good morning. earnings, the economy, oh my. corporate results coming. a deluge of data and billions of treasury auctions. a busy week is about to begin. it's already started. ben bernanke admits to being less than thrilled about last year's bailouts but argues there was no other option. the markets at this hour, asia up overnight. green and red arrows in european trade. u.s. equity trades are mixed. "squawk box" begins right now. good monday morning. welcome to "squawk box." i'm carl quintanilla.

becky is back today. she should be back later in the week. we're joined by our managing director at newberger. how you been? >> good. >> other than a blackout, the kilimanjaro training came in handy this morning. >> look over to see becky. man, what happened? where's becky? you're sitting in her chair. raise your chair a little bit. i like the -- show everybody your peace sign cuff links. that's not a commentary. they're just cool, right? >> they just look cool. >> there you go. >> we need more of that. >> we do. you know what? give peace a chance. >> okay. >> can we. >> let's give earnings a chance. how about that? >> i don't think we have any choice. is this the last week? >> last big one. retailers will come later on. >> friday.

friday is a little lame too this week. i look embarrassed. but there are some major things happening between now and friday. verizon, a lot of data. >> let's kick things off. on the agenda, atetna, honeywel, corning ware. thursday, we'll get kellogg, exxonmobil, disney, mastercard got written up very nicely over the weekend. motorola, cigna, colgate and dow chemical. friday, we'll get chevron and auto nation on a week where cash for clunkers kicks off. i think you might be looking at some aetna numbers right now. >> i am, carl. you're absolutely right. operating at 77 cents with a 78-cent estimate on the books for first call.

revenue, 8.66 billion. that's above expectations. companies taking appropriate actions to address higher medical costs, which is a lot of times what controls a managed care company's result. that medical loss ratio. i'm sure this company has some other things in mind, given what goes on in washington every day. big stuff about these blue dogs and the blue pups. apparently the head blue dog guy had a bunch of blue dogs playing dmar cards in his office. there used to be the expression, even a yellow dog could get elected somewhere. these guys adopted the blue dog. they are the tail wagging the entire tail of the democratic party and the progressives are not happy. >> you saw them over the weekend, we can't do this

ourselves. >> to gain chrome of the house, conservative democrats were put up by the party to take control of the house. they saw the opportunity and capitalized. in a lot of southern areas, they ran conservative democrats. the progressives in the party are looking at what happened to our majority in both houses where we were going to do whatever we want? and the blue dogs are -- >> the beauty of the system. you just keep self correcting. counter sicyclical approximate. >> what do you think happens with health care? the corporate option won't be part of it? they can't get it through. >> when i look at the health care debate, who will be a winner and who is going to be a loser is not clear.

the only thing that is absolutely clear is the only way any of these potential plans are going to be paid for is by raising taxes on the individual. so what's going to end up happening to the public companies that are in health care, whether they're the medical suppliers or managed care companies is not clear yet. i think the debate is taken to another level in the country, is that the only way this is going to be paid for is an increase in income taxs. call it whatever you want. it's redistribution of money from here to here. that's why it's almost sort of like deja vu going back to the early clinton years. it looked like it was such a strong -- this was going to happen. it was definitely -- we were going to have no issue trying to push this through. then the issue comes up, how are we going to pay for it? >> even if they tax insurance companies, they'll pass them along to people as well. >> absolutely. they want to keep their profit margin. >> you went from here to here

accurately. from high income people to carl. carl and i will benefit from some of this stuff. from the fat cats to the investment types. >> to the uninsured. >> i'm still under cobra insurance. >> you were under who? >> i'm subsidizing as a nonrevenue employee. but i think the fact is these companies -- what i've heard from the companies that reported is we're trying to manage our business in a period of where we don't know what the plan's going to look like. that's why maintain cost controls and see what ultimately happens, if anything happens at all. >> we've got a much better idea what it's going to look like. pelosi is still saying, i've got the votes. i'm going to do it. but i don't know. do you believe that such. >> it's hard to see the path that she sees in the house. barring some major change --

>> that's just the house. apparently they don't want a test going around the committee and the full house. because they haven't tested these guys yet. the house bill might not come you up until after the recess. but the screws are still getting turned by the obama administration. >> they're going to need help to fix the twisted elbows and twisted arms. >> is it fascinating to watch? >> i think so. the senate isn't even close. they can't -- >> they're huddled in committee. >> it's amazing. let's go to -- it says from earnings. we're really talking health care. we were talking earnings. aetna will be down. they're complaining about commercial medical costs, what hurt aetna. the economy this morning at 10:00 eastern, look for new home sales, if there were any.

tomorrow, consumer confidence. wednesday, the beige book. >> durable goods. you said gerbel goods. >> you can't really hear the difference. >> i didn't actually pick up on it. >> you didn't even hear it? it sounded like durable goods to you. >> durable goods, the beige book. weekly mortgage applications. on thursday, we have weekly jobs numbers. on friday, a first read on second quarter gdp, which now indicated down 1.5. supposed lly a good number.

you care about gdp? >> i think, as i said when i was on last month, the fact is the market -- >> a lot of facts that you constantly give out. >> down 1.5% is not going to create long-term economic growth. >> you'll only give back. what was that? >> why it's down 1.5 in gdp a good thing? guess what, i think that gain is coming to come to an end this fall. >> the market is saying it hasn't come to an end yet. >> what happened to the market in the last couple of weeks is the fact that many managers -- >> given us the facts. >> is that those who are underinvested, trying to play it safe, the same people that have chased markets before and the same people that did not get out of stocks last august and september and october, were putting capital to work in the last couple of weeks because they saw what had happened in the end of the second quarter.

they were trailing the benchmark and say -- you can spin it however you want. at the end of the day, active managers get paid to beat the benchmark. if they're not invested, they'll put money into the market. that's what happened. >> a lot of people thought they missed. it never did pull back. it was sideways. maybe 10% pulled back. here we are off to the races again. >> if you were fully invested last fall and went into september under the premise that you were not the money manager and you wanted to be fully invested and upper down 40 to 50% last year and you have bounced back, if you take your numbers, you're still trailing dramatically. there's this push and pull between do i want to try to protect capital or do i want to try to closet index. closet index is winning right

now. >> an article in "the new york times" that showed if you're down 40 and up 40, you're still down. i knew that, didn't you? >> you can do that math very quickly. >> if you're down 40 and up 40, you're still down 20 or something. >> i was up in new hampshire visiting my kids at camp. the hedge fund manager said we're having a decent year. i said, how are you doing? we're up 40. i said, that's fantastic. what were you last year? we were down 47. if i gave you capital two years ago, i'm still below, you're still not at the high water mark. it's a short memory in terms of where things were over the last year and a half. we're not even at the one-year anniversary of the lehman bankruptcy. >> that's right. we're going to get there this fall. >> september 15th. >> that's right. the bonds hit. the government is auctioning more than 205 billion in bills and notes. today, 6 billion in 20-year

tips. 40 billion tomorrow. wednesday, 30 billion in five years. thursday, 28 billion in seven years. in addition, we'll see auctions of another 90 billion or so in bills in duration of a month. we thought we had a busy week a few weeks ago. 200-plus is even more. the government needs to finance a lot of that debt. in the midst of the data and the earnings this week, joe. >> the operating net is even worse. their nongap is 68 cent. that 77-cent versus 78 estimate was putting the best face they could put on these numbers. it's not 77. it's below that. the company, you can see where the problem was there. their costs are higher. commercial costs were not fully captured by pricing.

they try to figure out what something is going to cost and decide where to put premiums. the next thing you know, they underestimated the costs. so the medical loss ratio, the opposite of a profit margin. i guess it goes -- when it goes up, it's bad. if it's 90, they keep 10 cents. so aetna does not por tend good things for that -- for that industry. we had united health last i can. i don't remember united being as affected. and music costs rise for all these guys at the same time. fed chairman bernanke said he had to in his words hold his nose over last year's taxpaye taxpayer-financed buyout meeting. speaking in a town hall meeting in kansas city yesterday, bernanke argued that the rescue actions had to be taken to avoid a major meltdown of the u.s. financial system and the broader

economy. >> yeah. let's take a look at market for this monday. the dow is on track, joe, for the best point gain in a month. since april of 2007. percentage wise, not quite as supervise. you all know about the rally we've had. not since march but the last couple of weeks. we want to continue with europe doing fairly well. we'll keep an eye on oil later on today. gasoline prices continue to go down. oil still hovering above 68. ten-year note, we brought you the news about the auctions. the yield around 3.7. dollar, we'll keep an eye on what that does with the strategic dialogue with china. gold, precious metals, 9.56.

>> aetna, 2.75 to 2.9 versus 3 penalty 53. so not pretty from aetna this morning. >> let's get overseas. christine tan is standing by. first we'll check in with jeff. >> good to see you. we have the european indises higher. let me pop up the board. we've had a couple of corporates that led us down a different road. tnt, a parcels delivery business, coming out with a below estimate second quarter. but the guidance was better. they were saying, there is some stabilization now in the business. elsewhere, ryanair, a budget airline in europe, coming out with numbers that were absolutely fine. then they said, we have very limited visibility at the moment. you know what? tnt went up.

ryanair went down. it's all about the guidance it seems right now here in europe. christine, let me send it to you in singapore. >> asian markets post a solid gain today. the main driver from corporate earnings. they were hoped to come in better than expected. up for the ninth straight day. nikkei surging 1.4%. earnings optimism pushed a south korean market up for the tenth consecutive session. the koz pea pi up as well. in china, shanghai's first listing in nearly a year, made an impressive debut. sichuan expressway soared,

trigger a suspension of trade. overall ninth session here in asia. back to up. >> thanks. it's a big week for the markets last week. can they hold their gains? let's get some views from gary. and our chief global economist with decision economics. alan, you're the big economist with the big name over the years. i've got to start with you i think just out of deference and out of respect. >> deference to age. >> good to see you. friday, we see down 1.5. our guest host was saying, what it is to celebrate down 1.5? is that something to celebrate? >> no. things are getting less bad. we think housing is recovering actually. that's part of the cycle. we're at minus 0.5. a slight chance of a positive,

second half gdp very likely to be positive. from a market point of view, i said don't watch gdp. watch what the consumer is going to do and the housing market. gdp doesn't tell us much anymore given the nature of our economy and what's going on underneath. i think it's misleading. >> translato . >> the employment industry shouldn't be improving that quickly. other people say this reception was causeded by a credit bubble and it actually could be bad because this is like self-fulfilling or self-perpetuating when you keep losing jobs. you can't recover if you're losing jobs. maybe it's not as much lagging as it is coincidence. is that how you view it? >> we think the next time around we'll get a big improvement.

it's only going to be down 275,000, 300,000 jobs. that's pretty good. the economy is going to be real anemic. i think this will be the worst jobless recovery we've ever had. we could very well have a "v" recovery. that's a big thing. companies have been amazing in how they've slashed costs. you've seen if in the s&p 500 every day. i've never seen this kind of downturn since the 1930s. so many companies making money and so few losing money. >> the stock market and everybody feels better when the market goes up. it doesn't help the people that don't have jobs. all this populist rhetoric gets

worse. >> a rising stock market will help repair balance sheets and set up the consumer for better times. a couple of years down the road, consumer spending will pick up more. it definitely helps. the stock market, i think in our work, is a very big deal in the economy and functionally how it works. >> do you agree with this, brian? >> i think a key thing that has been said or inferred is that markets lead the economy in profits. you know, our assessment with respect to gdp growth is more of a saucer-type recovery in terms of gdp growth. i think what people have missed is in the first quarter of this year we saw massive downward rescissions. 30-year lows with respect to earnings revisions. they've done an excellent job of

cutting costs and setting expectations accordingly. >> on our heat chart, everybody is beat. it's all green? >> we've had two recessions in the last ten years. in 2001, that was led by tax. the past was a consumer-led recession. corporate america has been conservative, cutting costs and overhead appropriately. that set up for this type of recovery. >> when you were on last time, i asked you for specific places to buy in. i don't know if you were overall bullish but you liked health care and tech. do you still like health care and why? >> here's a couple of things. since we rolled out coverage of strategy at oppenheimer, our target for the next 12 months is 1130. we're bullish. tech is our favorite sector in terms of the next 12 to 18

months. it will be leadership going forward. with respect to health care, many people will be surprised since may 8th, tech and health care the best performers of the market. we think the rhetoric of the obama bill is starting to seep into investors' minds they won't get this overall nationalized health care bill done. we think as a result health care is very well positioned longer term. >> it's well positioned because obama is going to be defeated in his -- >> here's the thing, joe. let's think about the fundamentals. health care is the only sector of the ten that showed top line growth this last quarter, number one. number two, in terms of valuations, i think people have forgotten that valuations for health care have been down for ten years. the last time that the government went after health care was '93, '94. multiples were coming down dramatically from the health care crazy, which you're reading very clearly. multiples have been down for a while. these stocks have been priced for this for a while now. >> i think carl would point out

the government's not going after health care. they're going after it to make it better for all of us. it might hurt a couple of your fat cat companies. >> my fat cat companies? >> what do you mean they're going after health care? >> it's called transference. he does this with me. now he's doing it with you. >> don't be, brian. >> am i right though? they're not going after health care? they're trying to cover people that don't have insurance and bring good health care to everyone. what's your problem? >> this is all about regulation and changing things. anytime that the government gets involved with regulating industries, you see a major, major change. the sector's already acting like we're going to be overregulated. >> the worse case scenario is already priced in. >> alan, any final words? you talk health care? >> you know, the biggest policy,

thing for the economy if they get it right. it would have more leverage to help the economy. if they did it right. that's a very important thing. the thing about health care, there will be huge demand. and the technology side of it in terms of taking care of people in more cost efficient ways will get lots of support. there are aspects of the health care sector that have tremendously positive futures. we are overweight along with brian here. >> if you look at the u.s. patent office, number one and two sectors with respect to issuing patents in this world, tech and leak. health care. hasn't changed. >> won't be any more innovation if we do this public -- no. thank you, brian. you're here for three hours? >> i will comment later about the "v" recovery in profits and why i will disagree with alan.

>> you disagree with alan? >> i think you had management late last year doing everything to squeeze out profit margins. you saw that late in profit reports. that is not long-term sustainable. you're going to try to grow business businesses, you have to start to spend money. you squeezed out the profits here. that can't continue. >> alan, you still there? >> we're going to get some revenue growth in 2010. you need top line growth in order to sustain businesses. the expense line, it's incredible how they've kept it down. they're set up for a v-shaped recovery. 2.5% of real gdp will do it for a lot of companies. >> good. alan, thanks. brian, thank you. >> thank you, joe. >> thank you for your garrison

keillor-type comments there. >> came here from minnesota. >> lake woebegone. >> other headlines this morning. the u.s. government pay czar will renegotiate contracts that he views as too high. the journal this morning says kenneth fineberg might seek other ways to reduce labor costs. citi, bank of america, aig, gm, chrysler, chrysler financial and gmac must all submit compensation proposals to treasury on august 13th. fineberg's decisions are not subject to appeal. >> speaking of compensation, the big story over the weekend, a top citigroup trader pressing the bank to honor a 2009 pay package that could total $100 million. that's what this guy makes. what he's made a couple of times per year because he eats what he kills, i guess.

it stays dead. the move could set the stage for a showdown between citi and pay czar fineberg. the trader's name is andrew hall. he heads citi's energy trading unit. he argues he's contractually obligated to receive pay based on profits. what do you do here? >> pay him. >> taxpayer money. it's fungible. but there is a lot of taxpayer money in there. >> is the contract intact? >> i guess. we threw out a bunch of contracts already, didn't we? >> gary? >> if you throw this contract out, what will happen in terms of the domnee effect, multiple contracts tied directly into revenues. >> this guy is threatening to take his whole unit with him too. >> fineberg will have to negotiate and get something palatable. what is palatable, 50 million?

>> i don't know. he is known for finding common ground. >> the money will be earned but rolled back into the business. it will be like a deferred compensation package. yes, you made the money. put it back into the business. because that seems to be what the public sentiment right now is in the sense, yeah, you can make the money but keep it in the business. >> lay low and take it out in a couple of years. >> when we come back, we'll get a check from the futures. x

good morning. welcome back to "squawk box" here on cnbc. i'm joe kearn you saw mccartney and mcshay. how was that? >> good show. he did a lot of beatles songs. >> any special guests? >> put your mike on. >> where's my mike? i'm all over the place. >> any special guests, did billy joel show such. >> billy joel was there on friday night. i was at the saturday night show. i did not see any special guests. >> they're all pretty special. >> off camera, i want you to

tell me baelth beatles songs h. >> the "live and let die" which was wings i believe. fireworks and crazy shows. >> no, no, no. >> joe is not interested. >> let's start with the markets this morning. george dowd of new edge is standing by in the futures pit. can this continue, george? i mean in the equity markets? >> i think that we've had a pretty aggressive move up. you know, i tend to agree with gary's comments from a few minutes ago. >> really? >> the negative gdp is not that exciting. even if you're bullish, i think we've had -- you had the statistic on the screen that the dow is up over 7.5% on the month. if you're bullish, you were supposed to expect some kind of back fill. with the data this week, everybody will look for confirmation on the home sales numbers and jobless numbers, and

last week's numbers that were better are kind of confirmed. if you don't get that, maybe you get a trade down. i think maybe it's healthy for a little bit more of a bullish move up. >> listen, george, is there anything we're not thinking about in any of the other markets? isn't the dollar in it breaks down from here could be trouble or bonds or anything else in another market that could affect equities and throw that off the track? >> you're exactly right. i think carl mentioned that -- >> really? >> sure. dollar index was below 79. we're down towards critical levels. if you look at the component, the euro is up against 1.43 highs. if you could see more movement on the dollar, that could be viewed negatively for stocks.

especially if it's viewed as negative sentiment on the united states as well. >> i wonder what we're not thinking about that's sneaking up on us. >> you got me hot talking about the citi bonuses. if they had ten more of that guy and paid him bonuses, they'd be a lot better off. i think he's helped citi and not hurt citi and should get his contractual pay. >> imagine the people out of work and their tax dollars kept citigroup alive. he's taking $100 million. you think they can see right or wrong that that's not -- i don't want to get you hot either. you're making me nervous. >> he's probably one of the most successful guys in the firm. if you can have more of those, maybe you don't need any money in the first police. >> do you have an e-mail address

where i can -- i can show you who doesn't want to hear that stuff? >> it's joe@squakbox.com. >> because the last aig bonus they were talking about was. >> miniscule. >> 60 guys and 4,000 a person or something. that got people mad because it's taxpayer money. >> i just think it's a contract. you have to honor the contract. i don't think there are two ways around it. it's a black and white picture. >> do you have to honor a contract on a company that wouldn't be around without the taxpayer? >> that's not the trader's fault. >> my understanding of the aig situation -- and i'm not probably as knowledgeable about it as you might be -- >> you definitely are. >> i think there are people that went to aig and it turned into a mess and didn't get paid. how do you expect to bring guys into citi to turn it around? you're going to say, we'll bring you a contract. but next week it's not a

contract. >> how do you make that argument? you saw bernanke at the town hall saying that the t.a.r.p. will not make all of its money back. how do you say that to a taxpayer and say, by the way, we're going to pay this guy $100 million. >> this is all we could talk about from 6:00 to 9:00 every morning. >> you could have this discussion for three hours every day. >> if you make the determination at this town hall, we had to hold our nose and save it, these are the ramifications of saving it. if you let certain companies survive, you have to take it as an opportunity that you want these companies to continue. >> right. >> all right. >> follow through. >> yeah. >> all right. well, covered a lot of ground there. thanks, george. >> see you later. >> california dreaming. the golden state one step closer to solving its financial crisis. what that means to the rest of us. first, let's look at last week's winners and losers. ♪

i've been growing algae for 35 years. most people try to get rid of algae, and we're trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels... that we could someday run our cars on. in using algae to form biofuels, we're not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well.

we're making a big commitment to finding out... just how much algae can help to meet... the fuel demands of the world. concierge claim centers. so i can just drop off my car and you'll take care of everything? yep, even the rental. what if i'm stuck at the office? if you can't come to us, we'll come to you in one of our immediate response vehicles! what if mother won't let me drive? then you probably wouldn't have had an accident in the first place. and we're walkin'!

and we're walkin'... making it all a bit easier -- now that's progressive! call or click today. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email... - on a vacation. - hmm? ( groans ) that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com. have discovered how easy it is to use legalzoom for important legal documents. at legalzoom, we'll help you incorporate your business, file a patent, make a will and more. you can complete our online questions in minutes. then we'll prepare your legal documents and deliver them directly to you. so start your business,

protect your family, launch your dreams. at legalzoom.com we put the law on your side. welcome back.

california governor arnold schwarzenegger is expected to sign the state's budget bills today. john harwood is our chief washington correspondent. he caught up with the governor on friday. >> i think we just have to wade through with it. everyone has to hold tight and be willing to make certain sacrifices and dial back because the reality is one- hfone-third wealth in the world is gone. >> the senate passed legislation last week. john, we think this will close this projected $26 billion deficit. is this a huge victory for schwarzenegger himself? >> reporter: he didn't describe it as a victory. cuts are very deep in education and health and human services and prison services. some of the furloughs got put off because of objections. i think this is making the best

of a bad situation. they came up with an earlier plan that they put before the voters. people are so soured to imcompaimku imcompa imcompanybents. they had to come back and vote. state offices will be closed several days a month. no governor is proud of that. the problem is they are so dependent on income taxes in that state, and particularly income taxes fr high income earners that once you had an economic crisis and those revenues fell off the table, the state budget fell off the table too. >> the journal this weekend, "california, be glad you're not here." but the cuts are so deep, as you mentioned, schwarzenegger and

republicans were forced to renegotiate the state contract between state governments and the public. they might lead the way for states around the country to start getting their books in line, under control. you go along with that? >> reporter: well, i think few states have the same kind of dysfunctional political environment as california. so there are other options available to other states. the thing about california, carl, is it's of course the biggest state in the country. but it has rules of legislative procedure which are forced by the way ballot initiatives are put before voters. you need two-thirds of the legislature to pass any budget. that's an extremely high hurdle. that means any group has veto power over what the majority of the legislature wants to do. it's very difficult to act. other states don't quite have that problem. the interesting thing is if they renegotiate the social contract,

they may have to renegotiate later this year. everybody acknowledges if the state economy doesn't turn around, they'll fall short when they get to balancing the books in october. >> that was my takeaway with john. they'll be back six months from now. because the revenues will come in short based on the projections right now. at least california is saying to the other states, this is how you have to do it because you'll be back there again. >> on health care. hear stories about the blue dogs. looking at schwarzenegger's plan and mitch mcconnell. >> reporter: the public option might be dead if the administration decides to continue with the bipartisan process in the finance committee. but if they decide to end that, that it's not going to bear fruit and they want to do a democrats only bill, the public option will be very much alive. can they jam it through in the

house? can they jam it through in the senate? >> do you believe pelosi when she says she has the votes? why is she saying that if it's not true? >> reporter: no, i believe she does have the votes. in the house, majority allows you to get things through. it's not like the senate. the senate tends to be more culturally conservative anyway. nancy pelosi is likely to have the votes to pass some variance of the obama plan, if not before the august recess, shortly afterwards. most of the question is about the senate. >> okay, john. we'll keep an eye on that. clearly not going to happen on the timetable they thought. >> reporter: that's right. >> we'll see what happens in september and later. >> thanks. i got a totally different take. did you read this in the journal about the blue dogs? it's simple math. if those guys were simple against it and go with the

republicans -- >> if you're a republican strategist trying to think about the next cycle, you would like nothing more than pelosi to jam this thing through. you would like nothing more than to be able to really use that as your agenda. >> and capitalize on what happens on the back end of that in 2010. >> absolutely. >> did you have a question for john? >> no. is he gone? >> yeah, i think he is. >> the blue dog clout arises for simple math. they account for 52 seats in the house, enough to add to the republicans. your question was phrased from the viewpoint that you didn't think pelosi had the view points either. >> after reading that story. >> that's what i mean. it wasn't in the op-ed pages of the journal, right? >> i'm sure we'll talk to him again. >> coming up, there is no time for a case of the mondays this morning. we don't have time for it. earnings will soon be hitting.

a preview of the names you need to know next. this is humiliating. stand still so we can get an accurate reading. okay...um...eighteen pounds and a smidge. a smidge? y'know, there's really no need to weigh packages under 70 pounds. with priority mail flat rate boxes from the postal service, if it fits, it ships anywhere in the country for a low flat rate. cool. you know this scale is off by a good 7, 8 pounds.

maybe five. priority mail flat rate boxes only from the postal service. a simpler way to ship.

a look at aetna kicking off earnings season for this weak anyway. not that good compared to some of the numbers we've seen in the past couple of weeks. you got any comments or questions this morning? we'd love to hear from you. squawk@cnbc.com. we will take a quick break and get news outside of business when we come back. tonight, a cnbc special event. meeting of the minds, america's health care debate, the future

of health care. a gathering of the biggest names in the business and government' eastern time. i never thought i would have a heart attack, but i did. you need to talk to your doctor about aspirin. you need to be your own advocate. be sure to talk to your doctor before you begin an aspirin regimen. you take care of your kids, now it's time to take care of yourself.

the gold delta skymiles credit card... from american express... it's the official card... of the world's largest airline. and it's the only credit card... that earns miles on delta. miles that take you... to more places than ever before. over 350 destinations worldwide. so switch today. get up to 25,000 bonus miles--

good for a free flight. call now to apply. there's no annual fee for the first year... and you can redeem... with no blackout dates or seat restrictions. these are just a few of the benefits... of carrying the official card of delta air lines. switch now and you can earn miles... on delta with your purchases: groceries, gas, entertainment, and more. get up to 25,000 bonus miles... with the gold delta skymiles credit card. call 1-800-skymiles to apply. this is the official card... of the world's largest airline. "what do you mean homeowners insurance doesn't cover floods?" "a few inches of water caused all this?" "but i don't even live near the water." what you don't know about flood insurance may shock you. including the fact that a preferred risk policy

starts as low as $119 a year. for an agent, call the number on your screen. ♪ it's a beautifully morning

time for a check on the news outside the world of business. here with us, alex witt again. you work all day long and you're here with us. >> just to be here with you. a good morning to you, joe. you know where we're starting? sarah palin. the title now reads former governor of alaska. this weekend palin stepped down and her lieutenant governor took over the top office. speaking in fairbanks, she would not reveal any future plans but she found time to rail against the media and big government. french president nicolas sarkozy has been discharged from the hospital after collapsing while jogging near the palace yesterday. medical tests showed no signs of problems. they blame the heat and say he was overworked. a colorado resident is lucky to be alive after a base jump that nearly killed him. the 28-year-old has jumped over 200 times but in last week's attempt he waited too long to open his parachute. just seconds larts he slammed into the ground but he survived

without any bones, broken. >> that's actually part of the audio from -- he was miked and wired and you can hear him -- >> yeah. wow. >> do we still have alex? >> yeah? >> we lost her. too bad. i think gary -- >> i haven't seen her in a long time. we actually did scuba diving together in maui, just by coincidence. >> do tell. >> she's an excellent diver. >> very cool. when we come back, we'll get top stories. we are waiting for numbers from verizon, honeywell and corning. ben bernanke holding a town hall in st. louis. the fed chairman tried to talk to jane and john q. public. our own steve liesman will tell us how that came about.

earning central gets the call. verizon on the line with quarterly result. honeywell and corning on deck. "squawk" has the instant reaction. >> what are they doing here? >> they're selling, mortimer. >> that's ridiculous. >> trading places. steve liesman heads to the trading floor. >> human sacrifice, dogs and cats, living together, mass hysteria. >> either way the sparking will fly. "squawk box" starts right now. ;

good monday morning. welcome back to "squawk box" here on cnbc. i'm carl quintanilla along with joe kernen. becky is off but our guest host with us for the next two hours. thank you for coming in early. we're getting a lot of wood shop this morning. europe's been green for most of the morning as we continue or try to continue the rally that's brought the dow up 12% in just a couple of weeks. here are some of the stories we're following. the fed chairman says last year's big bailouts made him want to, quote, hold his nose but he told a kansas city town hall meeting they were necessary to avoid a financial system collapse. yahoo! and microsoft reportedly close to a search deal. the journal says yahoo!'s board will meet thursday to talk about a potential talks. yahoo! asked for upfront

payment. aetna out with earnings following short with corning, honeywell, verizon still to come. >> corning's here. i don't know whether someone is messing us up. they're saying nongap but i don't think that's right. excluding items the company earned 39 cents which is 7 cents ahead of expectations on revenue of 1.4. that's all above. $1.4 billion is above the $1.36 estimate. and maybe we got a bit of a look into what the company might do when 3m that reported and caused them to go up $3 or $4 and it was electronic components that p 3m made, the optical film they make for lcd flat-screen tvs. >> and the respiratory masks. >> and the masks. we know lcds are a big part of corning's business. we'll look more closely at corning when we get a chance. so far i can't tell bid/ask on

where it's going to be. >> honeywell, 60 cents. looks like it meets $2.85 for the year, street's at 2.82. 2q sales of 6.7 billion. they say continued tough economic conditions. >> $7.6 billion is slightly below the $7.726 the street was looking for and that goes in with what the street is looking for on upbeat earnings as revenues are below. it comes with cost cuts. $2.85, that's a little above the $2.82 for the year. economic conditions remain challenging. automation and control down 17%. aerospace down 17%. company anticipates it will continue to operate in a tough economy. >> yeah. let's hone in on those numbers. with us howard rubell, manager

of aerospace at jeffreys. good morning. >> good morning. >> on the cyclicals when they comment, they say, look, we don't have any hope of anything happening this year or in 2010 or some language like caterpillar where they'll say, we're seeing some signs that are halfway encouraging. what about honeywell's business makes it more the former than the later? >> the case of we've probably seen the worst so you'll see grudging grument be ining impro will be improvement. >> where is that going to come from? what sort of macro economic dynamics will help them along? >> in an odd sort of way currency does make a little difference. dollar has the toughest comps in the first half of -- or the second half in q2 and q3 and then improves. emerging markets are continued to show resiliency. they didn't have the same howing problems we brought on

ourselves. >> they say the new outlook for the year here, this $2.85, is at the low end of their previously stated range. do you recall what that was? >> no, but di do have $2.85 andi think it was like $2.90 or $3 was the high end. it's not a surprise that -- you gentlemen said it best when you said everybody's missing revenues but coming close on the bottom line. it's cost takeout plus very good management of cash flow. >> aerospace sales down 17%. everybody knows about the trajectory of new commercial real estate development. at least in this country. did those things need to turn around before the stock turns around? >> no, the stock will turn beforehand because at some point you'll see, again, people start moving back into buildings and they'll need to refurbish things. you know, honeywell does a lot of products that actually wear out. at some point auto does turn. they have modest auto business.

last, honeywell is highly diversified with lots of early cycle businesses. so i suspect that we are seeing probably the worst quarter we're going to see. i mean, the fact the transportation was profitable in the quarter is really stand out. we had a loss there, was our estimate. so, you know, it's not all bad when we first take a quick look at it. >> you've got a buy on the stock still. you think $40 over a period of time, right? >> yes. >> howard, thanks for the insight. good to talk to you. >> thank you. take a look at the numbers from corning. joining us on the line is mark, telecom equity research analyst with rbc capital markets. thanks for joining us. why do they give a nongap that includes items. is that a mistake i saw on the wires? >> i think there were several things we will have to normalize in terms of the income state but generally nongap. certain items quarter to quarter will change but we need to strip

those out. >> it's above expectations. if you report simple nongap it was way below. >> i think the number, and we're going through it now, will be closer -- i think it will still slightly be higher. i think the surprise there will be the better margins. and i think a lot of that is just better volumes during the quarter. >> all right. do we see the effect of these -- these lcd sales, that those have picked up even in a down economy? >> i think if we look at the first few quarters of the year, there was a big shock to the system. that's dissipating for corning. we do see some more normal trends for the back half of 2009. i think the retail sales have somewhat been steady throughout the -- throughout the choppy first half. so i think it should be better for the second half. >> yeah, we are seeing it indicated higher on these numbers. so i guess we'll use that -- the number that was above. do you like this stock where it is?

it's up from 7. what's your rating? >> i think the big question for us is where do we go from here. we had two quarters of inventory replenishment. we had major stimulus in areas such as china. i think the consider is on order for it or do we have to consider lcd penetration? also, the diminishing return on large-screen tvs. we're neutral at the moment. >> all right. thanks, mark. appreciate it. >> thank you. coming up in about 30 minutx we'll talk to the cfo of corning. he'll be our guest. another first on cnbc interview. the federal reserve chairman ben bernanke traveled to the u.s. heartland to defend the central bank's actions and reaffirm his assessment of a improving but vulnerable economy. steve liesman joins us with more from the ncy. morning, steve. >> reporter: yeah, ben bernanke has taken a precedented step of taking his case directly to the people in a town hall meeting.

i don't think we've ever had that with a fed chairman. he's out there taking questions from bankers and regular folks on the street. even students. he said the outlook for the economy is really just 1% growth over the next six months. that unemployment should remain high, maybe peaking over 10%. that would happen early next year before getting back on track. and he defended the fed's actions, suggesting that if the fed had not stepped into the banking system last fall there could have been a depression. >> i was not going to be the federal reserve chairman who presided over the second great depression. for that reason, i had to hold my nose and stop those firms from failing. i am as disgusted about it as you are. i think it's absolutely critical as we go guard that we put in a new system that will make sure that when a firm does not succeed in the marketplace, that it fails, that it's absolutely critical and i support that 100%. >> reporter: that video, by the way, comes from the news hour's website. they're going to air the full

town hall over the next three nights on the newshour with jim lehr. bernanke defending the fed's independence and opposing as he did last week a bill in congress with a lot of support that would allow the general accounting office to audit the fed's monetary policy statement. the fed chairman saying, i don't think the american people want congress making monetary policy. finally, it seemed as if he softened his opposition a bit to the consumer finance agency saying, hey, the fed is here if this agency idea doesn't work out but he seemed to step back from his 100% opposition. there were some protesters out there. we have seen this at a few places increasingly where the fed chairman talks. they're out there with signs saying, show us the money and everything from health care to obama care and the opposition to the fed's bailout money that's injected into the system. one other thing, guys. the fed chairman was asked about

investing money. he did advise people to diversify their portfolios. joe, carl? >> all right. what do you think of that? thanks, steve. bring in gary. >> i wanted to ask steve -- >> go ahead. >> are you still with us? >> reporter: i'm here. >> the bernanke comment about holding your nose is very clear. it's clear what the agenda was and what he was trying to say. as far as talking about the unemployment rate and basically saying we're not going to see improvements here, was it a case of, he thinks things will get worse? he knows things will get worse? or was he trying to set it up for later upside surprises this year? >> reporter: i think there's two pieces to that. i don't know that he was setting it up for upside surprise. i think he's trying to say, unemployment is going to remain high, therefore, inflation is going to remain high, and therefore -- sorry, low, and therefore we can keep interest rates low for a while. that's part of his projecting out the fed's policy. the other part about that, gary,

i think, is the fed sort of saying, look, things are not going to get better right away. don't loose patience and don't lose heart. we know these things are going to happen because you need a certain growth level to bring things don't. doesn't mean the fed policies are wrong and d't mean we're on the wrong track here. >> it's interesting. when you think back to greenspan, i mean, he's basically almost trying to get re-elected in the public forum right now. it's just so different than what we've been used to with the federal reserve bank. >> reporter: yeah. i think this is going to cut two ways. on the one hand you'll definitely get criticism here that he's trying to angle for, reappointed here. on the other hand, you have to at least see that bernanke came in vowing to be more transparent before this whole crisis blew up. he gave me an interview back when he was a fed governor. that was unusual back in '03. he was very plain-spoken back then. he's done a lot of stuff to be more transparent. yeah, on the one hand, the

reappointment thing, that's fair. you can also conceive he's been a more transparent, anti-greenspanian chairman. >> afraid to ask you this. i don't know if you did your homework this week, steve. did you see the -- speaking of whether he deserves another term. rubini singing his praises and anna schwartz, and she says absolutely not. i didn't know rubini, i don't know what to expect from him at this point. >> well, he's done a fantastic job. >> who's doing that? that's carl. excellent. >> no, actually, we have -- no, that was carl. >> i'm sorry. >> but by writing this, he's conceding it's not going to be the great depression. i thought it was go going to be the great depression according to rubini. and anna is just a complete

purist in terms of monetary policy, is that right? >> reporter: right. bernanke relies on the work of schwartz and friedman they did in the early '60s that basically told us the fed was too restrictive back then. yesterday in the town hall he mentioned that. he said, what we found out is that in the great depression the fed was too restrictive and we needed to be easy. that's one thing that gives him confidence about the u.s. economy. so it's a little ironic that the criticism comes from schwartz, where bernanke is very much doing what he thought schwartz and friedman told him to do. >> steve, i mean, having covered the fed for as long as you have, from a communication standpoint, one could understand their decision to have this town hall because of the fire the fed is under. but we're also in an environment where people are worried about the fed, political sized and what's more political than holding a town hall? was it the right move? >> reporter: i have argued on and off the air that the fed needs to be more transparent and bernanke need to do just this

thing. i come to this with sort of a subjective point of view, especially now that the fed is so much more in the public domain, using taxpayer money and doing these things. i think there is an imperative on bernanke to do just what he did. but at the same time, i will concede this creates a certain political aspect to the federal reserve that is potentially dangerous here. and they need to watch out for. >> you can't imagine volcker ever doing this, i assume. >> reporter: no, but volcker draws a certain power from the way he was very, you know, short-spoken and didn't say very much. greenspan drew power from, unclear. whereas bernanke wants to draw his power from, very clear. here's what we're doing, not doing, tell me where i'm wrong. that's very much the bernanke attitude. >> taking that type of approach, he's setting himself up for when he needs to start to tighten. he better be very clear and very direct to the markets or you're going to see some very big -- >> reporter: i want to add one more thing. bernanke would not be doing this if he thought this was going to

lead to worse outcomes for monetary policy. there are studies that show greater transparency leads to greater outcomes. if bernanke had studies that showed him more offiscation, he would do that, too. >> if i was trading bonds and i was concerned with interest rates and i saw this town hall, there's no way he's coming back to tighten -- there's just no way in the next six months -- >> reporter: that's right. >> -- he's going back on air and saying, we're changing course. >> reporter: then he has to be clear when he changes course. >> you know who's joining us on the set? >> reporter: i heard about that. i'm down here on the trading floor. >> santelli's going to be here. once again, you high-tailed it out of here. >> reporter: no, no. i thought all the answers were down here on the trading floor. i thought that's where all the truth was. i'm anchoring. management made a mistake. they made me anchor "squawk on the street" from 9:00 to 11:00. you may want to tune in. >> who made a mistake? >> reporter: management.

it's summertime, you know -- >> steve, i'm going to watch just to see you. >> reporter: just to laugh. go ahead. >> are you with erin or r.j.? >> reporter: i'm with erin. >> she's back after a well-deserved vacation last week. we'll be checking in later with steve liesman in the program. you can watch him, please do, at 9:00. >> they'll get good numbers today. >> don't watch any other channels at 9:00. please watch us. anyway, what's going on? >> let's look at futures. we have aetna out, which wasn't so great. honeywell was in line and corning was, again -- joseph? >> yeah, corning is above. initially was trading higher. it's indicated a little lighter. we'll talk to the cfo, first on cnbc interview. now down about 15, 20 cents. it's weird. nongap number was low, you exclude the numbers it was above. earning revenue was above. when we come back, the earnings parade continues this

week. we've already heard from honeywell and corning. next up, verizon. we'll get the numbers and analysis on that. steve telling us about the chairman's town hall last night. later we'll talk to a man who knows the bank game very well, as joe mentioned, former fed governor randy kroszner is our special guest. we'll talk to him at 8:40 eastern time.  time now for today's aflac trivia question. what was the first use of tin foil when reynolds aluminum went into business in 1919 as the u.s. foil company? the answer when cnbc "squawk box" continues. you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh

aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac!

now the answer to today's aflac trivia question. what was the first use of tin foil when reynolds aluminum went into business in 1919 as the u.s. foil company? the answer, cigarette packaging. welcome back. quick look at what's happening on the economic front this morning. at 10:00 eastern, look for new home sales. s&p, case schiller, consumer confidence, wednesday, durable goods, the beige book, mortgage applications, thursday, jobless claims, friday, advance gdp,

along with disney, verizon and chevron. they're sort of winding down a little bit. just as many as last week but not as many as high-profile. >> do you believe we go from the high-quality tech names in the early part of the season to the low-quality retail names later on in the season? >> i believe we will do a lot of retailers in august, but the earnings -- it's not necessary to have a special earning central hit every 15 minutes. >> for retail? >> no, no, no, no, no, no. we don't do -- i mean, there are companies that report every q month. that does not make earning season. >> friday, you're done. >> friday is earning season. it's over on friday. >> all right. we're awaiting results from verizon. expected any minute. we'll get the analysis on that as soon as they hit. don't forget tonight, tune in for a special on cnbc "meeting of the minds: the future of health care," the gathering of biggest names in health care to propose solutions to the country's biggest crisis at 9:00 p.m. eastern only on cnbc. at 155 miles per hour, andy roddick

has the fastest serve in the history of professional tennis. so i've come to this court to challenge his speed. ...on the internet. i'll be using the 3g at&t laptopconnect card. he won't so i can book travel plans faster, check my account balances faster. all on the go. i'm bill kurtis and i'm faster than andy roddick. (announcer) "switch to the nations fastest 3g network" "and get the at&t laptopconnect card for free".

dow's had a heck of a rally over the last couple of weeks, and the past four months. markets wants to continue that trend this morning as we've gotten results out of honeywell this morning that were in line.

results out of corning that were a little better than expected. the occasional miss as with aetna earlier today. and i think, joe, we're looking for verizon to hit any moment. i'm not sure we'll get it, but gary, overall, are you impressed with the season? i wouldn't think so, judging from your comment about the revenue and the short life that cost-cutting has. >> the overall theme has been we've achieved our projected earnings or exceeded our projected earnings because we were able to rein in spending, whether that's marketing, building up inventory or hiring people. that's not how you create long-term growth -- >> 53 cents on verizon, a penny ahead of expectations. revenue rose 11.3% to $26.9 billion. that happens to be the right in line, actually above expectations to 26.849, 27.7% increase in total revenues. let me just see what the stock has indicated. looks higher on that number with

a 5.8%. at&t's yield, gary, and the kind that both of these companies are in. i mean, why not? 6% yield. why not park some money in these things? >> i agree. what both companies seem to be doing very well is they are transi guessing the business away from the land lines and growing the wireless faster than they're losing land lines. i think when you think about how these businesses are going to be ten years from now, will they have made that transition smoothly and maintained their customer base? because it's very hard to think about having land line service as a residential -- as a residential customer. >> you mean it's hard to -- for customers to envision not having a land line phone at heem? >> my children will not have land line phones in their home. they don't -- they use the wireless devices as though that's their only source of communication. to actually pick up a phone on a land line, i think, ten years

out, it just won't be part of the way -- just like we used to dial the phone, you know, then you went to the touch tone and the hand-held, that transition has to be handled to maintain the customer base. that's what it's all about. that's the challenge at both verizon and at&t. >> they acquired alltel. so the 11.3% increase includes revenues from alltel on a procepro forma basis. and actually, what was the other number i saw that was even more incredible? yeah. 27.7% increase in total revenues. you don't do 27% without an acquisition. but, yeah, we do see $31.80 bid on verizon. i'm looking to see whether there's an outlook. they're talking about -- 300,000

net new tv customers. you saw some other metrics. >> i see the 2q wireless retail ad up 26%. >> yeah, retail gross ad up 26%. wireless consumer, yeah, 13.7%. >> did you see gary just dive into the data? >> checking out the data on becky's machine. if you're going to sit there, you have to able to do it. >> yeah. >> i'm looking for an outlook. i don't see an outlook. for the year at this point they're looking for $2.53, which -- >> wireless pro formaadd down 6%. that's churn. >> nice. >> did you see verizon wireless is now the largest wireless company in the u.s. in terps of company and revenue? and their churn rate is better than at&t's, even though at&t had a pretty good quarter with the iphone exclusivity. >> wire line customers are -- now, they are quoting -- the

wires are quoting a $33.68 trade, which would be up 7%. i don't have that on my bid/ask right now but it looks like it's going to trade higher on the numbers we're seeing. >> we'll keep an eye on verizon. take a look at how marks market have fared this morning. europe has been pretty good. nikkei has had its longest winning streak in quite some time but the futures have lost a little ground since we started the program about an hour and a half ago. recap. corning did report quarter profit of 39 cents. revenues were slightly above consensus as well. former dow component honeywell, 60 cent a share for the second quarter, matched estimate. revenue slightly short of expectation. aetna under pressure after the insurer's per share profit came in well below con sen us. aetna cut it's full year forecast by a substantial amount because of those higher than expected medical costs. when we come back, your

tools of the trade. oil, gold, currencies. we've got it all for you as you come back from the long weekend and get set for a full week of trading. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that's when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i'll talk with somebody tdd#: 1-800-345-2550 who knows what i'm trying to do. tdd#: 1-800-345-2550 (announcer) switch to schwab today. tdd#: 1-800-345-2550 you'll get the tools, the technology tdd#: 1-800-345-2550 and the support to trade your way.

tdd#: 1-800-345-2550 go to schwab.com/trader tdd#: 1-800-345-2550 or call 1-800-540-7304 tdd#: 1-800-345-2550 right now. tdd#: 1-800-345-2550 but opportunities can vanish like that... tdd#: 1-800-345-2550 ...so most days, i'm right there tdd#: 1-800-345-2550 when the market opens.

get to our trading block. a member of the joe kernen appreciation page on facebook, is that the standard intro now for boris? >> you didn't resign, did you? >> no, no. >> tell your friend. i think we're up to -- >> 110 members. >> tens of dozens. >> it was five two weeks ago. >> i'm always a pioneer. >> you are. >> also peter butel is here. we have to join here. >> light-colored suit. love those. john, let's start with you. just give us the tone for the week, in your view. is it going to be -- continued to be set by earnings or are these options going to continue to play a role? >> i think you'll see a little bit of both. i would suggest that this late july and august time frame will be a little different than the last couple of years.

as you recall in august of 2007 fed chairman and company cut the discount rate as credit cards started to get going in august of 2008 the market was preparing for the lehman brothers collapse. august 2009 i think things will stay relatively quiet. there are a focus on earnings. most earnings have met or beaten expectations. there's been very little expectation on about the forward-looking market. in the bond market, we'll continue to see the tug of war between weaker economic data, i.e., case schiller price index will show a slowing decline. gdp on friday could suggest a slowing pace of negative gdp, but negative nonetheless. and treasury supply, which will be the big story. i think the real story to phenomenal this week is to see how participation is in these treasury auctions. specifically, what percentage of these bonds is taken down by the banking sector that continues to reliquefy itself following the

challenging last two years. >> do you expect any disappointment on that front, john? >> i think you'll see a concession trade. you've seen a little in the overnight. bonds have kind of -- bond yields rose slightly on average over the last week or two. i think we'll be -- with the inflation outlook remaining rather benign and with funding very cheap, carl, we expect the treasury supply and treasury auctions to go very well. >> boris, dollars just shy of the december low and german consumer confidence, a little better than expected. is the trajectory still down? >> i am really cautious on the long euro trade. mostly because the cftc came out on friday and showed that long europe positions are at a 52-week high. that's not always a very good turn signal but a flashing yellow light signaling positioning is skewed one way. i think specs are long euro at this point and any disappointment could create a downdraft. we're coming up, a resistance

level. 165 on the pound, same thing. so i think we're coming up, bumping our head against some pretty heavy resistance levels. i'm very cautious. i would be long with the short stop at this point. i wouldn'ting fading but if i was long i would be tidying up my -- >> did you hear anything from bernanke that shook your resolve in any way? do you think china dialogue over the next couple of days will bear any fruit? >> has it borne fruit for the last five years they've had it? >> no, no. >> i think the safe bet is no. i think the most interesting thing with china, as john was talking about the treasury auctions. so far the treasury auctions have been good. as long as the bid ratio is 2.5 or better i think that will be positive for the dollar because they'll see it as a vote of confidence in the dollar asset. >> on oil and gas, peter, gas down 7 cents the last couple of weeks but crude is eight out of 9 sessions. tell us what's going on. >> the gas, i think you're talking about retail because gasoline prices are up 31 cents

over the last two weeks. so that's about to hit at the retail. and that's not going to make a lot of people very happy. you know, we keep having these vs in the middle of the market. we had a v-bottom two weeks ago. no logical reason for it. it's just basically people drawing a connection between higher equities and an assumption that means the economy will get stronger and lead to highwayer oil demand. makes sense but we haven't seen it yet. a lot of people are discounting future demand, when there's no reason necessarily to discount. it's not here yet. haven't seen any sign of it this year. a lot of this is index fund buying etfs. >> john, good morning. a lot of people think august is going to be quiet. and you sort of similarly echo that sentiment. what could happen? what's possible that could actually shake that thesis right now? >> well, i think there's been a real lack of focus, as i suggested earlier, on forward

earnings and the outlook by corporate chieftans. what would reintroduce turmoil into the market would be if the economic data started to roll over again. we've seen some small signs recently with some employment numbers for the last month or so. but it appears as if we get into the middle of august, the last part of august and it looks like the economy may need a second stimulus package, then we could see a repricing by equities. equities globally have had quite a run. some suggest the chinese markets are up 10% year to date. we've had quite a run here. the risk probably becomes that the equity markets have to reprice to lower levels in anticipation that economic growth is going to be between zero and 1, 1.5% for the next year, year and a half. that probability exists. but the market probably doesn't focus on it this week. >> one more shout out to peter. we are going to get a bunch of big names. bp, conoco, exxonmobil.

in general, what are you looking for? >> well, they're not going to see the same kind of profits because the oil in the ground hasn't been doing that well. also the refining side of it has not been doing that well. they'll still make solid profits, no doubt about that. it's not going to be -- near anything like what we saw a year ago. >> all right, guys. good to see all of you. boris, peter, john, have a good week. we'll talk to you soon. >> verizon was out a couple seconds ago. 63 cents, a penny ahead of expectations. revenue growth was 11%, including alltel. joining us on the phone, craig moffett, sanford c. bernstein, satellite and cable analyst. what's the most important number? is this a pretty good performance, would you say? >> the most important number we were looking for we haven't been able to find yet and that is remember verizon prerecorded their subscriber gain on the wireless side last week with

vodafone earnings. we were hoping to find the difference between postpaid and prepaid. we can't find it. the reason that's important is because the postpaid market has been slowing down very rapidly. that's the real predictor of future growth for these companies. it increasingly looks like the postpaid market growth is concentrated in one device. that's the iphone for at&t.p >> okay. that is interesting. only an analyst, i think, could have brought us that. let me ask you a couple of other things, though. the company is crowing about the fios for internet and tv. these are pretty good numbers. 303 on -- >> and 300 for video. those are very good numbers, particularly coming in the second quarter because the second quarter is seasonally weak. the whole video market is suffering right now from the fact that occupied housing in

the u.s. is actually contracting during the recession. there's just fewer homes to serve with video. you've got more kids moving back in with their parents than you have new house holds, created by population growth during the recession. it's obviously tough to grow a business when the number of homes to serve is contracting. >> people also, craig, you know, you know it's a 6% yielder and so people watch cash. the company pointing out cash flow increased over $14 billion, 12% higher than last year. free cash flow of $6 billion was also up even in a recession. i mean, do you care about that? >> sure, that's important. particularly because verizon's dividend is a little more complicated than it first appears. remember vodaphone owns 45% of the wireless business. they're getting there essentially the same way that at&t got there last week. which is they're spending much less capital. at&t indicated they will be

spending much more aggressively in the second half, so they expect still capital spending to come in in line. it's less clear with verizon. either company is spending capital at anything like the rate they were last year. >> 6.5% yield on telephone, 5.9 or whatever on -- 5.8 on verizon. do you have a buy on both of these just based on a safe place to earn 6%? >> no, actually, i don't. i have a market perform on at&t. and an underperform on verizon. you know, it's -- i have a lot of respect for verizon. they are a terrific network operator but it's a tough business to be in right now. the issues you're seeing are not cyclical, they're secular. the organic growth rate of verizon today is down to about 1.9%. at&t it's down to negative 0.6%. some of that is coming from a cyclical contraction in enterprise that is serving large businesses. but the wire line business overall is contracting very rapidly.

you've seen the access line decline. and remember that although most people focus on the wire line -- or the wireless business, that when you buy a share of verizon, because vodaphone owns 45% of the wireless business, what you're getting is a company that is still more than half wire line. by cost, it's about 65% wire line, and structurely that's a business that faces enormous challenges. by the way, i just got the numbers for the prepaid/postpaid mix. it actually does look very positive. >> okay, good. >> the postpaid mix is very, very strong. >> great. >> that is probably, as i said, the most important thing to learn today. it does look like they are holding their own, despite the fact that they don't have the iphone. >> great. fast work. thanks. >> thank you much. >> thank you. >> bye now. when we come back this morning, are you watching us on a nice, new lcd flat-panel television? if so, our next guest thanks

you. the cfo of corning when we come back. tomorrow on "squawk box," america's mayor rudy giuliani. he's talking about everything, from wall street and washington to baseball in the bronx. plus, pennsylvania governor ed rendell and steve forbes. that's all tomorrow right here on "squawk box." natural gas is a cleaner burning fuel, yet a lot of natural gas has impurities like co2 in it. controlled freeze zone is a new technology... being developed by exxonmobil... to remove the co2 from the natural gas... so we can safely store it... where it won't get into the atmosphere. exxonmobil is spending more than 100 million dollars... to build a plant that will demonstrate this process. i'm very optimistic about it... because this technology could be used... to reduce greenhouse gas emissions significantly. ♪

corning shares have been rallying recently, up over 75% year to date. the company releasing quarter two earnings earlier this morning. joining us is jim flaws, cfo of corning. it's good to see you. before we talk about your results, just talk about some things i'm seek on the wires. you feel your business is definitely bottomed. while it's tough, you see some bright spots for the future. >> good morning, joe. yes, we do. actually, we had sequential sales increase in every one of our business units this quarter. so it's too early to declare that the recession's over, but i think we clearly think we've hit bottom and hopefully some bright signs in some of our businesses.

>> there was no -- i mean, sequential is one thing, but with a business like corning, i think you saw a lot of -- you know, there is some seasonality to your business. year over year, when do you expect to see some increases there? >> that's aways ahead of us in some of our businesses. we're definitely seeing year over year volume increases in the back half of the year in the lcd business. so we'll climb our way out. beginning of recovery starts with sequential, up. we're pleased by that. >> you've got a positive outlook for the holiday season. this is lcds? >> that's right. lcd televisions. we've been seeing television sales around the world basically average up 35% for units for the first half of the year. very strong in every country. really strong in china. and we think they'll be very strong in the back half of the year again. television is very seasonally back-half loaded. the supply chain is seeing good

results, rebuilding inventory, getting ready for the holiday season. >> you've restored some of the previously idle production capacity. you don't really say how much. do you know offhand? >> we're operating our wholly-owned business in lcd about 75%. we're operating our korean lcd business close to 100%. >> and how low did it get on the one that was at 75? were you at 50 or -- >> we were well below 50 in the january time frame. >> wow. how much can you continue to ramp up, jim, without hiring new employees? >> we are bringing back our production employees and have been in a number of our businesses as we've gone through the course of this year. so we definitely are bringing back the production work force. we're not adding to our salaried head count at all at this point in time. >> you did boost '09, the forecast for glass market volume to 15%. what was the old forecast?

>> originally we came into the year saying it would be flat, that i.t. would be down, wiping out all of television's gain. we now see i.t. is not down as much as we thought and clearly television much stronger. so we came in saying flat. we're now saying the worldwide glass market for the year will be up 15%. >> jim, i'm just trying to figure out -- i'm a little c confounded. you've gone from a low from 7 back to 17 but the stock is down 3%, 4 ar%, 5%.ao could you point your finger to anything that an analyst or someone that follows it closely might be pointing to for why the stock might be a little weak this morning? >> our stock often runs up before announcements and then drops after. there really is no weakness in what we're talking about in our results. we're talk, about quarter three volumes and lcd, very strong. we'll be able to get flat pricing. i know price decreases to our

customer in q3. we're looking for improvement in our dow corning. so no weakness. >> fair enough. we appreciate your time. >> thanks. still ahead, weekend at bernan bernanke's -- >> i like that. that's really good. >> -- busting out of the ivory tower, holding court in middle america last night. what mr. and mrs. smith taught the chairman in kansas city with we come back.

it's the chevy open house. and now, with the cash for clunkers program, a great deal gets even better. let us recycle your older vehicle, and you could qualify for an additional $3500 or $4500 cash back... on top of all other offers.. on a new, more fuel efficient chevy. your chevy dealer has more eligible models to choose from - more than ford, toyota, or honda. so save gas... and money... now during the chevy open house.

♪ live and let die ♪ >> even your beloved beatles -- >> that was guns n' roses. john, i think together, john and paul had something that -- with george -- anyway, you thought it was great. >> great show, great show. >> and you requested the animal orchestra. >> i happen to like it. >> he didn't request anything. you said, do you like the animal orchestra? he said, what's that. >> no, i didn't. ♪

>> the more you complain, the more -- >> you're right. >> -- you're going to get it. let's take a look at stocks to watch. aetna reporting second quarter earnings per share of 68 cents. look at the stock. the guidance was 76 to 80 cents and reuters was 78 cents so a ten-cent miss for the year. the company had been at bz 3.55 to $2.70. these are higher costs, higher commercial medical costs. verizon reporting second quarter earnings per share, 63 cents versus reuters of 63. the company reports revenue of $26.86 billion. that was pretty good as well. and then we just had an analyst on. i heard, actually, from verizon that did point out that most of those wireless -- they were all postpay. mr. moffett did say that. but in the past they tend to

feel mr. moffett has kind of sided with cable more often than not and sometimes has been proven wrong so they took a little issue with that, the most important metric we got from the analysts. i think it's fair to let verizon respond to the analyst. >> good to have that back and forth. >> it is. more arguing and more intellectual combat. >> heat. when we come back, the market rallies, the talk of the town this weekend, from the beach to the golf course, we'll ask wall street's biggest name what's next. and former fed governor randy kroszner. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk,

you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.

whento compliment theirflac benefits package aflac! it made a big splash with the employees yeaaaahhhh! find out more at aflac!... ...forbusiness.com (laughter) finally, good news for people with type 2 diabetes or at risk for diabetes. introducing new nutrisystem d, the clinically tested program for losing weight and reducing blood sugar. hi i'm mike, and i lost 100 pounds on nutrisystem d when i was first diagnosed with diabetes, that first step was more like a giant leap. till i discovered nutrisystem d. in a clinical study people on nutrisystem d lost 16 times more weight and reduced their blood sugar 5 times more than those on a hospital-directed plan. plus a1c was reduced .9%. choose from over 140 menu options, there is no counting carbs, calories or points. i lost 100 lbs. and lowered my blood sugar level. nutrisystem d changed my life. mike is one of many who have lost weight and controlled their diabetes with new nutrisystem d.

backed by 35 years of research and low glycemic index science nutrisystem d works. satisfaction guaranteed or your money back! new! nutrisystem d. lose weight. live better. call or click today. the summer rally, will it stay hot or is there a cold front coming for the bulls? "squawk" has the market forecast. >> yes, clear! treating america's health care crisis. the debate rages on. but which stocks could be winners? a "squawk" exclusive. former fed governor randy

kroszner. he just left the central bank and now talking to "squawk." find out what the former fed insider has to say about fixing the economy and saving the financial system. "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen. carl was here. becky quick is not here, but our guest host gary ka men ski is here, former managing director of neuberger. he's a young guy so he probably didn't go into the rest room. we'll see. there are the future. up 15 now. we've had a couple of weeks, two unbelievable weeks in the averages. it looks like at least on the opening so far the result that are in this morning, whether it's from dow component verizon or others, have indicated higher again today. and basically because of

earnings. if carl gets back, we'll actually talk to him about earnings at some point. carl? oh, you are -- there you are. i'm sorry. >> that's okay. >> so you did go over there? >> i go to earning central. >> it's yours tomorrow after the punishment i just took. we have movers in earnings central, joe. called lower this hour, the company had too few earnings of 68 cents. that was notably below the company's goid answer which ranged from 76 to 80. analysts were at 78 cents. aetna cutting full-year guidance. all those talks about rising medical loss ratios. honeywell 2q were in line to about $2.85. analysts were at $2.83. company's full year revenue slightly below its own previous range and the street's.

verizon's q2 earnings a penny ahead, revenue was in loin. their churn rate still the lowest in the industry. and we will finish with corning, the company's eps and revenue did beat. corning says resurgent demand for lcd glass, allowing it to restore much of its previous idle production capacity. we just talked to the cfo in the last few minutes. at one point their production on some lines was below 50%, now getting back to 75% and 100% at its korean operations. let's switch from earnings to the economy. steve liesman's at the nyse where he'll be anchoring later this morning on fed speak from ben bernanke on what i'm guessing is unprecedented, this town hall he gave over the weekend. >> reporter: we've never seen this, the fed chairman taking his case directly to the people, defending the fed's action during the crisis, trying to maintain the fetd's independence and giving an economic outlook. we're getting some of the video off of the web here.

here's a still photo but we were able to take some ved notice from "newshour"'s web side. he condu he kuked the interview. he called for unemployment to peak above 10%. >> right now we're seeing growth in the second half of the year. our best guess, it's only a guess, is growth in the second half of the year will be about 1% on an annual basis. so that's not enough to bring down the unemployment rate. so our projections, the federal reserve -- the members of the federal marketing committee, can which is the committee that sets monetary forecasts, and our projection suggests that the unemployment rate will probably keep rising a bit above 10%, it will peak early in 2010. >> reporter: and he also says along with that low -- with that high unemployment will come low inflation. he defended the administration's stimulus package saying you're going to get a quarter spent

this year but it's a good thing that about half is spent next year because unemployment will still be high. bernanke also said that without fed intervention, there could have been another great depression. >> i was not going to be the federal reserve chairman who presided over the second great depression. for that reason i had to hold my nose and stop those firms from failing. i am as disgusted about it as you are. i think it's absolutely critical as we go forward that we put in a new system that will make sure that when a firm does not succeed in the marketplace, that it fails. that is absolutely critical and i support that 100%. >> reporter: finally, the fed chairman opposed, as he did last week in congressional testify, a bill in congress that would allow the gaes to run the fed. should the fed chairman be out doing this publicly? is it a political campaign for -- to keep his job? that's something we'll debated all day long and debated in markets.

guys? >> that's interesting. you asked him to come out and be more transparent. does that mean, more political? isn't this kind of the same thing, steve? >> reporter: i think you're right about that, joe. one is going to go along with the other. you know, as i said before, he's long been a proponent of transparency, long before the crisis, long before his job was up for renewal. he's done a lot of stuff here, including making more fed forecasting available, including publishing more internal fed documents that were never available before. also in terms of going out there and talking more plain spokenly to markets in general. so is that political? is that not? i think you're right, joe, to put it together. there's no way to speak in public without it, essentially political. >> we have to go. i'm just wondering. the obama administration won't even give us a wink, a nod, any body language. we have no idea at this point -- it seems as if they want to keep that possibility of replacing bernanke open until he actually

does it. >> reporter: i think that's right, joe. >> why? >> reporter: it was this idea that came out earlier that larry summers would replace him but i think bernanke has done a decent job, both of plain explaining himself, and there are policies -- the policies generally have brought us back from the brink. had there not been results, it would be a different story. i think obama has an interest in keeping his options open until he has to. there's no particular scare right now in the market -- to the market. if it began to get scared, it would be a different story. >> i wonder what the advantage -- i guess if you don't need to, why do it? anything he would say, any type of positive comment it may look like you're going to reappoint would be taken to mean that you are. >> reporter: you could say it keeps the chairman on the reservation -- >> then you're political again and we don't want the fed to be political. >> reporter: right, right. the other thing is, i think the

idea is the reappointment will be behind obama and behind the fed by the time the fed has to make the critical choice to essentially separate with the body politic over the crisis. by that i mean, right now treasury and fed, for a lot of reasons, have been acting together to save the economy from the crisis. there will be an interesting time when those two agencies will go their separate ways. and i believe the appointment would be for the reappointment or appointment would be behind us when that comes. that's a critical question for the market. >> steve, thanks. >> reporter: pleasure. the dow soared above 9,000. the last two weeks have been big on the upside. a lot of days up, not many down. 12 in the nasdaq or so? our next guest was the first to call broader market rally, making his debut on cnbc, with a "squawk" exclusive, barclay's chief executive, barry knapp. he was the former chief economic strategist at lehman. do you know barry? >> i don't.

>> do you remember kamenski, barry? >> a little bit. >> all right. looking at the pre-interview notes, what struck me is you are embracing this rebound in the overall global economy, i think, because you like cyclicals. you're cyclically positioned. you're not looking necessarily at utilities and staples but you're looking at cyclicals meaning we're going to recover. >> it will have a snap back in industrial production that will create a tradeable rally, yes. >> is that different than -- i mean f we were going to have a "w" or an "l" it wouldn't make sense to buy these stocks, would it? >> not at all. >> so you figure we're not going -- these are generational lows we've seen at 666 on the s&p? >> yeah, i mean, i think that's fair to say it's unlikely we'll hit 666 again any time soon. you know, as we get out into

2010, i definitely think that forward estimates are too high and that there's certainly risks the consumer deleveraging and finance deleveraging carries on and we don't have much in the way of positive returns. but return to 666 is probably a fairly low probability outcome. >> so this is playing out like you might have thought it would. we go up very quickly, go up 35%, 40% and then you were right we had a mini growth scare. it was the employment report that shook out the overshoot. now worry back over 9,000. how much do you see in this uptrend? in the immediamedium turn. >> the magazine any tide tud was higher than we thought. i thought compelled grind our way up to 930 as opposed to having an 11% rally in two

weeks. a two-week rally would be exceptionally short so i would think it would probably carry on through the balance of earning seasons and push through 1,000. after that, though, as we get -- as it comes clear we're getting industrial production snap back, if there's no followthrough on the consumer, if back to school sales look tepid, then we probably will have another one those mini growth scares. and pull back closer to 900 or so as we get into the fall. >> barry, good morning. one of the themes i continue to hear from people that are fully invested is there's so much cash on the sidelines, interest rates are so low, that money has to come back into stocks. and i just don't get why that money has to come back into stocks. what if the money on the sidelines gravitates towards corporate bonds or gravitates towards increase in savings? what if after losing the entire generation of investors in the s&p, that money doesn't come into the equity markets? >> i am -- i'm absolutely with you on that. for the entire year, we've been

a big proponent of investment great credit over equities. now you have to be a little bit more specific to the sectors. for example, we like investment grade credit in the financial sector but we don't like financial equities. i think you're spot-on. i think risk profiles will be lower. if you think about what's going on gone on in the last couple weeks, you look at the fixed income market the fed is directly intervening in like agencies and agency mbc, the core fundamentals have looked terrible. you get the latest price number from moody's, it was just awful, down 35%. cumulatively from the peak. but those markets are pushing higher. that in turn has pushed investment grade credit higher for investors that have -- clearly there's a whole bunch of investors that have the ability to swap between and i think it's

dragged the higher risk parts of the market along for the ride. but i agree with you, absolutely, that money does not have to go, you know, all the way to the equity market. it might just sit in investment-grade credit in a more, you know, sort of cautious way for a period of time. i think that's -- i think that's a fair assessment. >> all right, barry, we appreciate it. good to see you. i hope to have you back at some point, check in with you again. thank you. >> all right. thank you very much. >> you're welcome. when we come back, the political debate will be around for quite a while so how does an investor capitalize on america's health care crisis? we have some potential winners and losers after the break. at 8:30 rick santelli is on set. he'll have plenty to say about the markets. at 8:40, former fed governor randy kroszner, he left the central bank early this year and now he's talking. you don't want to miss that interview coming up. tdd#: 1-800-345-2550

tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab tdd#: 1-800-345-2550 or visit schwab.com/trader today. tdd#: 1-800-345-2550 'course a trade doesn't always work out my way. tdd#: 1-800-345-2550 but when it does... tdd#: 1-800-345-2550 ...man... do i love that feeling. in the north of england to my new job at the refinery in the south. i'll never forget.

it used one tank of petrol and i had to refill it twice with oil. a new car today has 95% lower emissions than in 1970. exxonmobil is working to improve cars, liners of tires, plastics which are lighter and advanced hydrogen technologies that could increase fuel efficiency by up to 80%.

opponents of president obama's health care reform warn the measure could be the demise of the private health care providers. our next guest says now is the time to buy health care stocks. john sullivan, director of research and health care strategists. gary is going to stay with us as

well as we go through this. i'm trying to figure out, john, whether you have some of your picks based on this not going through or whether you have some picks even if it does go through. what are your assumptions, to start with? >> yeah, hey, guys, good morning. i think we will see something that's called health care reform by the end of the year. i think it will be more benign than what is currently, talked about. certainly way less threatening for investors than what was talked about in the kam prcampa trail in 2007. my picks are base on the assumption we're going to get something that looks like health care reform but pretty watered down. >> there will be a public option that's not a co-op? there will be a pure president obama type public option that competes directly with private insurers? >> i don't think you're going to end up with a public plan. i think that in the senate it's pretty clear, both republicans

and conservative democrats are saying they don't want a public plan. they think that 1400 health plan competition is plenty. the house increasingly there are factions saying a public plan is is not preferred. >> do we buy managed care companies? if we're going to cover another 47 million people, aren't they going to get a bunch of people to cover? >> sure. and i don't think that any of the plans that are, discussed right now get us all the way to coverage of everybody that doesn't have coverage today. but having said that, with a big portion of today's uninsured about to be covered, i think managed, and with the valuation of managed care stocks, where they are, i think managed care is a sector investors should be looking at. >> aetna had some comments today about -- i think it was commercial medical costs rising. did you get a chance to look at that release? >> i did look at it briefly. aetna is -- don't forget, managed care stocks in addition to, leveraged, they are economic sensitive companies and last

year was a tough year in the economy, this year as well. so i think aetna had a little trouble with its medical loss ratio. i think more broadly, it's reflected in -- i think first of all, the economy is improving and more broadly, these sort of concerns are reflected in the current valuation of managed care stocks. >> all right. so where is the most opportunity in health care? what do you think? >> i'd send you in a couple of directions. first of all, the entire health care sector is valued pretty cheaply relative to where it was a year ago. a couple of years ago. don't forget, 2006, 2007, health care traded at a multiple above the overall market. it's now, if you look at the s&p 500, health care is trading about 25% valuation discount to the overall market. that's health care reform's worry in these stocks. first of all, i think most anything in health care can improve if a more benign version of health care reform comes. specifically, we'd point you to

big biotech stocks, biogen, amgen, and wellpoint and significant cigna. >> do you do any i.t.? patient billing -- >> electronic data. >> joe, that's absolutely true. but it's important to see that health care reform is not where the been -- it's not where you'll see the benefit. in the stimulus package that's already passed and in law is where you'll see hcit. we'd send to you cerner, although that whole sector should benefit dramatically. >> if i took a top-down approach that whatever happens, reform, no reform, there will be government incentives for new product development. should i take that and look at med tech or biotech? where should i focus for investment in that's my top-down approach? >> well f your top-down approach is that -- is that for whatever -- however it happens

you're going to see more new product development in health care, then certainly biotech is the first place i'd send you. biotech is a -- is a great engine for new product development. medical technology, secondly, is an area. certainly, health care information technology is the third. >> i don't see why buy logics wouldn't be prone to generic -- you know, even biotechs are going to be -- have some generic competition, aren't they? that doesn't worry you at all? >> that's absolutely true. we are going to get some biogeneric regulation in this congress. having said that, i think what was the concern of investors even several weeks ago, namely, that we were going to get some sort of a bill that says, five or seven years is all the protection that an innovator company will have, i think those sort of discussions are largely off the table. today what is advancing in both the house and the senate is a version that gives 12 years of

innovator protection. i think that's fair. and i think that that's a -- that's an amount of protection that allows biotech companies to make money. >> there's a piece in "the times" about what we discuss a couple weeks ago and that's advertising for big pharma. is that material if they for some reason were not able to taut their drugs on television? >> that's worse -- >> carl did "nightly news" last night -- >> it's also about print, online, the advertising -- >> if brian williams ever retires -- you were there last night. >> you want to answer that? >> i saw the piece in the "times" this morning. i don't really know. i know that drug companies' product lines are more lifestyle oriented than they used to be. it would be a headwind, certainly f they were legislated against in that area. but i'm not sure how -- how significant an issue it would really be. >> wow. we need that advertising.

>> ask your doctors. >> ask your doctor for the purple pill. >> it may or may not be right for you. >> with you it's the blue pill. all right, thanks, john. >> or the red pill. >> president said blue or red, that's right. gary with us the rest of the hour. >> can you play the "nightly" music? how hard is that to get? ♪ >> sweet, isn't it? again last night. and he had john harwood on. he's never been a man to mince words. free-speaking, former fed head, that's not enough respect, randy kroszner is our special guest. ! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living.

so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac!

coming up next. take a look at this. rick santelli is in the boardroom. he's left chicago. he is here at cnbc headquarters. >> he's getting ready to rant. >> he's writing a rant. we can't wait to have him on set. it will be his last. rick santelli coming up in the next half hour. also cnbc exclusive, randy kroszner, he left the fed not too long ago. he was on the front lines. crisis. he'll talk to us about -- well, about everything.

in today's "people, planet & profit" report -- >> driven by -- >> ray believes technology is key to reaching what he calls the peak of sustainability, an expedition he and his company interface began 15 years ago. >> the technology did not exist when we began this have fallen in place in the last few years. >> bringing what was once unthinkable within reach. >> the idea of zero footprint. >> interfay has cut 82% of net greenhouse gases, 44% of energy use and 42% water consumption. the firm has salvaged 87,000 tons of used product. >> we have avoided costs of some $405 million over the years. which has been enough savings to more than offset everything associated with sustainability. >> and what's more -- >> we were influencing other companies to begin to make the

same journey. >> for more check out sustainability.cnbc.com. we know why we're here. to redefine air travel for a new generation. to ensure our forces are safer and stronger. to take the world we share to tomorrow and beyond. announcer: around the globe, the people of boeing are working together-- to make a difference. that's why we're here.

good monday morning. welcome back to "squawk" here on cnbc, first in business worldwide. we're one hour away from the opening bell on wall street almost exactly. futures have been losing a little ground and steadily as the results this morning have been if not -- if not stellar, i guess a little stubborn. verizon, honeywell, glow warm and others have come out. what was the fourth one? we got one other. >> aetna. >> yeah, that was the one that -- >> honeywell's down almost $1 now for some reason. verizon, after initially trading higher, is now down 40 cents or so. >> so we've had a little -- it's been a little sticky as the market tries to to rally the last couple of weeks. rick santelli before we mentioned is on set today. so great to have you here, rick, for a couple of days at least, in town to anchor "fast money" tonight -- >> tomorrow and wednesday.

>> good to know. although it says tonight it's our guest host gary kaminski. what's on your mind, rick? we have so much going on back in chicago with the auctions and stream of earnings. >> auctions are key. $90 billion in bills, we don't know what the drive by bill is one month as it's announced today. i think the big story, ira is here, dollar index is within a sliver of the lowest level since december. with the housing number coming out today and the metals moving up and energy, awe the dollar denominated commodity, if housing were to improve, i would look for copper and aluminum to improve today. >> ira, will you back him up? >> i will back him up whole-heartedly. we're going into one of the things, strategic economic discussion with the chinese. we've come a long ways since geithner's ridiculous comments back in february about the

dollar. >> whichridiculous? you have to be real specific. >> when he talked about the chinese manipulated the currency, as the united states was forced to back off of that. they backed off so far, they better watch where their next step is going. it really shows who holds the cards. therefore, rick is 100% right. we'll watch that 210 curve this week with the huge amount of supply coming to the market. i think that will be a very -- >> libor, under 50 basis points. >> the credit markets are showing they're in pretty good shape. it doesn't mean that if -- if the long end starts turning higher, rick, then it's not going to kill off whatever insip yent recovery is there. >> now, rick, you're going to be on "fast money" you'll be asked to weigh in on whether equities correct or go higher as baron suggested over the weekend. what's your trajectory? >> i think we could see firmer

stock prices. i think along with higher stock prices we'll see higher unemployment and a mediocre economy. i think it's going to be a trifecta that's going to be unusual based on history. >> firmer stock prices in the face of rising unemployment because of? >> a mediocre economy. because i think we bought our way into a stock market rally for all the various venues of liquidity, these are good things, but stocks going up, goldman stock going up doesn't create jobs and i think the consumer is tapped out. you sound like gary. >> rick and i typically agree on most things. this will drive joe crazy, but physical stocks go down, they're going to go up. that is because so many people -- july 4th, when we were about to possibly go back and test 860, 870 on the s&p and we didn't, it was immediate rush to get invested. saw it in the index funds, and until you get a reason for

meaningful correction, money managers will get invested. >> and throw in high-frequency trading which is finally, finally starting to main stream press, 70% of the volume is the shakers and the movers. you know what, those momentum models, knowing roughly which direction traders are going, that's certainly going to propel stocks higher as well, wouldn't you think? >> and i guess i'm old enough and young enough to remember when we had that in the fourth quarter, 1999 and it was the same phenomenon for a different reason. it was, we need to own these stocks. why do you need to own these stocks? we need to own these stocks because they're going up. >> quick reacts to bernanke's town hall? >> you know what, it seemed like he was pretty much -- i liked his personality in most of those blips i saw. i think at least in the early stages that he probably did a good job. i think he's going to be be doing this for the rest of his life, explaining where all of these billions and billions of dollars have gone. and maybe why and who. >> yeah. is it a step down the wrong path to have a fed chairman be so --

we argued in the last hour, so political or is this a natural fallout from the kind of steps they feel they had to take in. >> these are unique times. i will tell you i think he is in a way campaigning. in this instance i'm actually for it because i know what the alternatives are. this is going to be a political hot potato in terms of whether he keeps the job or not. you know what? he's open to the same types of venues to state his case as everybody else. >> ira, is that the view back in chicago overall? >> my view is i think rick is right on that. bernanke's fighting for his life here. i don't think -- steve liesman about a month ago was given 3 to 1 in favor of bernanke, i'll take all of that and then some at 3 to 1 because he's not going to be reappointed. he's way too independent. this is a paul volcker type chairman rather than an al greenspan type chairman. he doesn't want to create a cult of personality. he want to create a cult of doing the right thing. i think that's way too independent.

especially -- it administration will be leary about a fed governor -- a fed chairman who's so independent. in the face they'll need easy money if they're going to back off on fiscal stimulus. >> super glue their right foot to the accelerator. >> absolutely right. i think he's much to -- he's fighting for the right reasons but i think the head winds that are into him are really great. >> that really helps the conspiracy theory that i want to think, that the reason they're not saying what they're going to do is because they don't want to reappoint him because they want somebody they can -- that they can -- >> who's even closer to home? >> they want someone in their pocket who will politically do what they want to dpo. >> some initials are -- >> larry summers? >> the compromise will probably be janet yellin because she seems to be independent enough, soft enough and i happen to like her. >> wasn't she instrumental in the basel that was never implemented? >> yeah, but a lot of people's hands were on that.

that was with a lot of information -- >> pushing off the employment gives administration the flexibility that if we don't have -- bernanke said last night i see 1% gdp later growth this year. if you don't get it, all of a sudden we need to take things in a different drik. you're giving yourself the flexibility in the administration right now to change course if you have to -- >> perception. >> yeah. it's like what advantage to reappoint him now? none, zero. >> right. >> you may as well hold out as long as you can. there are those who are sitting there saying, don't forget, this is a republican. he was in the white house. so they have enough cover if they want to -- it gets interesting. but he's done a great job. in the most dire situation, he was left with -- with deuces when everybody else had a full house. >> that's the problem. so many people think he saved -- >> like roubini. >> that's the problem of just throwing him out. but he was a republican. >> yeah. ira, thanks. we'll talk to you later.

gary, you stick around. you, too? >> i think. >> good. >> where is steve liesman? >> i was outside watching cars go by and i couldn't find him. >> you're here, he's not. >> we'll see him in a little bit, i think. >> yeah, but not here. >> he's at the nyse because he knew rick was coming in. >> that's what i mean. >> steve's a good guy. >> when we come back, he left the fed and now he's ready to talk in an exclusive interview with former-f federal reserve governor randy kroszner from inflation rate to fixing financials and the power of the central bank. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney.

a new wealth management firm with over 130 years of experience.

time for a "squawk" exclusive. our next guest has insight into the fed, financial crisis and the economy. joining us from chicago, randy kroszner, former federal reserve governor and joined by our senior economics correspondent, steve liesman, our senior economist over at the nyse. randy, good to see you again. >> good to see. >> you you're catching us on a morning are where the earnings continue to come in. the dynamic is the same. manufacturing is getting ramped up in some areas of manufacturing but they can do it without hiring if not all their manufacturing employees at least without bringing back their salaried people. will the consumer be able to hold on long enough for us to avoid this double dip that everybody likes to talk about?

>> well, that's really the key question, because the thing we saw in -- over the last nine months was really just a wrenching change from the consumers, pretty optimistic and bringing their savings rate down to basically zero and saying, oh, boy, we don't know what our housing values are going to be, what we don't know what our stock values are, our unemployment prospects so we move from zero savings rate up to 6% savings rate. is the consumer going to be satisfied with roughly where the savings rate is now or are they so uncertain they need to push it up even more? >> what do you think the answer is to that question? >> so i think that it's always very difficult to tell because there's so many things that could go wrong. but i think that with some signs of stabilization in the housing market that the consumer's likely to feel comfortable roughly in the range that we're in. that could provide the basis for recovery sometime in 2010.

>> steve? >> reporter: my question for randy is this, when you looks forward at the pivot the fed has to make towards, more restrictive, raising interest rates, does he see it as kind of a violent type pivot or can the fed ease into it? does the market get enough warning this is going to happen? >> again, this is very difficult to know because it's going to depend on the particular circumstances of how the economy evolves over the next year. but i think there's a reasonable chance it can be fairly gradual. look at the evolution the fed's balance sheet. the way we had structured a lot of the programs when i was back at the fed is that when the risk spread started to come down, people would turn to the market rather than turn to the fed to try to get some liquidity. so we actually had seen some fairly significant decreases in the size of the fed balance sheet in a very gradual, very orderly way. and i think we'll see a lot of that going forward. >> reporter: randy, the other thing i want to ask you is about the town hall the chairman just

held. what is your take on that? is there a danger this is seen as political? >> well, i think if you look back at the writings the chairman had done long, long before getting to the federal reserve, and that many other economists had done, what many people think is very important the fed try to be as transparent as possible and try to speak broadly to various audience members, whether it's business people, whether it's consumers, whether it's members with congress. i think the chairman is taking this seriously and in these extraordinary times where people -- regular people are much more focused on the fed than they otherwise would be, he's really trying to get out there and engage with them to answer their questions, which i think is something that's important and valuable. >> randy, let me ask you a follow-up to the town hall. there was a forecast or a projection, if you want to call it, a 1% gdp growth fourth quarter this year by the chairman. do you think he makes that forecast feeling very certain that that will be achievable? because that, to me, was

somewhat of a risk to put that on the tape. >> i mean, it's always risky to say there are going to be particular numbers coming out in the future. gosh, we have certainly seen over the last few years it's so difficult to do that. but i think there is a lot of evidence building we're going to get some stabilization toward the end of this year. and then probably some reestablishment of growth in the following year. i mean, you look to the most recent monetary policy testimony that gave the averages and the ranges where the f&c members are. that was right in the middle of that forecast. >> reporter: there's a particular reason for putting those numbers on the table. when you know what the fed is looking for as to gdp outcomes, inflation outcomes, unemployment outkoms, it explains where policy is today and where it's going. if the numbers should change, then you would necessarily expect a change in policy. and i think get back to what said about transparency, that's the reason why bernanke put out

the forecast four times a year. the thinking is you get market expectations along with fed expectations better aligned. is that about right, randy? >> that's exactly right. one of the key innovations over the last few years was try to bring more information to the market, to see frequently what our forecasts are. now, those forecasts can be wrong. but exactly as steve said, policy is, made, trying to look through the front windshield of the car rather than through the rearview mirror of the data that has come out from the past. so the forecast of where gdp, where inflation, where other aspects of the economy are going are crucial for monetary policymaking and they should be. we should be looking through the front windshield rather than through the rearview mirror. >> we have just gotten through the first couple weeks of mostly financial earnings and they are saying reserves getting close to a top, $30 billion in reserves at jpmorgan and so forth. do you think financial balance sheets are on any kind of thin

ice or have they built enough of a fortress they can withstand a rough second half, 2010? >> well, certainly both capital and reserves have been built quite a bit, through capital injections and private sector raisings getting us through perhaps the scariest phase the financial markets have had since the 1930s. so we're much better poged than we were. but there's still a lot of fragilities out there, whether it could be problems in eastern europe that could have knock-on effects for western europe and other markets around the world. whether there could be issues in the commercial real estate market. so i wouldn't say we're out of the woods yet but i think we're in a much better position we were nine months ago. >> randy, are you surprised it was not even one year ago? the chairman spoke last night that he didn't want to be the captain on the ship of the second great depression.

i mean, it's one year. securitization market pretty much still dead. capital still slowing but not flowing the right way. it's only a year. are you surprised that we've been able to snap back as fast or as many people think as fast as we have? >> i mean, i'm very much comforted by that. obviously, when i was there, that was a real focus, to try to avoid the extreme downsides and to try to provide some of these new liquidity facilities that would deal with exactly these issues of, well, if securitization isn't going to come back, is there a way to provide liquidity to make sure commercial real estate projects could refinance themselves, people could refinance their homes or buy new homes. and so that was part of the extraordinary set of activities we undertook to try to deal with that. that's exactly what our hope was a year ago. and i think we've largely avoided the likelihood of that extreme downside. one never wants to say never, but i think we made a lot of

progress. >> randy f i could press you on that. the other side of that argument is that if we are going to have unemployment that tops 10%, then maybe we didn't really avoid the worst outcomes, two back-to-back quarters of minus 6% gdp. i know your response will be, it could have been worse. but it's hard to look at the unemployment rate and say, we succeeded. >> i'm not saying this is an easy step forward and there were no challenges in the economy. obviously, it's always the facts of what would have happened but for the actions that we undertook. so obviously i think that's important. but this is an incredibly challenging time in both the real economy and financial markets. i think we really haven't seen that kind of interaction between the two before. really uncharitied territory. and i think it was very important to try to maintain some of those market movements going forward because i do think we're seeing more stabilization much more quickly than, let's say, in japan, where japan did

move down the short rate to close to zero but just kind of stopped at that. didn't do these measures. and they didn't fight the deflation, and they really have not had very good economic performance over a very long period of time. >> randy, it would be difficult, i think, to get a sitting fed governor to weigh in on the health care debate, but since you're now -- you stepped down, we know what cbo has said about the plan. we know what the president has said. as far as you can tell, the proposal that the white house has put forward, would that be a net gain for the economy long term, or not? >> well, i'm still in the process of analyzing it, so it's hard for me to give a final word on it. i think the cbo analysis i found quite compelling. and i thought there's a lot of real cautionary tales in there about the costs and what benefits you get from those very large costs. so i just give a tentative answer right now. but i think i would be much closer to the cbo analysis,

which i think would be a bit skeptical on the benefits of the program right now. >> some say a bit skeptical. some say it's the death nail of the plan. are you convinced there's something else, a milder version, something that could bend the curve? >> i'm sure there will be a lot of compromises that will be proposed. i do think that cbo analysis was crucial in getting people to think about different compromises. maybe get sbus a butch better position. >> randy, always good to have you. please come back often. >> very good. >> randy kroszner coming to us from chicago. steve liesman, as well, and gary is here for the rest of the show. interesting stuff. >> success in not having the second great depression, i think, a lot of washington, the fact you can go to an atm machine in october, put your card in and get cash out. that is a success, if you remember what it was like. it was not that long ago. success -- oh they're not

defining success on what we're in now, it's what we avoided. >> you have money in your account. >> actually, no, because there were some lenders back last year you didn't even have to have money in your account to give you the cash advance. when we come back we'll talk about the summer rally, whether it's going to fizzle, whether it has the right stuff to continue. don't go away. meet jack. recently turned 65. glad he's now got medicare on his side. but jack knows that medicare part b covers only... 80% of medical expenses. so, he got himself an aarp...

medicare supplement insurance plan -- insured by unitedhealthcare insurance company. a medicare supplement plan... lets you to keep your own doctor, helps you budget medical costs, and it picks up some of that 20%, potentially saving you thousands of dollars... out of your own pocket. if you're turning 65, or are 65 already, call now for this free information kit... and medicare guide. learn more about aarp medicare supplement insurance, and its wide range of coverage options, competitive pricing, and, plans that travel with you nationwide. so call now, just like jack and millions of others have done. because when it comes to medicare, we should all be on a roll. call now for your free information kit... and medicare guide. ♪

in these markets, i'm glad i turned to fidelity for an annuity with guaranteed income for life. that's right, guaranteed income for life. my annuity from fidelity means my retirement income is safe. it's guaranteed, no matter what happens. if guaranteed income for life sounds good to you, do what i did -- let fidelity be your guide. call fidelity at... for details about guaranteed income for life.