer today, clay, i have to tell you. let's move from the mid 2s back up to, you know, the mid 4s. you don't sound like you think it's necessarily a great place to buy the stock.

>> advertising driven stocks are not going to do well in the foreseeable future. the ad market has not bottomed yet. there's no signs of recovery. as such, google being driven by search advertising is not a place i would be putting new  home, no. >> so you would not be buying google. do you expect it to tread water where it is or go back down in the 3s? >> i think probably here in the near term, it will return to the 3s. i think with an in-line quarter, there's nothing to get excited about. the trends in the third quarter, the current quarter, do not appear to be particularly strong. .we think the season will be unusual due to the recession. i can see this symptom pulling back from 400. >> who doesn't go on youtube a couple times a week? it's like, thank you. >> well, eats interesting you

bring that up because google's management trieded to kemgz last night that they have a time of users, they're monetizing more of the videos. but still, they wouldn't disclose whether youtube is profitable or not. certainly not a meaningful driver of revenues, either. >> do you have a business model to monetize anybody -- is there a business model to monetize it? >> well, prerolled video ads on the professional content. >> they don't have an x that is -- i do have to sit through them and i definitely won't buy something that's advertised like that. >> that may be your view, but it seems like prevolumed ads are accepted by users. >> you can't tivo. none of those things work.

mraung, thank you. i special it. >> now back to becky and kaun peepel peepels. he's a handsome -- hey! is it your birthday tomorrow, becky? >> yes, it is, thank you for pointing that out. >> thank you very much. >> if you'd like to send in greetings, it's becky's birthday tomorrow. you can do it now and you can do it tomorrow. >> thank you, joe. thank you very much. the. >> go ahead. >> this looks pretty good out here, right? >> yes. >> are you a little jealous?? just a little? >> no. it's too hard to get out there.. >> oh, come on, play with me here. you wish you were with me for the moment, right?? >> yeah, yeah. >> we will tell you there are a few not great things. we've got little gnats chasing

us around right now. >> somewhat like the bankers and here nibbling at the the gnats. >> it does. they've gone in other people's eyes and they're -- i'm going to try and recuse myself by explaining this up front. take a look down at the dock. it's a really cool dock, but it has big holes in between. and i, being a woman, wore heels out here. so i'm going to trying and walk down this boardwalk with don, but i think getting stuck. carl could do this much better than i can. i could do smooth tv. but i'm giving you this up front admission. >> even in the heels carl would do that better. but he wouldn't look as good doing it, though. >> you don't know, don, you don't know. >> we're going to try and walk

and talk and talk about what we've been talking about with commercial real estate. the economy, commercial real estate, all of this plays out. and i'm going to grab you if i start to fall, oblg? >> sure. >> commercial real estate, where do things stand? >> it's the quiet before the storm. more and more commercial mortgages are maturing, either through the nns or the banks. so by 2010, we've got $1 trillion in loans. there is no place to refinance any of those loans. essentially right now, these banks are going to have maturing loans that are not performing and that is going to be the next crisis in terms of liquidity of the banks, capital balances of the banks. so i see that happening and you're beginning to see it happen now in new york, south florida, washington, d.c. a lot of times -- >> and there is no hope that the

financing will step back in in time for these things? >> no and, in fact, now, many of these lenders are not going to work especially those in the cnbs market because they have limit amgzs on what they can do to work with them.. and ironically, the famed wat watergate toelts total is in the blocks on cnbc. the hotel was bought five years ago, closed, and it hasn't reopened yet. so that gives you an idea of what's going to happen here. >> are there going to be bidders at that auction? >> oh, yes. i'll be one of them. >> so what kind of range? or do you not want to give that away? >> well, if you look, that property was a $60 to $70 million property a couple of years ago. if i got half that, i'm sure everybody would be happy on thebacking side. it's a tough environment right now because property like that needs tens of millions of

dollars to put into it to renovate it and there's capital out here for that. across the board now, where the market is going will be cash transactions there is no financing out there. and then the hotel market is down big time. >> when you talk about what's going to happen with the commercial real estate and the tsunami that's coming, people know this is coming. what is it going to mean for the economy twhit happens? >> it's interesting. i live in florida and we get hurricanes. we know when a hurricane is coming. if the storm is bad, we rebuild afterwards. i think in in instance, we know it's coming. people know multiple ways to stop it, but there are no tools to do incentive, and i think from go the there has to be a step forward into bringing more liquidity into the commercial lending market and

requiring the lenders to step up and make some loans. if that does not happen, values were mrurmette. >> don, we've got a lot more to talk about you this morning been but as you can understand, there are some big problems out there. if you've got any questions about anything you see here on squawk, e-mail us, squawk@cnbc.com. when we return, we are waiting for numbers from general electric, bank of america and citigroup all coming up today. when i was told i had diabetes,

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check out the futures. it's been a sprying week or the bulls. in fact, now, the futures are indicated higher.r. yesterday was interesting. the dow managing a nearly 100 point gain after that huge move on wednesday in spite of the

news on cit, which can have been disconcerting to some. but the market this week is at a series of up days. come up, more from don peebles.. plus we're waiting for the more of delivery. we'll have the instant analysis straight ahead. >> in xwl p request jan we thil thp that's the way a bottom always is. styling, they did have a production glitch, which is why the quarter paent as good as i expected. i want to stick was. dell and nokia, i'm tired of your excuses. if you had the right products and the right execution, you would be as good as apple.

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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen.n. kind of along with becky quick. she's out in the hamptons. i'm here with -- you know who i have here with me, becky? i have mac. >> crickets? oh, mac is there with you, right, right, right. >> mac is it. me and mac and the equipment.

>> well, mac probably has his hands full trying to act as the only person you can talk to. we always tease you because you take off for the earnings season, but carl and i really got you for this one. it's ge and bank of america and it sounds like ge is out. >> ge is out, becky.. we've been waiting for earn eggs from the dow component.t. the company is reporting second quarter earnings of $2.9 billion. that equates to 26 cents a share and that is 3 cents ahead of expectations of 23 cents. company revenues from continuing operations were $39.1 billion. that is down 17% year over year. however, some of that is currency and if you factor out curren currency, it was down 12%. that is below analyst expectations, that $39 billion.

the annists were at about $42 billion. however, it has been pointed out that about only half the revenue soms from essential rinking revenue than perhaps other an lists were thinking about jeff imme immelt, i seas, i'm pleased with ge in this stuff environment. we see a 2009 which is what we see with our framework. we've strength.ed ge capital equal, we've dramatically positions and we have an additional pipeline of of $2 billion in restructuring projects that are evaluating to improve our performance in 2010

and beyond. some of the highlights include capital finance, which was profitable as expected. it's interesting because it earned $590 million which was down 80% on revenues that were down 29% pretax that earned $149 million. that's where some of these tax benefits come in. energy infrastructure grew 13% to .7 billion on a revenue decrease of just 1%. that's 9.6 billion. so energy infrastructure continues to be one of the real highlights. technology declined 11 mers to 1.8 billion 11% sxp in bc universal decliniced about five

cent off the ad. and the stock managed to close higher yesterday after being lower earlier on. it ended up, though, closing higher yesterday. so all in all, beck, a beat on the bottom line, below expectations on the top line, but the company lass some reasons that it illustrates. it says it's in line with its forecast for revenues and so we got that one out of the way. now we're waiting on bank of america and citigroup. >> ge out today, you have citigroup yesterday to come. let's check in with george. george, you just heard from ge's numbers. we didn't hear a substantial move on that this morning, but right now it looks like the

futures are about ready to flat line. what do you expect from bank of america and citi? >> regarding ge, i think those markets are unsabld. a lot best on the ownerings per share and if there's any comments about how the consumer will look going forward, i think that's going to be important to the market. >> george, just in terms of ge catchal, if they're shrinking more quickly than analyst expected, how would you expect the street to react to that? >> i think it's going to be a positive sign. in that, i think it's going to get the problems out of the way and they'll be able to move forward from here. i think it will be encouraging, i guess. >> bi and citi, the bar is still high for the financials..

i almost think that if you get better than expected earnings from thegs stocks, it might be a nonevent. everyone is looking for the financials to do okay and historically at least this week that's been the case. so i think the real risk is that we start to get weak numbers. today st sxiration friday. historically we get a trade up into exert friday. features on the ex and on the clothes. but then when you put that in for the day. >> george, thanks very much for joining us. appreciate it. >> thanks, becky.. enjoy sag harbor. >> thanks. before we get to jack again with harbor advisers, a couple more things. the capital finances we did say

earned $590 million. expected to be profitability for the year. as expected, in terms of shrinking the business, ge points out that in ge capital, we provided $155 billion of new financing to companies, infrastructure projects and municipalities, extending $127 billion of credit to 50 million customers. 330,000 commercial customers and 145,0$145,000 small businesses e aed added 16,000 new commercials for this provide gm capital equal doespy to reduce its balance sheet. also, sdwrak began -- ge had aal has completed all of its '09

long-term debt funding and prefunded about a third of 200. so what do you make of all -- all in all, what do us, jack? >> well, joe, i still was ready to take the under on this. and i think investors will reserve decisions on this until they listen to the conference call. in the deep dive meeting a couple of months ago, there was a lot of concern about how the assets were being valued. as you know, ge capital doesn't have to mark almost all of their assets. there's also a concern and at that meeting there is a discuss about the rate of unemployment versus the expect saying. >> all right.

all in all, with the revenue number, is that going to be an issue? it was below expectation, but the company says that has to do with shrinking ge capital faster than analysts thought. >> well, most analysts were hoping they would shrink capital quickly because that generates cash.. and, of course, the concern just a few months ago was liquidity. and so i think it's positive that they're generating cash there because if things in the economy and we double dip a little bit sxb it's going to do the funding that you thauk the earlier, and it's going to generate run you have. the leverage rareo is about six to one. we've got to go, but in summary at this point, there's nothing

clarifingly troubling in what the company has put out this morning in the press?? you know the bid has moved up from week from the low 11 to $12.40. so at this point, $12.40 bid and $12.44 ask. you're saying people will wait to hear a deeper dive, if you will, on the conference call. >> i think so. but you know, we're longer term bulls on the stock. we think peak of cycle earnings easily a buck 50, so 15 multiple $ 22 stock. but we're more cautious on the short and intermediate. >> jack and jackie, right?t? >> that's right. >> does that ever get confusing? >> well, it's easy for people to remember, joe. >> mrrpt tell her i said hi. thanks, joe.

mac, you're all i have. jack's wife was with me at merrill lynch in 1981. i was the youngest employee ever at merrill lynch. i was 8 years old. it's not my fault! there's nobody here. it's me, the crickets and mac. i'm sorry. >> would you please put some microphones on mac so everybody else can hear him laughing, too? >> you know what this is going to be like? this is going to be gelman. i'm kind of like regis and you're kind of gelman.. >> i'll take that.. >> and you have to be kelly. >> i will take that any day of the week. sign me up. don, your point was the real estate factor. >> real estate to market, they have all of their real estate portfolio at 100% of their loan amounts and 100% of value and

that is unrealistic. and they are heavily invested in the real estate sector and that has been hit, is being hit and is going to be hit harder.. so the real question is, as we get into third quarter and fourth quarter when we start seeing commercial foreclosures, then where does that put ge capital? >> i guess their point has been they're long-term investors because they don't have the answer to that question, as well. when we come back, we're going to talk more about real estate and how it's being impacted here in the tamp tons. obviously, there are some different things that have been happening here. we are at the beacon and sag

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reporting live from wall street's summer home in the hamptons, here again, becky quick. >> welcome back, everybody to the hamptons. we are spending the morning with real estate mogul do you know peebles. we've been talking about residential real estate here in the hamptons. it's gotten hit pretty hard. >> it's gotten hit here. and there is no better time than -- i hear, joe, without them saying

it is that jae, realtors now saying this is a good time to buy, but this is really a buy you would be buying? >> yes. and if you look at the markets in places like las vegas, sales are up 73%. even thouth florida suspect so laeng had its record month in terms of sales volumes. big numbers. and we're 7,000 nigh. >> real estate is -- residentat real estate is a necessity. we need shelter to live and so it's a necessity. it's either renting or buying. you can't do without it. basically, you're looking at whether or not the cost of housing to rent versus buy is on an equal level been right now in

los angel las vegas, south florida, the cost of ownership is equivalent to renting so now more and more people are coming into the market.. ft.'s stimulus plan is working, as well, $8,000 for new home buyers. when we return, we've got the financials in focus this morning.g. everything from real estate to cit to general electric, we've got bank of america and citigroup all coming up. rob nichols will be joining us and walking off when we come back. 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."

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what a week, right, jam-packed with financial earnings. here with his take on the overall health of the sector, rob nichols. hey, rob. >> good morning, joe. how are you? >> good. do you guys lobby for the financial services industry? >> we are a voice for 17 much the large global financial services firms here in washington, absolutely. >> did you watch the hearings yesterday? >> i did watch the hearings yesterday. >> are you going to do something about that?? do you sleep on the job at the switch or what?? can those congress people -- did you see the lady from ohio? >> all right, first, there were several hearings yesterday. i assume you're hearing the hearing with former secretary paulson. >> yes, that's the one i'm talking about. did you see the lady from ohio? >> i saw about half that hearing. >> disgraceful..

i'm changing my state where i'm from. >> well, here's my -- one observation. again, i saw only about half the hearing. one observation is, is i think the hearing ignored a lot of what went right. and i think that secretary pahlsson and chairman bernanke really did some very positive things to help avert a catastrophe at a time where our financial markets were in -- >> obviously, not, rob, because jpmorgan and goldman sachs made profits which will result in tax revenues to the united states government. did you see how that was looked -- they were going to crucify paulson because goldman and jpmorgan are now profitable again. >> right. we are -- our economy is certainly -- >> we're in the twilight zone. >> we're not out of the woods. there's a lot of fragility, which is obvious by what's happening in the housing market, what's happening in the labor market. but i will say, there are some encouraging signs. again, it's still very fragile, but -- kro that's so nice. >> i think it's positive, it's positive that we're starting to see some of these earnings.

i think that's positive. and we'd like to see, obviously, that trend continue. that said, we're certainly not out of the woods. there's plenty of head winds affecting our economy in the short and long-term. >> i can't stir you up as a lobbyist to respond to what you saw yesterday. you're going to play it by the book and tell me that the green shoots are coming, things like that? >> no, i'm not being overly positive in any way, shape or form. i do think secretary paulson and chairman bernanke do warrant a lot of credit for taking some unprecedented, inventive, creative actions to help our economy when it was in a really, really troubled spot last fall. >> you know, with jpmorgan and, you know, you look at the cover, two giant emerge from the ruins on wall street, and "the wall street journal" says jpmorgan's results show it's one of the best managed banks in the country. and yet the backdrop that all these companies have is that credit quality continues to

deteriorate. there's worries about cars, worries about commercial real estate. you're right, we're not out of the woods. >> right. that speaks to the fragility i referenced a moment ago. i think it's encouraging companies are paying back the t.a.r.p. money. indeed, the u.s. government is making money off that, u.s. taxpayer is making money there. there's a return. that's very positive. in addition, when i talk about the fragility of the economy, joe, in addition to that we're facing long-term challenges and that's one thing i'll talk about today in testifying -- i'm testifying for chairman francs committee. we're going to talk about the need to reform and modernize our supervisory architecture.. part that led us to the crisis. there were numerous factors but one was an outdated supervisory architecture. we're working on updating that, modernizing that so we can avoid the sort of crisis we had and also remain competitive e globally. >> you need to take the gloves off, my friend.

if these congressmen and congresswomen responding to what they're hearing from their constituents, you need to take the gloves off because there's some misinformed people out there. i'm sorry, we've got go. you agree with me, right? let's go. >> i would say this. there's a lot of education. >> hurry. >> -- we are doing to show the importance of the financial sock tore in our economy. >> rob, appreciate it. good luck today. see you. >> all right. >> what's going on? >> coming up, we have more of this morning's top stories.s. don't forget, we with are waiting for the quarterly results from citigroup and bank of america, plus wall street's elite stopping by to say hello this morning. a little later this morning we'll be talking to investing legend ron barron. but right now, standing by in our "squawk" boardroom away from home, this is the boardroom hampton style, we have the famed trader with us right after this.

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this summer you can't escape the heat. "squawk box" live in the hamptons. and it's all business. becky quick is joined by don peebles, chairman and ceo of the peebles corporation. and john kines on the state of financials. and back at earnings central, joe kernen and guest host donald marin break down the earnings, including general electric and bank of america. surf's up, it's business and the beach as the second hour of "squawk box" begins right now. ♪ i'm picking up good vibrations ♪ ♪ she's giving me excite ♪ i'm picking up good vibrations ♪

>> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick live in the hamptons this morning. this morning i'm joined by "squawk box" regular don peebles, chairman and ceo of the peebles corporation and doug cass of sea breeze partners. joe's back at cnbc headquarters. don marin, ceo of light your capital, is in studio with him. we're awaiting earnings from bank of america. they could be coming on the at any moment. doug, what are you looking for in the numbers? >> it's going to be a mixed affair. a lot of noise. >> sounds like we have the numbers right now. joe, let's send it back over to you. >> it's hitting the wires right now. the press release just hitting, they're putting out a number of 33 cents, which is above the first call and the reuters number. and there's a disparity between the two, depending on the type of one-time items you include. there is a gain stemming from the sale of shares in china construction bank, an fdic assessment charge, but the company did manage to post 33

cents a share. the reuters number was 9 cent, so that includes, obviously, more of those items. or doesn't include the sale of the china construction bank. and then the first call number was 28 cents.s. so the 33 cents that we're seeing is above both those numbers and maybe more -- we can glean more from revenue, which is $33.7 billion. reuters was $31.9. the first call was $33.1, so it's slightly below that. we did see revenue, obviously, beat -- big beats on jpmorgan and goldman sachs. so maybe some people would have, perhaps, thought that bank of america -- looks like it is a little low. mary thompson is here also. it's going to take us some time. these banks in the normal quarter there's about 50 pages to go through. >> and this is an exceptional quarter, again, because of all the sales they made in order to raise the capital following the stress test, et cetera.. just a couple of other headlines

i'm seeing here. tier one capital ratio at 11.93%, extended more than $211 billion in credit in the second quarter.r. and added 4$4.7 billion to loss reserve. something we should have expected given the lost loss in the consumer. >> we'll definitely be looking at all the consumer metrics. they're citing strong in wholesale markets. $3.2 million, when bank of america, the biggest bank people perceived to be one of the zombie banks, right, don? they almost called it a zombie bank, not quite citigroup, but isn't that as much money as goldman? >> right around what goldman made. >> now, this is a good thing, right, don? we won't ask congress, but isn't it a good thing bank of america is in a position to be earning money? >> i think it's a good thing. when they did the stress test what they really looked at was

the balance sheet. we didn't know more about the earning power. now we're seeing big institutions can earn real money. >> you are -- i assume everyone knows who are you but let me introduce you.u. joining us for the next two hours, as i do with mary, but for this special "squawk" is don marin, ceo of light year capital, former paine webber chairman and ceo. then it became ubs. did you like working for the swiss? >> it was a very short period of time. >> yeah, all right. in the hamptons we do have becky quick and don peebles of the peebles corporation and doug cass of sea breeze partners management is out there as well. i don't know, beck, if doug has had a chance -- immediately we're seeing a nice move in the stock. it's been trading higher, trending higher for weeks now. and, doug, it's now bid up 13.40 after a 13.17 close. about $13.40 on the bid and the ask. are you going to -- do you find

anything good here, doug? >> i don't have the -- >> i've got the computer. >> i don't have the report, but as you mentioned, joe, there's a number of one-time items. there's a lot of noise, you mentioned, fdic assessment charge of 10 cent, also a charge from the tightening of spreads from merrill lynch, but in addition there should be a very large nonextraordinary gain from the sale of shares of china construction bank. >> right. >> the key to the -- the key to the company is two-fold, above the provisioning line -- let's talk below the provisioning line in terms of credit loss. how is the company provisioning relative to writeoffs or are they taking reserves out? hopefully there's a reserve buildup, national quality of earnings. above the provisioning line we'll have to look at net interest spreads particularly in a lower rate environment. are they holding up? are they continuing to garner deposits, checking deposits, which will go well for net

interest margins and spreads over the next couple of quarters? nashgsd we want to look at the capital market activity, which should have really been the highlight on the positive side because of the plethora of capital raising, both primary and secondary during the second quarter, as well as trading volume. finally, we have to see in the consumer areas, have the franchises, because of the weak delinquency trend, been damaged at all. >> let me tell a little about what ken lewis says. he's talking about difficult challenges lying ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010. he says he's convinced bank of america will weather the storm and emerge as an acknowledged leader in the united states financial markets. but when asked about about some of the negatives that came in here, they said the positives were somewhat offset by continuing high credit cost,

including addition to reserves. they talked about significant negative credit valuation adjustment on certain liabilities like the merrill lynch structured notes and the fdic charge. >> i just want to jump in here, becky -- >> joe, if we step back for just one second, you know, this is an industry that's moved from the ugly in 2008 to the bad in 2009. hopefully to the good in 2010 and to the excellent in 2011 when they reach closer to their normalized earning power. so i would expect some consolidation. i think that appears it's a mixed picture both on the revenue and bottom line side. >> mary? >> yeah. i just want to give more details on what we're seeing here. the company says its sales and trading revenue, excluding credit valuation on derivative valuations and market disruption change rose to a record $6.9 billion. in the quarter they said was wholesale mortgage loans on

detail on that, funded $110.6 billion on first mortgages. 2% were for purchases. as far as credit extended during the quarter this is something a number of people have been watching. they want to know what loan demand and loan growth is for these companies, including commercial renewals were 55 -- of $55 billion with more than $211 billion and that compares with $183 billion in the first quarter there. so, again, sales and trading revenue look very strong for the company and some strength in its wholesale mortgage business as well. >> although they do say the conditions that are out there led to higher losses in almost all credit portfolios when you compare them with the -- >> what provisions relative to chargeoffs? did they have reserves built?t? >> i'm trying to dig through. >> one thing people are not paying as much attention to, b of a is in survival mode. they're trying to survive. selling off assets like construction bank of china. what we aren't hearing is how

many real new originations are they doing? they're extending credit by $2 billion, that i have to believe is almost to all existing bor w borrowers trying to keep up with the nonaccrual list and help them weather the storm so they have a chance to pay them back. lewis said not too long ago that he thought the bank could be experiencing another $130 billion of loan losses. that would be, you know, catastrophic, wouldn't you think? >> yeah, that's -- the key metrick is provisions versus chargeoffs in this quarter and the next several quarters. i don't ching expectations are too grand right now. they're muted.d. >> don wants to weigh in, becky, on these numbers. don? >> doug, first of all, as i recall first of all -- >> hi, don. >> how are you, doug? >> long time.. >> it's been a long time since i've seen you. you're in a good setting. things must be going well for you. bank of america took advantage of the markets in the second quarter, maybe they first raised about $20 billion in equity.

they also sold things, charged some things off. do you agree maybe the second quarter is a clean-up quarter for the whole industry and going forward we'll get a better sense of what these institutions can really earn? in fact, the whole question is, who's borrowing money? who are they lending to? why are they doing it? they now have a business model that works. >> yeah, i think that's a great question. that's the key to evaluating the bank stocks in general and bank of america in particular going forward. i suspect that the second quarter is the nader, excuse the pun, joe, but i think the second half will be -- will be a struggle as well. that's why i describe 2009 as a bad setting for the industry moving towards a better or a good setting in 2010. the problems, the legacy problems, don, are enormous, as don just mentioned. both dons just mentioned. so this is not just the first

half 2009 phenomenon.. it will languish and linger and retard earnings growth for several quarters going forward. that said, i'm long bank of america, jpmorgan and a number of other banks because i think the normalized earnings power has not been materially impaired despite the dilution. >> doug, how do you think ken lewis and vikram feel when they read the new york times article, that the whole business now only has two giants, jp and goldman? >> i think -- i believe it's a fair assessment. the legacy issues have weighed heavily on citibank. as you know, don, i go way back. i wrote a book with ralph nader in the 1970s called citibank. we new walter risen and vikram is ain't no walter. >> the provision for credit losses was $13.4 billion, flat with first quarter. credit losses were higher than previous quarter and reserves

increased by $4.7 billion, added across most consumer portfolios and -- >> i would give the company an "a" on earnings quality. >> okay. >> wow, that makes a difference coming from -- from doug. >> from doug, yeah. >> from doug, i think. makes me wonder with the new forecast for employment, whether we need to worry about everyone again, doug. >> well, you know the expression, one man's bread. it's been a remarkable period for corporate profits. if you think about it, in the first quarter, 60% of the companies missed sales estimates but 67% of the companies beat earnings consensus estimates. so the reason i don't think that the economy will be self-sustaining is because i think the elevated joblessness stemming from those dran cone yan cost-cutting measures by -- you saw ibm missed revenues last

night but have a well on the bead of bottom line. that will weigh on joblessness and personal consumption expenditures for some time to come. it will be challenging economically. >> all right. >> yeah, we're going to take a break, becky. thanks. if you have comments or questions about anything you see here on "squawk," e-mail us at sidewalk@cnbc.com. a quick check on the futures this morning now with general electric and bank of america both out of the way, flat. but we've had a good week. a surprising week. one more check on bank of america. there's the bid and ask. slightly higher. also here's an indication on general electric this morning. a lot of people waiting for the conference call to get more details of reported earnings a bit earlier. when we return, our conversation with becky, doug cass, don peebles, don marin and mack will continue. oof! i hope he has that insurance. aflac!

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welcome back. let's look at some other headlines this morning. a bomb blast ripped through the j.w. marriott and ritz carlton hotel in gentleman kata business district. killed at least 8, wounded 50. authorities say it was carried out by a terrorist group and vowed to arrest the perpetrators who are believed to have been staying at the marriott. for cit, and i haven't said

this in a while, as we speak, is scrambling to secure financing. after rescue talks with the government collapsed. the lender to hundreds of thousands of small and medium-sized businesses could be forced to file for bankruptcy as soon as today. but giving it the old college try in the college markets. ibm and google both reported last night. ibm beat on the bottom line, even though revenue fell. it raised its full-year guidance and the stock jumped. meantime, doinged shares are under pressure despite just barely beating earnings. it was the disappointing sales growth.. just barely grew, just over 2%. beck? >> all right. welcome back to our special "squawk across america," live from the hamptons. we are joined this morning by guest co-host, don peebles, chairman and ceo of the peebles group. doug cass is with us as well,

sea breeze partners. and back at cnbc's headquarters, joe's holding down the fort with our guest host done marin. we've been talking about bank of america's earnings and doug gave them an "a" on the quality of earnings, vis-a-vis chargeoffs that have gone through.h. we're watching that closely and also talking about cit, as joe mentioned. how important is cit to the overall small businesses across america, don? >> very important. they are the banker for the small businesses, especially when community banks emphasize more of a focus on real estate. that void cit picked up quite a bit. you have small businesses from retailers to suppliers to restaurants, who can't get credit in the credit markets that rely upon them. what's happened, of course, is that many of those borrowers have already drawn down their loans which has created this liquidity crisis for them. >> if it's so important how come the administration is choosing not to step in and save cit like

its done other companies out there? >> the president is in a difficult position. the economic stimulus program has only been in effect for four months. the job loss went from 700,000 jobs now down to 400,000 jobs so we're making progress there. at a certain point the free market has to pick up. the president's been getting hit hard by the other party about letting the free market prevail. i think they've gone into cit and made a determination that even with government help, they aren't going to be able to get through it because their business fundamentals and business problems are to a point where they just don't see a way out for them. i think that's what we heard from raum emanuel yesterday. he felt they were basically unsaveable. that will be tragic if that's the case. >> what do you think happens? >> i'm happy that we have a democratic majority for the first time on the "squawk" set. >> no, he's going to be a democrat one day. we'll meet in the middle where we always do. >> he keeps saying don's going to be a republican.

>> don is a republican. >> don is a republican, right. >> i'm a conservative democrat or liberal republican, but who cares about labels, right? >> yeah, nobody out here cares about labels. >> when your -- when your taxes are 60%, you might care. >> well, i care. >> that's where we are. >> i agree with don there will be a huge void from cit's expected bankruptcy. let's turn the tables around and get a little more optimistic and positive and look who are the beneficiaries. this is why i'm so keen on the banks. both from the standpoint of filling the void of the capital markets when the weakened franchises go by the way, and the void in lending by companies that fail like cit, look at how the benefit will endure to companies like bank of america, but jpmorgan in particular, and you don't look further from goldman sachs -- >> wait a minute, do they want to be doing the small business loans that are $2 million, less

than $10 million? >> these are very profitable loans. >> they are profitable but i think you'll see the regional banks, like the bank united john's bank, i think you'll see them be the key beneficiaries. small community banks have no place to make loans now. >> let's ask don marin. >> as long as they're not capital impaired. >> that's true. >> don, weigh in, too. >> i think what's going on here, first of all, is the government has saved the banks but hasn't fixed them. cit has a lot of businesses. airplanes, rail cars and small businesses don is talking about here. the first two can be handled by the big firms and big structures around the world. it's the small businesses that are key. what should be happening here, and doug commented on it, this should be business that will be taken over, not by the big banks but by a whole lot of banks all over the country. focusing now on a new opportunity. that's the issue here, i think. these are crucial businesses to restart the growth of the economy. the government's in a very

difficult position. >> but good business in good times but if they're not managed properly in bad times -- is there any way cit could be successful raising money privately? has the market recovered enough to where they might do that?? >> they might -- first of all, you have to realize their loans themselves have some problems. >> right. >> not only mortgages but small business loans have issues. cit is in a very difficult position. they have a lot of debt. they're trying to swap that for equity. that would be something they could do. secondly, if they could get longer-term financing, that would help. the key, though, for the country as a whole is this business -- this economy has to be jumpstarted. this money has to be used out there for lending some way. if not in cit, in the industry as a whole. >> doug, weave got to go. i don't want you to get on a long answer here, but is there any systematic risk? a lot of cdos in europe supposedly have cit debt. are we ready if they do go, are

we ready for this, the financial markets? >> i think the risk -- no, i don't think the risk is systematic. goldman sachs, i think, provided a $3 billion line late 2008 to cit, for example. and it's fully collateralized, they said on bloomberg a day or two ago. so i think the companies are -- >> $2.3 billion of t.a.r.p. money. >> and this isn't the first t time -- >> and the government's already -- by the way, they've acknowledged it. the president, the administration acknowledged they'll write it off and move on. >> all right, guys, thank you very much. everybody's sticking around. still to come on "squawk" this morning, we'll have reaction to citigroup earnings. plus, bank united ceo john on the state of the financials. he is standing by in the "squawk" sag harbor boardroom. we're live at sag harbor cove in the hamptons. . much more. we need to send an expert. a walking, talking...

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everybody. if you have any comments or questions about anything you've seen here this morning on n "squawk," go ahead and e-mail us at our address squawk@cnbc.com. we would love to hear from you. coming up next in the "squawk" boardroom, our hampton file "squawk" boardroom, that is, we have john kanas, the ceo of bank united. we'll get his thoughts on the big earnings reports on the morning, the state of the financials, the situation with cit. that's when "squawk box" comes back. we are live at the beacon at sag harbor. we're in the hamptons today. mr. evans? this is janice from onstar. i have received an automatic signal you've been in a front-end crash. do you need help? yeah. i'll contact emergency services and stay with you. you okay? yeah. onstar. standard for one year on 14 chevy models.

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welcome back to "squawk box." we'll start with general electric, per share profit three cent ahead of estimate. revenues of $39.1 billion, short of estimates.s. the company points out much of that was currency related. bank of america earned 33 cents a share for the second quarter compared to analyst estimates of 28 cents. the bank says difficult challenges lie ahead, including a weak economy and deteriorating credit conditions. ibm putting in a blowout quarter, first earnings were well ahead of wall street estimate.

big blue raising outlook because of raising results from software. google beating estimates but investors not fining results so pleasing. google made more money last quarter than it ever had, nearly $1.1 billion. the disappointment came from a bigger than expected slowdown in revenue growth. joe, back to you. >> thanks, mary. we're speaking to don marin of lightyear capital and we'll be joined by our own david favre, he'll be coming in for a rare hour and a half appearance on the brain, i don't know, on -- i guess he figures he gets to sleep tomorrow so he dragged himself out of bed to show up here.. he's late. we want him to get makeup. don, it's good to have you here in the meantime. do you foresee some of the most dire forecasts about employment? do you think we get to the low teens?

>> i think, first, the employer statistics are higher than we talk about, so we know that. i think it's a possibility. i would look at it a little different way. for better or worse this is a time where every ceo, his or her salt s trimming back, streamlining company, raising productivity, unfortunately, through cutting labor. hopefully the other side of this is we've built a group of companies, and when things turn even modestly, we'll be staffed at minimum levels and we'll be able to start hiring again. yeah, i can see unemployment getting to 10%. >> what does that mean when the stress tests were applied in the low nines or high eights, whatever it was. >> it means it's all going to depend on the trend. as we know, unemployment is a lagging indicator. the whole issue is going to be -- is the trend down, flat or up? consumers have been smart. they've stopped spending, started saving. now -- >> don, we'll get back to this thought in a second, but let's just embrace the moment. >> good morning. >> they're playing -- you don't

have an ifp in, do you? >> no. >> they're playing 2001 as you walked up, and you were on camera. >> so you're going to be -- what happened? what did you do last night? >> i don't know. what was on last night? >> your -- >> which one? >> your housing -- >> oh "house of cards." >> and you looked good. >> don missed the porn special and -- >> no, i'm not allowed to do that. i thought it would be like old times. why should i be on time. the old "squawk" i would always show up late. we have lot of news, though. >> we do. >> what happened in the housing market was much more pornographic than anything that happens in the porn industry, don't you think? >> i agree. >> don, we'll get back to you. have you had a chance to -- >> check in on cit? >> yes. >> no. will be momentarily. >> do you think -- >> luckily i'm sitting in my seat so i have on my communication tools. >> do you think it's possible

someone thinks there's some value here? the market has recovered a little. the private market. is the government the only place for cit or is it possible -- >> no, yesterday i was reporting, and everybody's reporting today, what we were reporting yesterday, they were seeking $2 to $3 billion in secured financing. they have $30 billion in unencumbered assets. you say, whoa, why didn't you try to secure that some time back? but it doesn't mean you can borrow $30 billion, far from it. you don't want to be tying up every single asset you have in the place with debt. that, said, they were trying to do that yesterday, joe. i think it was a longshot. that's the way i characterized it in my reports, based on what i was hearing. they were approaching the same investors, banks out there trying to look for this money for cit. also saying we might want you to participate in a dip loan.. because at the same time, they were trying desperately to raise this money. they also were preparing for bankruptcy, chapter 11. they would need a debtor in

position facility, which are very hard to come by these days. it's not like previously, where ge capital, for example, was one of the largest provides of d.i.p. financing. we'll see what happens. i hope to get updated fairly soon. >> have you had a chance to look at either ge's numbers or bank of america's numbers? >> i await your analysis. >> my analysis -- >> ge numbers, when you look at the headlines you are reminded of the severity of this downturn, which is shocking. >> the one business, what, energy infrastructure -- >> right. >> -- was strong. are there five divisions now and that was ---- >> and i guess at the end of the day, obviously, we're all ge shareholders, 26 cents a share. so a buck a year. what's an appropriate multiple for ge in this environment and what kind of a growth rate can you hope for? that all depend on how long the downturn lasts. >> let's look at the bid and ask as you comment to because initially it traded up a little. now it's actually showing some

weakness but up this week. >> what's difference in these relations is the tone. all these companies are going to point out that they're lending less, paying off more, getting more conservative, cutting back. that's the mood right now. the issue's going to be, when's that tononoing to change and they'll get proud of the fact they're out there lending and expanding market. that's a key issue right now. they're in a competitively difficult spot. there's lots of opportunity to lend now but there's pressure not to lend. you don't to want overleverage a company. as you said, it's hard to borrow money. but money is cheap. that's the extraordinary time here. money is as cheap as it's ever been for many of these companies. and they should be taking advantage of it. but there's a lot of pressure to show that you're -- >> and there's not. yesterday jamie dimon on the jpmorgan call said there's not as much demand. that's at least what they're claiming as one reason why lenning is going down as opposed to up. he said, it's -- you know, he just says it straight, the demand's down. >> well, i think that's true in the broader sense but demand's

also down because many people who normally borrow don't think they can get the money on reasonable terms or in a reasonable way. so you have a balance here that has to be met. i would say what's happening is very healthy for the companies. the next step is to create a new platform for lending. without lending you're not going to get growth. without growth we won't -- >> what's the time frame? >> we have kanas, comment on all this. more from don and david throughout the show. we'll get you an ifb so you can listen to these guys. right now, back out to the hamptons where becky quick is catching up with some of america's business leaders. hey, beck. >> hey, joe. we've been listening to everything you guys have been saying. we want to pick up right where you left off. our guest joining us right now is bank united chairman and ceo john kanas, an industry veteran and very well known for selling norfolk bank corp just ahead of the financial crisis.s. we've been talking about the earnings of the morning, bank of america, general electric. what does it tell you about the state of the banking industry

right now? >> i think it's time for differentiation, becky. clearly, you know, we're high-fiving each other over the wall street banks. it's going to take a long time to figure out what are in the bank of america earnings, conversion of preferred shares, a lot of numbeoise in the numbe we'll have to dig deeply to figure them out. what's more representative of what's going on in the small business part of the banking world is what's going on in ge capital and unfortunately what's going on in cit. so there's a vast difference today between wall street bank and main street banks. i think the earnings over the next few days will highlight that. >> what do you mean with what's going on in ge capital's numbers? >> i think if you want to see what's going on in main street america and understand how small business is doing, it's more reflected in ge capital's numbers, in the banking piece of general electric, than it is coming out of the numbers of bank of america today. >> you mention the difference between wall street and main street banks. what is happening in main street banks? >> main street banks are still suffering under the weight of

continuing devaluation of the assets that banks have been lending against over the last half a decade. and there's, frankly, in most parts of the country, that's not abating fast enough. and we're -- we are going to continue to have to deal with that issue of regional banks and small community banks, frankly, for the next couple of years. we expect, as no secret, we expect the amount of bank failures to continue to rise over the next few months and probably right on through next year. >> don, you know a thing or two about community banks. you're buying a community bank in florida. >> yeah. i think in the banking sector, the big problems, of course, are the small community banks and super regional banks because they have to mark to market. their asset values, primarily real estate loans and real estate loans are declining constantly and that's creating significant capital problems. we're going to see probably 1,000 banks close. john has said that and i agree.. about 1,000 banks will close over the next year and a half or so. i think this year we're going to

see a step up in the second half of the year in bank closures. there's tremendous opportunity because, remember now, banks are created to help serve the economy. they're there to make loans. they're there to help stimulate business activity. that activity should be done by the community banks and the super regional banks. that is -- that hasn't been done. the cit and other organizations. now is the time for banks that can get through their capital problems, these community banks and regional banks have some capital, get through their legacy problems and get on with the business and focus of making loans.s. they'll be some significant profits. i think with john's bank, bank united, if they can get through that, you know, he knows how to bank, knows how to build customer base and serve customers and those things are going to matter again. and i think -- >> although -- >> i think they can prosper. >> how much more difficult is it going to become now that the fdic, washington is weighing in and deciding what the rules will be for private equity rules will

be. you kicked that off with bank united. >> there's been great dialogue over the last couple of days. we're in the middle of a comment period where sheila bair is asking for comments about that very subject. i believe, although people are panicking about this and people are worried about what the rules -- new rules are going to look like, quite frankly, i think the fdic is going to come out with some balance set of rules -- >> have you spoken with sheila bair? >> yes. i've spent a fair amount of time with sheila bair this week and with other members of the fdic board. they're well informed.d. they understand the issue. they are not looking to make it difficult for private equity to put their capital into this market. they're simply concerned about the control issues, which have frankly always been an issue in banking. and the new regulations, i think, will accommodate both of those things. so, frankly -- >> it won't be anything as drastic as we originally heard on that? >> i really doubt it. i think that most of the comments are coming in weighted heavily in favor of allowing

private capital into the business -- >> which is -- >> -- with reasonable restrictions. >> by the way, i agree. i was in washington two weeks ago at the fdic meeting with the chairman staff and will be back next week meeting with her. our firm is joint venturing. we're doing a billion dollar private equity fund. we're in the process, the people's corporation, of buying i community bank. the fdic wants to see capital, potential go back into banks. they want to see solvent buyers. i think the big concern i heard was private equity, both from the fdic and the administration, is a short-terminate of private equity. private equity is a short-term investor and they want long-term ownership in banks. they want the stability of ownership. i believe that is a fundamental challenge for private equity and how we work through this in the comment period to get the fdic and the government regulators comfortable that when private equity makes an investment, they'll be there for the long term, because -- >> how long are you going to be in your banks? >> well, i selected investor

partners who understand the long-term -- >> wilbur ross? >> and carlisle blackstone, but to be frank with you, if you view the injection of private equity capital almost the way we view the government investing in these banks, these investments will jump start, i believe, something that will develop later on. and hopefully when these banks get -- when these banks get restructured and start to grow, we can take these banks in public market again and access and even -- and even wider base of capital and invite them back in. if it takes private he can quit capital to get them started, i think -- >> john, is there a lot of private equity capital that will come in if rules come down the way you expect from the fdic? >> i think so. there's a lot sitting on the sidelines and everyone has a different number of trillions or billions sitting out there. people are interested in this. this there are a number of private he can quit groups watching this. when the rules get defined, i think eventually we'll see a lot

of involvement. >> thank you for coming out to join us today. i know it was a long haul. >> 15 minutes from my house. >> yeah. everybody who comes on set gets -- keeps making me more and more jealous. john, great to be here. >> and welcome to florida. >> there we go. still to come from the hamptons this morning, we've got much more coming.g. ron barron, we'll talk about where he sees opportunities in this market and get his thoughts on the second stimulus package from washington.

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reporting live from wall street's summer home in the hamptons, here again, becky quick. >> all right.. welcome back to "squawk box." our special across america. we are live from the hamptons at the beacon restaurant in sag harbor cove. our conversation continues with don peebles, chairman and ceo of peebles corporation. we've been talking about real estate all morning long. i know you are spb who has not always been positive on real estate. you got out before the crash, sold a lot of your stuff but you think right now is a good time to be getting back in. >> oh, yeah, on the commercial side it may be a little early. hotels, now is a good time to

buy. on the residential side, and i think in places like miami, las vegas, washington, d.c. -- >> the places that have seen the biggest drops?s? >> yes, the big drops. vegas came down really hard, bounced back, with a record month last month, another record month this month because of the affordability index. also you have good fundamentals, markets with strong monday mentals will do well. now americans -- not everybody has lost their job. we still have 90-plus percent employment. people who can afford a vacation home, now is the time to invest in quality of life at a bargain. >> now, does that mean you don't think prices are going to continue to drop? you're not necessarily trying to time the exact bottom on this, it's just from where we've come? >> yeah. also i'm a big believer in buying quality. quality goes on sale just like junk. but quality sells on the way down. junk bottoms out. you want to buy on the way down. so what, you don't -- you miss the last 10% drop. it's okay. it will bounce back.

>> don, thank you very much. we'll have more with don in a moment. first, joe, we're not the only ones on the move. key keep running around to different sets and you and david are doing the same thing? >> one of the reasons he's here, beck, it's a man earnings central and i do mean man, because if anyone can do it, the two of us will be able to do that in a very manly way. only in a good manly way, right? nothing -- nothing wrong. we are going to go over there, stroll over to earnings central -- >> we're going over -- >> eventually to discuss some earning. we're not going to bring don with us because he's 6 feet tall. >> 6'8". >> i get up on my toes -- sdpoo are you leaving me here?? >> you and mack. let's get another shot of mack. mack, you're doing a heck of a job. thank you. all right. i'm going to make him gelman and i want a cut. anyway, we'll preview citigroup. it will be out in a bit. more from becky, who's in

beautiful sag harbor cove. have you -- do you-e go out to the hamptons anymore? >> i go to montauk. it used to be the anti-hamptons -- >> you go way out. we are talking with some of the big-e names in business. i don't go east. there's one road? we'll be back. ththththththththth

♪  >> that is a shot of the animal

orchestra on the beach, sunning themselves out in the hamptons. that's where they reside. actually, i know where that house is, i think. it's out on the -- out on the east end of town. welcome back.. let's take a look at some stocks to watch. we are over at the -- you know that? >> no, i don't. >> i think it's near seinfeld's house. >> it's very pretty out there. >> yeah, it is. >> general electric, david, is now indicated lower. a lot of the guys we talked to that own the stock, the money managers, say they want to wait for the conference call, for the deep dive on some of the meterics for ge. it's down -- if you read the wires, they attribute it to revenue, below expectations. bank america, take a quick look at the stock, 33 cents a share. that was above expectations, handily above. that stock also trading lower. kind of the -- when people had a chance to digest what they were looking at, there's still a lot of issues.s. >> credit quality -- >> s&p's up 7% in, what, the

last week or something along those lines.s. these stocks have moved fairly aggressively. ge was $10.80, moved well above $12.2. bank of america has had a nice rally. i want to take close look at the report and again the conference call will be of importance there. >> this is earnings central. bb&t corp reporting 10 cents a share, including reduction of 7 cents related to a special assessment from the fdic, which a lot of these guys have had to deal with. bbt indicated lower. it's been an incredible week in general. we thought we were in the throes of this correction from the 35% to 40% move. we gave back, what, 10 or 12? people were waiting, it's almost my chance, i missed the original -- and here we are up at 8700 in four days. >> well, we said this was going to be an important week to get a sense of where things stood. it has proved that way. we'll see what the market action is today. but i guess, wouldn't you agree, it's in a positive reaction to earnings so far?

>> i'm looking in the monitor -- >> what are you doing? you're not talking. >> i'm looking in the monitor. the camera is showing a big line in my face right here. >> you weren't aware of that line? >> well, i keep looking in the monitor. did i get it? it's still there! they're still -- mattel reporting second quarter -- >> i know a good plastic surgeon. >> mattel reporting -- how long does that take to heal? >> i think it could be quick.. it could be quick. two weeks. i'll say you went to the beach. don't worry about it. >> implants? >> sure, why not, while you're at it. >> six cent a share, above estimates of a penny. worldwide sales for core brands like barbie down 16%. wheels down 28%. fisher-price down 14%. ibm will be a feature, big number from ibm last night. a lot was cost-cutting and revenue, again, not as good as

i'm sure the company would like. and then google is indicated down sharply as its growth continues to slow a little bit. i don't like this shot over here, becky. i don't know if it's the lighting or what -- >> i can't see it. i keep wishing i had a monitor so i could check it out. what are you doing, the sideways profile? is that with you're checking out? >> two chinz i can deal with, but five or six, there's something wrong with -- >> you look good. you look good, man. >> you were feeling so good earlier this week. you look great. you look thin. you've been running. yeah, yeah, yeah, i'm sure you look fantastic. >> thank you. i'd look good out there with a suit on. >> yes, you would. >> you have a pink shirt on. >> don looks good in that shirt. i'm telling you. you guys would be able to pull off pink shirts, too. coming up live from the hamptons, we are waiting on quarterly results and ron baron, we have his investment advice and his thoughts on the state of the economy. what's happening with cit and the latest earning? former new york insurance

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the summer wind ♪ >> this is a special presentation of "squawk box" live from the hamptons. it's wall street's favorite summer hangout, a home away from home. but this year, the stakes are too high for simple fun in the sun. between the beach and the boat dock, serious business is getting done. ♪ all summer long >> a cure for the summertime blues. quarterly results from general electric, bank of america and citigroup. all before the opening bell. business america's triple play as "squawk box" begins right now. ♪ all summer long we sang a song and then we strolled ♪ >> welcome back to "squawk box" here on cnbc. good morning again, everybody.. i'm becky quick on loekdz in the hamptons with our guest host today, billionaire real estate investor don peebles.

over the next hour we'll talk big bank earnings from the wall street east out in the hamptons. joe's back at headquarters with david faber and done marin of lightyear capital. carl's out but he'll be back. >> now i'm understanding that citigroup is hitting right now, and this is one we've been waiting for as well. and i'm certain we'll have to go through this and look at t metrics. revenue $29.97 billion. that's for real? 49 cents.x net income of $4.3 billion or 49 cents a share. $4.3 billion. and those numbers, that revenue number is like so far above nsensus expectations, it

almost makes me wonder what we're talking about here. whether there's a reason -- >> $6.7 after-tax gain on the sale of smith barney. >> i wonder if that was in -- you never know what analysts are including in some of the revenue numbers. the 49 cent number is also so far above what the -- i mean, we're looking for i aloss, so a loss of 37 krebcent of -- >> but the number includes that gain. >> it does? >> so they're giving us a -- >> and they did not -- you know, i've got to read through this. i just printed it out. >> and as we always point out, citigroup, with a number of outstanding shares, it's hard to move that -- >> right.t. we'll have the huge exchange offer which is going to conclude fairly soon. the u.s. government will own about 34%. there will be 23 billion shares outstanding, roughly, of

citigroup. when you look at that $3, remember, you do want to be multiplying that by $23 billion. you're still talking about quite a significant market to capital on the part of this company. not quite reflected yet because, of course, that exchange is yet to take place from the preferred to the common. >> even in the old days, a citigroup press release would be about 30 pages, 30 or 40 pages. now with, you know, with what we've been through in the last six months, it's going to be really, really arcane and detailed. we'll need a little time. those are the numbers that we're talking about. we need to back out some gains. don, overall -- don pa rin is our guest host today. what do you make of citigroup, is it a zombie bank? does it ever rise from the dead? >> well, you're seeing a little bit of what you make of it. it is assembled to a lot of acquisitions, smith barney spinoff giving them the one-time gain.

thaelgt good. they have to get back to basic business.. they divided citibank into citi and citi holding, citi, the business going forward. basically the old citibank plus a more active soleman brothers is the model. if they can do that, they'll be a strong bank. problem, with 34% owned by the government and constraints on compensation, how can you build a great organization if you can't compete for the best talent? >> and you think that's going to be manifested more in citigroup than -- i guess the government is most involved with citigroup so you never figure they'll let anyone get a bonus again? >> i think it's going to be difficult. while we talk about the number all the time, the actual fact is talent is crucial. you have to combine capital and talent and technology to do good in this world today. if there is any hampering of the ability to keep the best people and recruit the best people, you're not going to compete. >> there's a notion that the best people, highly paid people

got us into this mess in the first place. >> the ones that take you off the rails in the first place. >> the amount of pay and how well you do in the last two years is not really a core laying. picture when recruiting at schools, you're out finding good people who are changing jobs here now. where are they going to go? they're more likely to go to a place where they can make sure they'll get paid competitive. >> well-being congress and, you know, with the populous backlash, they're surprised -- this last aig bonus was $2.4 million for 40 people. it was $60,000. there are people that who -- that are in the government that don't want any compensation paid to anyone that -- at any of these firms. they don't realize, financial firms services. they don't have to buy aluminum. the costs are the people. compensation, you'd have 100% margins if you didn't have to compensate people. you have to compensate people to work for you. >> it's all labor.

>> all labor. >> i find myself wondering why a bond trader should be paid $6 million a year when they're getting capital and -- >> then it's opm. >> yeah. >> i've never quite understood, after 22 years, to be honest, of compensation -- >> or -- >> you know, the stars, 22 years ago when i started the stars s made huge money and everybody else did fine. that's changed. >> you've never gotten over the envy and jealousy of the people -- >> i've never it either. talent doesn't have to go and stay with big firms anymore. the capital will follow the talent. that's how you can tell. have there been successes? absolutely. do you need a level playing field among organizations to compete? i think you do. >> head count down 30,000, now 96,000 below -- >> that's smith barney. they basically merged it with morgan stanley so they're

counting that 30,000 triggered by the smith barney deal. >> so that isn't even -- >> because of the smith barney deal, i'm looking here at my -- we have to look through the numbers a bit. >> the credit costs were $12.4 billion, $8.4 billion in net credit losses and a $3.9 billion reserve billed. i'm not sure if that's what people were expecting, lighter, heavier. yesterday with jpmorgan, some were saying they expected a heavier reserve. that get into the numbers as well. there you're talking about huge numbers that can have, obviously, a huge effect half a billion one way or the other. >> any good ceo is trying to take as many reserves as possible. >> the key question for citigroup continues to be management. >> it's management. >> and where they stand. they made significant changes last week. but, you know, there are still a lot of questions about vikrim pandit and whether he'll be at the bank for the foreseeable

future or changes given the u.s. government. >> parsons now is back doing what he's done so often. he apparently is -- is in "the journal," he's convinced at least temporarily that sheila bair, pandit's the guy and convinced the board that pandit's the guy. did you see the parsons' piece yesterday? >> uh-huh. >> we'll hear more -- you want us to keep? we'll hear more from don and david in the next hour. becky, you're out in the hamptons. what do you have coming up from here on out? >> well, coming up next, actually, we've got someone i know you want to talk to, joe. we've got a man on manages billions for the nation's wealthiest investors. ron baron's here. we'll be talking to him about what he's seeing in terms of opportunities in the market. "squawk box" will be back. as you can see, there he is in our boardroom away from the boardroom. welcome to the now network. population 49 million.

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reporting live from wall street's summer home in the

hamptons. here again, becky quick. it may be summer but that doesn't mean that wall street is on vacation. in fact, no matter where the location, investors like our next guest are hard at work, following everything happening with the economy and market.. ron baron is the founder of baron capital management and he joins us on set. thank you for coming out. >> thank you for inviting me. >> you're joining us on a busy morning.g. we're hearing from several financials. citigroup and bank of america out with their earning. ken lewis says there are difficult challenges that lie ahead. vikram pandit saying the most significant challenge is going to be consumer credit. how does that match up with your concerns about the economy? >> well, we've had a lot of f debt -- too much debt for too long. energy prices were too low for too long so that's been a problem for our country. now that will be changed. the consumer is under pressure. and everything is down since

last year 40 -- 30% or 40%. one of my friends is a builder out here and he actually built my foundation and he said he just got a quote for a foundation and it was -- last year the quote was $220,000, this year it's $132,000, down 40%. hes, i know we cannot be making money. because i know what he pays people. all he's doing is taking jobs just so people can keep their jobs. and i think that if you go out and you look at hotels, hotels are down 30% or 40%. everything is down 30% or 40%. you go to stores, prices are down 30%, 40% without even asking. so profitability is down fairly sharply. what's going to happen to our costs? what's going to happen next is all you have to do is get a little improvement in the revenues and profitability will go up dramatically, much more than people think. >> where does that lead you when you start looking around the stock market? you are a long-term value investors and what does that kind of bring you towards?

>> long-term growth investor. so what i think is that long-term investing is out of fashion right now. and everyone talks about trading and, strategic and investing in the carry trade and investing in reflation trades. everyone has an etf. remarkable, the largest makers in etf are hedge funds. using leverage to do it. and what i think is we have always been a long-term investor, always. when i started in business in 1970, the first two stocks i was recommending were disney and mcdonald's. my boss said, you can't keep talking about these companies because people are getting bored. but i was interested in disney because they were building a park in orlando. i was interested in mcdonald's because that's where i atd. that's what i could afford to eat. the hamburgers were 18 cents,

fries were 15 and cokes were a dime. disney is up something like 35 times since 1970. mcdonald's is up 40 times. we've been an investor in devry. just replaced general motors in the s&p 500. amazing. so hyatt corporation, we were helpful in bringing the company private in 1976. and it was $150 million market cap when he went private. we invested in the company $100 million. i think they had 19 hotels. they were building hotels at airports. there weren't hotels at airports at the time. now they're talking about bringing it public at $5 or $10 billion. and 19 hotels at the time.. so if you invest in a growth company, ip vest in interesting people for the long term, and this is such an exciting g country, such an exciting economy, that it's hard to imagine that you can't do well. >> but people say buy and hold is dead. i mean, if you hold onto

mcdonald's and disney since you were first recommending it? >> unfortunately, for me, i didn't. i did invest in mano care since i was in law school and that's up 100 times. i learned over time, when i saw all these companies, and i did hold onto devry and charles schwab, which is up 50 times. how many of those do you think you need before you can become a successful investor? dwloo he sounds like a real estate person, but actually interestingly enough, ron has a chemistry background. that probably focused him on long-term thinking. look, the real estate market -- >> blow up the world? >> yeah, on a long-term basis safely. what's interesting is the real estate business is also a very long-term business and people look at it and what happened to the real estate fundamentals is it became more of a commodity and a short-term trading business and that's when people got into trouble. and i think ron's exactly right. if you look at the fundamentals

of some of the opportunities to invest in, invest if good opportunity for the long term, there are great opportunity. i think the hotel sector has got a lot of pull back to experience. and also they're going to get more efficient as well and their profits will come back probably in 2011, 2012. >> ron, don marin is back in the studio and he has a question for you as well. >> hi, don, how are you? >> don lives in my building in new york. >> i thought thaw lived -- >> actually -- >> you were there first. i do live in your building. but, you know what, i went down into the basement at one time with don to show me how to play basketball, except he's much taller than i am. you know, 5'7" jewish guy shouldn't play basketball with don marin. >> we've had a lot of exchanges. we were talking about -- at s h

sothe sotheby's years ago he would say, teach me about the art business. >> this wasn't a good investment. >> didn't work out so well. here's a layup question, but it's key. every investor out there, the professionals and amateurs, are wondering, where do they put their money and how do they put it? stock market was down. this year the average hedge fund is up 9%, the market's down 4. or 5%. how do you give advice to investors about long-only managers in a world of hedge funds and credit funds and more complex ways of investing, some of which have done relatively better than the long-only management. >> you know, the stock market, when i started was, i guess, less than 1,000. traded between 600 and 1,000 from 1966 to 1982. i started in 1970. the stock market, even after it's fallen 82% eight times over the last 39 years. so that means that's three

doubles. i'm sorry -- yeah, three doubles. >> yeah, three doubles.s. >> and that means you double your money every 13 years and 13 years means you're making 6% or 7% a year. if you just invest in stocks, in index, and i think index is an interesting investment these days. and i think if you go to a place like fidelity or baron, then i think you're able to find interesting companies to invest in and growth companies for the long term that you have a chance to do better than the stock market. this should be a period of time when managers, analysts, can outperform the indexes for a long time, it was about beta, volatility and now i think it's about stock selection. >> how about all these regular layings and government? they don't talk too much about mutual fund. they talk about banks and other things. where do you think you'll come out in all that? >> the regulations are long

overdue. i think that there's been too much leverage for too long. you can't have businesses remain viable for too long if they're levered. and a few of their loans go bad. that's a real problem. so historically i haven't invested too much in insurance companies because i don't know what the liabilities are. and as far as mutual funds, what are they? they're just companies that invest in equities and you get to invest in a pool of those equities. mutual fund management companies, i think my business, which is a mutual fund management business, is real interesting. why wouldn't i think that's interesting for my shareholders for the shareholder of our funds to invest in similarly? and mutual fund management companies, which don't employ leverage, you look at t.rowe price, those are interesting companies. >> we've had some people on recently they bring up these 18-year cycles. in 1970, i guess, you were kind of right in the middle of one of those bear 18-year. then we had '82 to 2000.

now we could be in year nine of an 18-year -- i don't know whether you want to call it a bear, but certainly not the kind of environment from '82 to 2000. do you see the backdrop, the political backdrop, the assault on capitalism? i mean, what positive things do you see in the tax front, in the interest rate front, in the government involve arement front? just the general attitude towards capitalism. i wouldn't want to run a mutual fund right for you. >> i should have written some of those questions down. there were a lot of questions there. >> well, answer them one by one. >> how am i going to remember those questions? >> all right. how about the political backdrop, does that make you think that maybe we're in the middle of an 18-year bear? >> i don't buy into those theories. my idea is, i am very positive on the fact that our president and chairman of the federal reserve have essentially saved our economy from having a

depression by saving the financial system. i think that's a real big positive. as far as the social programs and as far as the tax implications, i'm not the president and i'm not in administration and that's not what i would do in order to make the economy grow again. on the other hand, i applaud what they've done on the financial front.. >> and, listen, this is a president that's there for three or four years and he has to make the country do better. i hope that he does. i believe he will. i believe that -- you know, bill clinton, he said he -- he had this very ambitious program for a long time about, you know, social program, and ultimately it came to conclusion. that's the only way he'll be able to implement it. what's best for america is if we're able to make the country, the economy grow.. and so he said what's best for everyone is what's best for businesses. if businesses prosper, then there will be other trickle down theories. bill clinton was the trickle down theory.

that's what it was all about. obama, i think he's a smart guy, and i think if taxes are too high and people say, gee, i don't want to work for five days and take home for two days. he's going to get the message and people are going to be more productive if there's some programs to say, okay, if you invest your money then you won't have to pay taxes for the next three years if you hold an investment for three years. we should be stimulating for making investments. i don't see any of that yet. >> all right. all you guys that are sort of the supporters, that's what you always fall back on, well, he's going to eventually come around to be thinking right. you always have to hang your hat on that. it's not -- if what he wants to do goes through you're not bullish. when it comes around to your way of thinking -- >> he saved the financial system. >> paulson was here before he was in, ron up. know most of the steps were taken before the president was even inaugurated. >> joe, the president did come in and --

>> joe -- >> the stimulus package? >> no. the stimulus package, he's also -- >> 10%. >> -- preserving jobs for firefighters, police officers rank and file employees, $20 billion of public works projects going on right now. and we're looking at tackling some challenges this country has overlooked and forgotten about for so long. that is educating our young people, providing a second-tier education level beyond high school. on college or community colleges. also, recognizing we can't are 40-something million americans without health care. that will bankrupt this country on it's own. he's taking on some tough problems. i don't know why this attitude that if someone is willing to step up and take on problems.s. why should he be criticized? you should applaud him for going out and saying, we're going to tackle tough problems. the fact s some of us will have to help pay for them. we've benefitted handsomely from the great opportunity in america. now is a time for us to step up and live up to our responsibility to help finance

and make this country a better place, too. you know, it isn't all just about taxes. it isn't all about a quick fix. we've got to get beyond this attitude of americans of expecting miracles overnight, but to be patient and be long-term, just like ron baron. the reason ron baron's successful is he's a long-term investor. i'm a long-term investor in america, as you are as well do i'm a long-term guy also. and i think when we talk about health care, when we started our business, and there were two people who were working there, i committed i'm going to pay health care for people whether i could -- i'm going to figure out some way to save for it and we did. we've always had health care for our employees from the beginning. i think everyone should have health care. on the other hand, if there's things you can't afford, you can't afford them, wlak and white.e. we have so many opportunity, america spends 30%, 40%, 0% more on health care than anywhere else in the world. our results any better. would dough with do that?

we're unbelievably inefficient. >> we say to the doctors, you don't get your bill unless you sign your bill -- >> don't miss the lead article in the journal today, the cboe, nonpartisan cboe, the economist harry reid and pelosi put in says the health care proposal won't keep down costs. i mean -- >> i don't agree with -- >> they'll just do anything -- >> i don't adpree with the proposals that have been made so far with health care. >> thank you. there you go. >> me neither. >> there are different ways -- >> they're all speaking. >> there are different ways of fixing things, don -- >> you have to pay for -- >> some don't fix. >> let me go one step further about your 18-year theory. my idea here is that i don't buy into those theories and technical analysis and someone saying, hey, you have to sole goldman sachs at $155 and buy it at $140. why? do it five times a year?

where do they get that stuff from from? my thought is there are opportunities. health care's problem, company's solving the problem, should be able to make a lot of money and grow a lot over the next -- >> zimmer is one of the stocks you like? >> yep. zimmer, hips and knee, that's when you get older you need new hips and knee. community health care, your buildings and hospitals in rural community and bringing health care into areas where they didn't have it before. there's opportunities to benefit by providing services, by solving problems to america, by providing education, by providing environment appear engineering. there are all kind of opportunity that are going to be offering us chances to make a lot of money in the future, just like we did in the last 30 years. and i think that the key is to make sure, when you make that money, your incentive to make it, the government is not trying to take that money away and give it to other people. everyone will be benefit the most, in my opinion, if they're able to keep a little more

assets and earnings they earn and can provide other benefit to everybody else. >> ron, we appreciate you coming out today. don will be staying with us for the rest of the program. ron, we would love to see you on set sometime soon.. thank you. >> thank you. joe, coming up, more from the playground for the rich and famous. we'll break the housing starts numbers down. 

breaking news now. june housing starts due out right now. kevin at the cma group. >> 582, john, on starts. pretty good number. bumped up revision to last month also. so permits, 563 versus expectation of about 525. so relatively good numbers from an economic standpoint. actually, kind of a surprising there's that much activity in the sector of the housing market. >> yeah.h. we have steve liesman, who's joined us. you've been out for a while, steve. you were here earlier this week, but not around much. we have david here, and our guest host don marin. is your computer working?? >> my computer is working. but i don't hear my microphone. there we go. i'm not wearing my jacket, i wanted you to note, by the way. trying a new look.

let me just tell you here, what's important about this is we didn't get all the gain in multi-fame, where it's been. it's been the volatility inside multi-family housing that's given us the game, made people skeptical last month where you saw a huge increase. this time around, it looks like multi-family fell where single-family had a bit of the gain. looks like a little more real. you don't have to build a lot of single-house families. again, as kevin ferry pointed out, that rise in building permits, 8.7,%, suggests things have bottomed out if not rising here. to months in a row. one thing i wanted to check, joe, was the last time around we had two months of gains that at least weren't revised away. for the most it looks like a decent -- we need to come up with a different term other than green shoot. green shoot was widely discredited. >> absolutely. because you've got a lawn mower

going over these things. i think what these housing starts say, this is what i think, we're building demand in this country. there's a million and a half family formations a year. we tear down 300,000 houses. what's important now is financing to buy housing completions. housing completions are much lower than housing starts. we've got to get the completion level higher. that's through demand. in order to do that, banks have to start lending. >> you know, i think you've got to go back -- you have to go back to -- i want to say, is it the end of '06 here? no, no. sorry. the beginning of '08 to find two months in a row in gains in housing starts on a month to month basis. one thing that did happen, don, is that -- or maybe kevin wants to comment on this. kevin, it looks like the mortgage market settled down, right? you had that rice from, what was it, 2.5% ten-year to 3.5% -- 3% all the way up to 4% and then it came back down. this might be helping the

housing market, at least stability in rates. >> i think stability is the big thing, for sure, steve. the market was getting away from people. we've seen a movement of -- well-being obviously this week rather aggressively back towards riskier trades. not just equities. but also on the commodity story. gas up over 12% yesterday. so that's the theme. and today's trading is all going to be about whether they keep it going for a friday or if it calms down a little bit after a big run this week. >> kevin, you sent me a note yesterday and we didn't have a chance to respond to it. you were interested in the tick data, the treasury international trade data and it showed the chinese are still buying our securities. the ones selling are the hedge funds.s. what did you read from that, admitly, old data but the most recent we have when it comes to what our international partners are doing. >> right. it corresponded to the worst period of time the bond market was experiencing, steve.

so i think really the only thing we were gleaning from it was that the conventional wisdom at the time was that the chinese and foreign investors were dutching out of american securitiesesorried about the dollar. that just was not the case. in fact, there's more concentrated in our securities than ever. so i think it is a very delicate situation over the long haul. but it just shows the conventional wisdom at the time in may was completely off base when the statisticics showed up. at the enof the day, the dollar has been markedly behaved despite all the comment about doomed. the ten-year has been markedly behaved. they'll issue another billion dollars. the bond market is well aware of the treasury's plans here. are you surprised how well american securities are done here? >> i'm not. there's $4 trillion money market funds, and when you go around the world you find in the end, people want to be in dollars because the alternatives are no better and probably worse.

kind of like democracy. as i'm not surprised at that. one thing i think that's helped are the stress tesses on the bank. it's given foreign investors pore sense of transparency. we have to continue that. what we need here and the rest of the world, basically in regulation, is transparency so investors can understood more about what are admittedly complicated -- >> one more plan.. the obama administration, after the rise in the ten-year, started to make much different rhetoric about deficits. they seemed to have heard the bond market, you heard the kevins of this world crying out. >> david didn't weigh in. did he find anything out? i hope so. don will be with us for the rest of the show. coming up, he was new york's chief insurance industry watch dog. what's he going to do now? he's a god. he can get a table in any restaurant now, the insurance commissioner in forecast. if we had a key role in the

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welcome back, everyone, to this special edition of "squawk across america," we're live at sag harbor cove at the beacon. we've been talking about everything happening in the financial markets this morning. seeing what some best-known investors have to say. they're doing it from the hamptons. we will have more with our guest host don peebles when we come back but back to you, joe. >> beck with us in our headquarters. eric dinallo, the former top man in the new york state insurance department. he left in may to become a finance professor at the nyu-stern school of business. oddly odd that you're want there in two years, eric. i know, you don't want to talk about what you might do, mr. ag -- oh, no, no. give me an idea. have you seen -- when we pre-interviewed you, you talked about what citigroup might look like, bank of america might look like. pretty much what you had thought? >> most illustrative are the

jpmorgan results. you're seeing the institutional side and the consumer side. and it's very open. people in america have to understand, there's really two things going on here. the markets may be picking up, but there is still a serious drag on the economy when it comes to credit cards, for instance, which i talked to you about before. you have the looming rock over the economy. those are off balance sheet transactions to a large degree still and we have to see how that plays out. >> some people were very encouraged this week, eric, by the fact that the delinquency on credit card trust which is get reported, i think it was wednesday, every month, in the middle of the month, started to show 30-day delinquencies stabilizing, actually declining june over may. should you read into that or is that just a one -- >> i'm still too concerned about it to just let one cycle not concern me. people have built up their credit cards and they're trying to negotiate them so

delinquencies, which result in the writeoffs. i think that you heard jamie dimon, pretty open about their long-term credit concerns there. >> 20% at jpmorgan, 10% on the washington mutual credit portfolio. >> speaking about credit, what do you think is the future of the guarantors, all the rest of them, how will that play out? very crucial part of -- >> thank you for asking that. that's a crucial issue. i think it has to do with congress, whether barney frank and others are is serious about putting a u.s. government backstop on the municipal side, the general obligation bonds of this country. even if they the do, there is still at least -- i think it's 50% of the bonds that go to market are these revenue-generating bonds, you know, hospitals, and schools and water authorities, airports. those have to be able to go to market. they have to be commodityized. traders have to trade them at some level.

they need a rating. it's been historically very expensive so go to the rating agencies. that was always the rule of the bond insurers for the long term. if congress does not do the backstop, i think bond insurance, which is still the best solution i've seen, not like -- i don't really care that much but i think i don't see a way to commodityize those offers. >> what do you think about the rating agencies' role going forward? they've been under a lot of pressure, a lot of criticism, but in the end you have to have ratings. >> i think you should have ratings that are, in fact, funded by the users, not by the issuers. i am really a fan, have written in "the wall street journal" about a rating agency that's more of a consumer reports type of rating agency, where you don't doubt the origin of the funding for it. and i think even the big rating agencies should create sub subsidiaries that offer that truly unbiased reserve. >> do you this think they will? >> if you just took the mutual fund industry and insurance industry, those two could fund it. the purchaser of those products

wouldn't feel it at all and you would get truly unbiased objective research. >> a final question. you were a fabulous state regulator. there's a lot of talk about having a federal regulators, a little more government in our lives.s. how do you feel about that? >> well, i have always been open to federal regulatory role in insurance. my only concern is i want to have it happen on the right reasons. if we were to judge how the state regulatory system for insurance performed over the last cycle concerning solvency of insurance companies, which is what that was all about, whether banks and others had money behind their commitment, that system performed relatively very, very well. i wouldn't make changes based on that. concerning bringing products to market, the licensing of agents, sort of like the securities industry solved a lot of those problems. i'm a supporter of that as a national undertaking. >> the states are very uneven. you had the higher standards -- >> there is that. >> many people thought.

not true everywhere in the country. >> there is that.. there should be potentially a single test for solvency, what kind of capital ratios are insurance. they should turn to the state to look for the solutions because overall i think they did it quite well. especially new york. >> thanks, eric. good to see you this morning. >> thank you very much. >> we'll keep in touch. see you soon. becky? >> all right, joe. coming up we will have more from the hamptons. plus, we'll find out why this date is so important to art. stay right here. everyday we generate 8 times the information found in all u.s. libraries. where did it come from? store transactions, market movements. emails, photos... videos... blogs... what if technology could capture all this information... and turn it into intelligence. we could identify patterns faster... we could predict with greater confidence... convert data into action... smarter information means smarter decisions. smarter decisions build a smarter planet... that's what i'm working on. i'm an ibmer. i'm an ibmer. i'm an ibmer.

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coming up, more from what they call wall street east.. we'll finally find out why july 17th was so special to art cashin. the trader's edge is next. ♪ look at this man ♪ so blessed with inspiration ♪ ♪ i don't know much ♪ but i know i love you ♪ and that may be ♪ all i need ♪ to know (announcer) customers love ge aircraft engines

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all right. we have big reports this morning, david. did you find out something about bank of america? >> a mixed picture. that seems to be the case this morning. citigroup is its own story. on bank of america, you've got what people are saying is perhaps a deceleration of nonmono nonperforming assets. they did fine in trading. you have on one side perhaps the hope that credit is close --

credit losses close to peaking in the next six months but on the other side some wonder if there could have been better performance in trading of the other businesses. morgan stanley for its part noting that nonperforming loans of 22% to 29 billion but below the first quarter -- >> still bank of america? >> i'm talking about bank of america even though we're looking at citigroup. citi has a couple weeks before the exchange offer. >> now we're talking about citi. >> anyhow. ge, you saw it. >> is it as simple as that? >> yeah. if you're shrinking ge capital faster than some anticipated on ge, nonetheless some would say how are you going to shrink yourself to profitability? that's the naysayer question there. >> from the ceo's point of view what's going on is the quality

of new loans is much higher than the quality of old loans. if you're managing these, you're looking at that hard. basic businesses will do well over the next couple of years. >> art, you're down there on the floor. what's getting the most scuttle butt today? >> away from financials. most of the reports have shown better income by cutting costs. that's a short-term solution. that's not a method of growth. there's a little suspicion. today is an exploration day. it's the 17th. two weeks ago i said we would know by the close of business on the 17th what the market thought of itself. i'll have to extend that out to next friday.. we have things cooking on the 21st and 22nd to look at before we confirm it. we got a run for our money this

week. >> it's been a surprising week that took us from 82 or 83 back to 87. art, if i held you to your word, bulls would have won out. >> if you stick it at the 17th. >> what's coming up on the 22nd and 23rd? >> a couple things. not the least of which is a major solar eclipse. we'll have to see if that changes the ionization in the upper atmosphere. >> art, it's john. >> how are you? >> one question that we talk about over the years. if you look at the institutional buying versus the individual buying and domestic versus foreign, what would you find right now in terms of trend? >> well, i think it is not as heavily retail as a lot of people suspected. i think what you saw going into the end of the half as march rally started to kick in, the institutions wound up doing that hold your nose and buy them. they didn't buy with conviction which is good for the rally.

they bought them to show them in the portfolio. not a lot of retail playing. short-term playing with people shorting and covering and that kind of thing. >> we have to go, art. the financials are more or less okay what expecting? >> financials pretty much on target.. industrials a little bit different. >> all right. thank you. enjoy yourself. it's friday.. >> we'll be marinating.. >> ice cubes don't stand a chance. >> right. >> see you later. >> coming up, a roundup of the big bank earnings today with our guest host and before we do that let's take a quick look at gold prices this morning. "squawk box" will be right back.

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welcome back. let's get final thoughts from our guest host today. don is one of the most powerful real estate investors. let's talk about earnings. we heard from most of the big financials. many better than