check for $4,500. >> what happens if you default? >> i don't know. over the weekend, ragged a lot of stuff, americans aren't stupid. if you give them money. if you pay them cash, they will accept it. >> they want something in return. getting all those old guzzlers off the road. independe energy independent. i think you don't like seeing a government program that's targeted, temporary and effective. >> i'm really glad you're here to argue this side today. >> say that again. >> i think you don't like seeing a government program that's targeted, temporary and effective. >> did hared wowood send you th verbatim? >> do you want to read the journal op-ed page? >> there is something there

about why every consumer good we should sell the government should have a program for. >> occur finish drivers and irons. >> my driver is old. to get a new big bertha or new tailor-made, i need the government to send me money to induce me to buy this new driver. >> there are people who say that's the best incentive. >> let's see whether the senate at this point, which we do have -- we've run up some bills in the last year. we'll see, will they say, here's another 2 billion to -- >> that is one -- >> to bribe people. >> 150 of the stimulus package. it's like this. >> my point last week was that most stimulus programs are so useless and ineffective, at least this one is getting cars out the door. you've got to make more cars for the ones that go out of the door and have automakers. >> stealing sells from down the road. there has been a backup because

people have been waiting to see what will happen with the program so they haven't been buying new cars. does it need to be such a rich program, people are rushing into buy these? >> you don't like it because it's a government program that's targeted, temporary and effective. where did you get that, was that just you? >> no. i knew what you were going to say at the top of the show. how are we going to respond? >> let me move on here. >> i can't wait. if they haven't voted yet, we'll be talking to the 6 senators. >> tomorrow is the deadline. the administration said if we don't get some action by tomorrow, they can't continue to say, we'll honor everything. >> 800 billion for the stimulus program is 800 million. 2 billion is 2,000 million. the president's economic team

was on as they usually are on the talk show circuit yesterday on sunday, national economic council director, larry summers crediting the stimulus plan with preventing an economic freefall. >> the stimulus bill will largely play out in the next couple of years. long-term deficit is a central problem. that's why we need to reform health care. >> in the meantime, tim geithner said the white house can't rule out tax hikes, and not just for people that make over 250,000. we sort of thought that middle class people wouldn't get a tax hike. i thought it was interesting reading in baron's about harvard and larry summers and the two whistle-blowers that were talking about all the derivatives in 2001. they thought they sent it in

confidence. next thing you know within a couple of weeks, that lady, the african-american lady, only the second person to get a ph.d. in applied mathematics at harvard. she said the harvard endowment, they have no idea what they're doing with these derivatives. sent it off to summers, next thing she knew, everybody knew this confidential letter that she sent. it was interesting. larry summers has been everywhere. his name comes up in every -- anything that you read.. hedge funds, derivatives, he's been around. he was in the clinton administration. >> everybody but this show. >> also, joe was talking about how health care, that's the main topic of a debate in washington. before the house left for a five-week recess, speaker pelosi gave up 256 democrats cards

outlining key points of the house's health care proposal. this is an attempt to keep members on message in their home districts where it's expected there will be real questions asked about this. late on friday, the house passed a bill that would let the government negotiate payment rates for an insurance option, allow states to set up insurance cooperatives. the senate finance committee said it will not vote on legislation before it recesses at the end of this week. administration officials, including tim geithner say the white house prefers a bipartisan approach but may move forward without this one. we want to get the full story, so we are going to washington. we will be live on capitol hill, broadcasting from a senate hearing room, where we willing talk to senate lenders.s. as joe mentioned before, six senators will be joining us

while they are still considering all of this. >> i think we are going to have to wear a jacket. senators generally do. you got a problem with that? i know it's summer. >> i packed a jacket. >> you too? >> yeah, i did. >> okay. >> we can do our short sleeves here. >>. >> garment bag down on the train. >> i've already packed. >> you're already packed? >> i'm on a 12:00 train. >> if eur there today and you see joe, hound him for autographs. >> cash for clunkers.. >> i have tens of dozens of fans literally. i should get a hair cut. >> get one on capitol hill. >> i've already made arrangements for one to clean up my act. did you see a picture of that room we're going to be in? >> yes. >> oh my word, it looks like th fake boardroom on the

apprentice. >> really? with the fake fire? >> yeah. it makes me nervous. i'm going to feel like one of those bankers. >> all right, mr. blankenstein -- blankstein, blanken -- >> you're fired. >> in other headlines, top citigroup trader andrew hall has been pretszing the bank to honor the 2009 pay package that could total $100 million. now hall is pushing for a quiet divorce of the trading firm phibro from citi. the times said hall had preliminary talks to take it to a possible suitor and discuss the spin-off with citi's leadership. that would be one way to get out of this gracefully. >> phibro brought in $2 million. when they start losing rainmakers, it raises questions. the guy who is in charge of signing off on every

compensation. >> something the size of citigroup. when the overall company loses their shirt, it's almost impossible to make the case, these little subdivisions made money. this guy deserves 100 million. >> he was driving the price of oil over $4 a pump. >> kkr preparing as many as six pos. the firm getting ready to float companies, including toys "r" us, first data and dollar general. and the fda is approving cancer treatment against a form of kidney cancer. the sixth approval for the block buster drug used to treat certain types of lung, breast and colon cancer. the treatment will be allowed to treat advanceded renal form of carcinoma, the most common form of kidney cancer. in england, it's the drug that can't even be mentioned.

>> ah. that of which we do not speak. you don't know it exists over in england. can you give me anything? no. there's nothing that works for under $50,000. so you're screwed. >> have you seen the market this morning? we're in pretty good shape for a monday. markets in asia were relatively decent. got great earnings. better than expected earnings from barclays, hsbc, can ubs. got good manufacturing data out of china. >> this is amazing when you consider the run we've been on for the entire month of july. markets have moved so far so fast. >> peter shack, one of our producers points out the last six sessions, double-digit moves. as the rally has gone on -- >> gotten smaller. >> oil is close to $71 this morning. people beginning to talk about a

resistance level unless equities begin to help out. clearly that's what's happening at 113. treasury numbers, none of which to speak. dollar down against the pound and the euro. dollar index, not sure where we are, if we're below 80 still. in gold, we'll talk more about inflation down the road. for the time being, not doing a lot it's 9.5420. let's check in with louisa in london. >> i'm with you, joe, in terms of having to wear a suit. you can't work when you're comfy. european bosses, higher at the moment. at 1.5% across the board. what happened?d? why did that happen? because we were trading pretty flat when we started this morning. down to the banks among other

things. a number of earnings out already. hsbc being the biggest bank in europe. first half profits hovering from a year ago to $500 billion. they've been hit by bad debts and jumped 40% higher to $14 billion. loan impairments and other credit risk provisions reaching a high for the first half of the year. barclays trading higher by april 7%.. fell short with an 8% rise in first half profits. investment bank unit has benefited from the assets they bought from lehman brothers. they have managed to do well there. it's a tale of two cities. some of the loan impairment charges still expected to head higher this year. and the investment banking operations have been doing better. in part simply because of the e market recovery story. let me show you the sector best performance. not just about banks this morning. heading into a new fresh, clean

week. basic resources up by approximately 4%. autos also in charge. that's what we're looking at on a european front today. let's head over to singapore and check in with you, chloe. over to you. >> thank you very much. we had a pretty decent session. i would say especially for monday.. of course, investors getting buoyed by auto stocks. given the earnings we've seen for a number of car makers it looks like investors are willing to put their money back on the table when it comes to banks and also autos. hyundai, their july sales numbers up nearly 40%. can you believe that? in terms of banks, mitsubishi quarterly earnings up nearly 50% as well. overall now, pretty strong session i should say, especially

in terms of economic data. china's pmi above 50 for four months in a row. certainly giving more investors in the greater china region to put money. the shanghai composite 1.5%. going forward, a lot of investors will be looking forward to the jobs numbers coming out on friday. approximate of course, ism numbers a precursor of things to come later tonight. that's where the numbers are stacking up in the asian session. back to you, carl. >> back in the states, market preparing for another week of trading. we've got our monday task force ready to go. lou green joins us. guys, happy monday to you. john, we've had the weekend to digest gdp. anything in the internals that you think would mean good

numbers for the jobs numbers on friday?? >> i think the internals are the real story. with the inventory being such a big draw-down, the production building up again will be good for unemployment. we're looking for a number down 245,000, which is really an improvement. i think you're right. you really look at the internals of the gdp. it does suggest economic growth of 2 to 3% in the third quarter. >> lou, i know you have not been hi historically as bullish as this. could it turn? >> on the jobs number, i guess it could turn. each month there is hiring and each month firing. last month the number was a little worse than expected. june is a month during which a lot of hiring goes on. that's simply not there. but the firing has been a little

bit less. in july, we generally lose a little bit of jobs. if the firing is not as quite as much not guil much in this month, we could get a higher than expected number. for instance, what's called the labor differential from the consumer confidence number fell to a new low for the move here, which is kind of interesting that it would do that. even though we've moved consumer confidence quite a bit off the low. >> you've been taken aback by -- i don't want to say the resilience of this market but its stubborn unwillingness to trade down sharply. >> lulabsolutely. the market held at every technical level. earlier in july, the 875, which a lot of people saw that as a neck line for head and shoulder, i thought the more interesting thing was that it hab resistance

earlier in the year and acted as support. i thought we would go back and test that and the market would fail there. it has not. we head up to the next technical level i see of importance at 1,014. again can my usual bear issishb i think it will fail there. >> has the market been lucky there? are we able to predict some of the things that came about in friday's gdp number in terms of aggressive electrliquidation th saw earlier in the year? >> i think they were smelling economic recovery. i think they thought basically the fed was going to stay easy. the fiscal stimulus coming on board.d. i think the stock market got it right. we have an economic recovery. it may be uneven from quarter to quarter. i think the worst has passed and

policy is still pretty easy. >> are we in danger of getting pass rep liability? the journal talking about if there is some repair in housing, the high end is not getting nearly what the low end is. >> i think you're quite right. very uneven economic recovery. particularly when we're thag it's auto production and federal spending that will move this economy forward in the third quarter. when we look at nonresidential construction, still a big negative for the rest of the year. >> lou, you mistake a big point. in some of the notes of yours i was reading, talking about the fear of inflation, right? sort of a lesson that we learned in the '30s. you want to go into that real briefly? >> yeah. back in the '30s, because of all the stimulus that the government was doing -- >> just like today? >> right, just like today. the ten and 20-year bonds went

from 2% to 4.25% as the data was deflationary. today we went back to 4%. it's a different scenario and optical illusion now. we had that very strong rally and came back really not to the yield levels that existed during the fourth quarter -- most of the fourth quarter of '08. the fact is that there is a lot of concern about the possibility of inflation because of all the stimulus. for the current situation, we have the consumer price index at a 60-year low. we have wages and consumption at data series record lows. and that data has been around since the beginning of 1960. i still think there is a chance that the psychology of the market will turn to a fear of

deflation. we could get an extended period of deflation. >> it's hard to reconcile that notion with all the talk about a second half recovery, isn't it? >> you get the second half recovery. the point is well taken. as the year turns, what effective exit strategy is the fed going to but the in place? geithner was talking this weekend about getting the budget deficit down if the market perceives that the market is not going to implement their exit strategy and geithner is really not going to bring the budget deficit down. you've got a lot of inflation fears in the marketplace. >> we've got the wells sign behind you? >> yeah, we're with wells now. >> wells-wachovia company? >> in your area we're completely wells. >> guys, have a good week.

we'll see john on friday. he'll turn in his tie for a pair of waders and fishing pole, joining us with steve liesman in grand lake stream, maine for jobs day. >> coming up this morning, nissan rolling out a new electric car. first, as we head to a break, let's look at last week's winners and losers.

nissan motor unveiling its new car, the leaf. electric cars will account for 10% of overall global vehicles by the year 2020. >> what is very important for us is that the consumer considers that buying an electric car is i good economic decision. we don't want him to say, i have zero emissions, but i have to pay a big premium for this. no. >> when we come back for this morning, we'll get this morning's top stories. and then the bell, please. put your pencils down. earnings season coming to an

unofficial close. >> official close as far as we're concerned. >> we'll grade the carpenter tests and get scores after a break. hi, may i help you? we're shopping for car insurance, and our friends said we should start here. good friends -- we compare our progressive direct rates, apples to apples, against other top companies, to help you get the best price. how do you do that? with a touch of this button. can i try that?

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kern along with becky

quick and carl quintanilla. the house has approved the occur for clunkers program and the senate has to act next. we have a live report from phil lebeau on the issue. it all builds up to friday's big jobs report. today they're reporting on manufacturing. tomorrow, personal spending. wednesday is when the real build-up begins. we'll get the adp report, which gives us some hint at to what to expect on friday. on thursday, we get weekly jobless claims plus the interest rate decisions from the ecb and boe. on friday, forecasters are looking for data that could show the economy lost 300,000 jobs of

last month. jason roeny is standing by. we're looking at the futures, indicating a gain of 100 points today. after all the gains from the last month. when continues to be the driving factor on the floor? >> it's a big week for european bank earnings. last night we started off with the big two. hsbc and barclays. both were better than expected. they were not able to withstand any futures stocks. that's building on the u.s. futures gains overnight. and the big momentum move last month. >> you also had over the weekend, the obama administration officials out on the talk show circuit talking about how things are starting to improve and potentially seeing

the end of this real long downturn. greenspan himself said he thinks we're near a bottom. does that give you a lot of hope that things are going to turn?? >> i think, again, that the data continues to improve. two things are driving stock prices continually higher. one, the pace continues to ease. that is the scene that greenspan and obama were speaking about over the weekend. as a result of that, earnings revisions are moving upward. some of that, as related to analysts undermating the ability of companies to cut costs. those two things, unless either were to change, then the underlying bid to the market will unchange.e. >> the momentum has been in the bulls' favor for a month. what would bring that to a halt? >> it's august now. we're coming into a month where we're done with the u.s. earnings. really the focus will be on the economic data. it won't be until we get to the

next earnings cycle that could derail the momentum. if you look at the last two weeks, the nasdaq gained 10%. 85% of the gains occurred during the market hours.. that was real money buying stock from the open. the best sign of strength in markets is the open flat, and then rally weaker later. the more likely scenario is a range-bound market. >> if you have to look around at what we're looking for at friday with this unemployment report, the marshal looking for potentially a better number than we've seen in quite sometime. >> the high 300s would be a sdpo disappointment to the market. we're still looking at a job loss of 300,000. when we talk about things are improving, et cetera, yes, that is true.

but it's still unprecedented to remain in this kind of job loss per month. xwa again, the talk of feds raising rates or doing anything in the next six to 12 months is highly unlikely. >> thanks very much. good talking to you. >> one more exclamation point on earnings season. the other side of the parentheses. we'll look at the earnings season now ended. i know what you're saying. our two guests, head of research, global head of research. jim is executive vice president and cio for cit wealth management. cisco is a quarter that ended in

july, not june. you know what i'm seeing? it's not the normal june calendar. that is done, right? so you're with us on that. >> we're doing this because we go to earnings central repeatedly in the morning. >> but now let's let us take it. and, jim, i'll ask you the same question in a second. we used to call it monday morning quarterback. i call it monday night quarterback. let's look back. tell us what we know now from this latest earnings season. >> a fantastic earnings season. >> fantastic?c? >> 74% of companies beat estimates. normal average is 61%. we all know it's very cost cutting driven. i think the more focus for me this season was the guidance, the outlooks. the outlooks were not that bad. that's really what i was focusing on, more than what companies were reporting this quarter. i really anticipate this.

if you look at our numbers at reuters, we went from negative 36%. it was very expected. but the outlooks are very expected. that's really what i'm focusing on, the next earnings season. we've had the big run-up. >> jim, if you were an investor. let's say you stayed out of the market or were short the market. you would probably be upset, saying, look, every company posted a result that was down 30 or 40% from a year ago but above expectations, which the company kind much set. is that fair that we're calling it great just because they beat expectations that maybe they talked down in the first place? >> i think that's part of it, joe. you reduce your expectations. anything above that starts to look a lot better.

you had a lot of debate in your earnings reports around the quality of these earnings. i think they count as companies reacted quickly to cut costs and drove some of that. we certainly now need to look at a revenue line as we go forward. if the u.s. is in a recovery, that will be an important part of that next earnings season. >> no coincidence what happened in july. every day it seemed like the market went higher. do you see a cause-and-effect there? you contend maybe it's just people tired of low-yielding investments and ready to take some more risk. >> i think there's two parts. i do think you see investors moving out to risk assets here. i also think, you know, the market likes the anticipation as much as the event if not more than the event. anticipating higher earnings, that guidance and now will be looking forward in anticipation. can we continue and will we get revenue growth around that? >> maybe we'll actually see not

just beating expectations this quarter but last year, which was awful in the time quarter.r. >> in the next two quarters, extremely better comps. a little bit you're talking about the revenue numbers. last quarter, 28% of companies beat on the revenue side. a huge amount. this quarter a little better in terms of beating revenue. >> 2q was better than 1q? >> yes. relative to expectations there has been more revenue beat than there were last quarter. >> there were a lot of misses though. >> a tremendous amount of misses. we're still -- more companies are missing revenue estimates than beating revenue estimates. something to keep in mind, maybe we're leading to the right track. the market is really looking for

that revenue to get up into the normal range of 60 to 70%. i do exactly that pull-back like your last guest mentioned. when we start focusing more on macroeconomic data rather than the earnings.. we start getting into the third quarter earnings season again. >> i'm looking at futures today. july was a big month. but august is going to at least start out in a similar fashion. looks like almost triple-digit gains. doesn't mean we're going to end there. is it possible we wake up and look around and we're at 10,000 or 11,000 and don't go back to 8,000? most people think we would head back down to 8? >> i think so. this rebound is not out of reality with what we've seen in history. so the flow here, we certainly have potential on the up side. i think this market will be a little bit more discriminate as

we go forward where the gains come from. no doubt we can continue this. so much from the sell in may and go away. >> no kidding. >> i thought it was a different downturn than we've ever seen. that's what everybody may be telling us. we expect to see the same sort of rise and recovery out of it? >> no two are alike. i think they probably rhyme in some way, shape or form. i think with the -- we saw last week that the amount of that decline was worse than we first expected when we saw those economic numbers. the positive report for the second quarter. so it is possible to see a rebound here in the third quarter from an economic standpoint. it could be better than we expected.. again, in anticipation of that, the market will react to that. >> 12 years flat. s&p, 12 years. that was one of the things pointed out. do we have paulson on today? do we have paulson on air?

here's on at 8:30. number one, we're back now, just back from a reaction low. >> optical illusion. >> we hit a reaction low and all we did was get back to decide whether we have to buy and sell. this is normal where we are here. we'll see you. thanks for coming in. jim, good to see you this morning. >> you bet. thanks, joe. >> 12 years. where were you 12 years ago? were you at the journal? >> what year was it? yeah. >> where were you modeling? >> '97? >> i was at the "wall street journal" with becky. >> 12 years we've been sitting here 18 hours a day at cnbc. blah, blah, blah, stocks. earnings report, blah, blah, blah. that's flood, float, flat, noth. >> people made money and lost money. >> 12 years flat. >> you do blah, blah, blah

again? >> two per show per decade? >> this is like the commercial. stocks go up, stocks go down. >> 12 in 14 years' counselor. in an 8 x 10 cell. >> you got any comments or questions, if you get the "cape fear" reference drop us a note. we'll take a quick note and come right back.

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time now for -- is that monica i see? time now for a check on the -- her name too. news outside the world of business. monica novotny. let me give it -- monica novotny joins me with a round-up of the headlines. i want to give you a big build-up. >> appreciate that. after two decades, remains of navy commander scott speicher were found in iraq. yesterday, transportation secretary la hood said the obama administration will suspend the cash for clunkers program unless the senate provides $2 billion for for the incentive. the plan has burned through its $1 billion budget in just days. in turkey, a demolition project that went terribly wrong when the building was not exactly demolished.

instead of collapsing, the old flower factory rolled right over and almost into a nearby building. no reports of any injuries. not sure what you could do with that information, but we love those demolition videos. >> we want to roll that again. >> that didn't do anything. >> where was that, in turkey? >> yes, in turkey. making way for a shopping mall. trying to demolish this building except not so much. look how close it comes to the other building. yeah. >> i guess that's a reason not to go up close. always wanted to do that. maybe not. >> heads are going to roll. that's my prediction. >> see you tomorrow. coming up, we'll have more on the stories that have us squawking this morning. plus, check out the squawk boardroom. we spy rich bernstein, the highly regarded former merrill lynch strategist.

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yeah. we're going to washington, mr. smith. mr. quintanilla and mr. joe kernen go to washington. >> it's going to be cool. >> yeah, it is going to be cool. i don't think senator boxer will be -- >> she does work there.

on the show. >> this is "the wall street journa journal", a-. sometimes politicians write novel, fictions. she wrote -- she started back in 2005, she wrote a novel called "a time to run" with a heroin, who is a liberal california senator. apparently, i didn't ask for that zooish is this her description of her own novel. >> yes. and apparently she has made her mark on the world to the most exclusive club, the senate, by serving as a tireless advocate for the children, the poor and the environment. in the latest novel, the arts villain is an unhinged republican vice president named craig fulton who has trampled on individual liberties, jeopardy

human rights, and authorized wiretapping but he calls it enhanced interrogation. it would be nice that senator boxer intends to satirize -- >> dick cheney. >> it would be nice that she's going to satirize what we went through but it says, no, this novel is painful in earnest and she's about to hand pick the vice president nominee. he's like this lunatic dr. strangelove and wants to run amuck with -- >> how does it end? >> i don't know. i just -- i read this this morning and thought, is is this april 1st? is this one of those "journal" editions that -- senator boxer, are you real? >> senator boxer, if you want to

find him, he'll be in the senate energy hearing room starting at about 5:45 a.m. >> they always say write what you know, right? nothing along the creative -- >> the one about intrepid journalist -- >> you're not a journalist that's right. >> paul krugman writes about andrew hall, the guy we've been talking about for weeks. we talk about high frequency trading. he says the stock market is about to allocate capital to its most productive uses by helping companies with good ideas to raise money. it's hard to see how traders who place their orders 1/30th of a second faster than anyone else do anything to improve social fekz. high frequency trading is coming under attack after yesterday we

saw how they were under attack, why do we help the banks? now they need to pay society back or because of -- >> nice wasn't part of the equation. does high frequency trading increase liquidity? otherwise, just, quicker and seeing order flows? i don't know. riskless arbitrage has been going on for a long time. it keeps the markets honest and you can make money. >> there was the argument that guys doing these trades used to on slow people down. now there's nobody left on the floor. >> will you write a novel? >> about? >> i don't know. charismatic co-hosts -- >> i have the best co-host. >> yeah. >> that is funny. >> i have to read the rest. >> when we come back, we'll get some top stories. and a huge week ahead for the markets. economic date it will be hitting

left and right. we're going to the bull pen for wall street one of the bes cloesers, rich bernstein, for two hours.

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the government's cash for clunkers program hits a roadblock. the fate of the program now lies in the senate's hand and a tuesday deadline to approve another $2 billion. are there green shoots beneath the browned weeds? treasury secretary tim geithner expecting the economy to grow

later this year. we have a look at third quarter gdp revisions. we talk with rich bernstein. plus -- ♪ it's the final countdown we are counting down to friday's jobs number. a jobs preview round table, has joblessness peaked and when will we see improvement? the second hour of "squawk box" begins right now. good monday morning. walk to "squawk" here on cnbc. i'm carl quintanilla along with joe kernen and becky quick. check out futures. i think we're in for a triple digit gain. it's been hovering around the 100-plus level as we had good numbers in asia and europe. some of the earnings out of asia and china is helping out. >> people might have thought we were in for a pull back after a strong month of july, huge

market return. >> all through july. >> think august will be as good? >> this has been a pretty nice wall of worry. a lot of guys we trust and talk to have been -- >> s&p 993. do you think we could see 1,000 before the month is out? >> do we know anyone that's smart about this stuff? is bernstein here yet? >> he is. he's in the chair. >> we'll ask him. you had to be a little surprised by this. >> oh, sure, absolutely, without a doubt. >> i think you were the one that told me i could wait six months between the bottom to buy. >> you can. that's absolutely right. it may work. >> some of the stories we're following, the nas's automakers reported sales for july. the cash for clunkers program has ford on track for its first monthly sales increase in two years. you can catch ford's chief sales analyst live with our auto reporter, phil lebeau 11:00 a.m. on the call. nissan motor unveiling the new electric car, the nissan

leaf will launch next year in the u.s. and japan. ceo forecasts electric cars will account for 10% of all global vehicles by 2020. the fda confirming avastin for kidney cancer.. already used to treat certain types of lung, breast and colon cancer.. the injectable will be able to treat renal cell carcinoma, the most advanced form of kidney cancer. health care reform is the main topic in the house this week. before the house left for a five-week recess, nancy pelosi gave all 256 democrats cards outlining key point of the health care care proposal and attempt to keep members on message in their home districts. they need these cards to answer some phone calls they get positive and negative. friday the house energy and

commerce he can passed to allow states to set up cooperatives, insurance cooperatives, and biotech industry wanted this, protect biotech drugs for generic competition for 12 years.s. the senate finance says it won't be able to vote on legislation before it recess at the end of this week. i guarantee you, we'll talk a lot about that tomorrow when we're in some fancy dirkson room. now they say the white house wants a bipartisan approach but may move forward without it. i don't know how that's new. they're threatening to take it to reconciliation. we want the full story. there it is, live tomorrow, 6:00 to 9:00. this means jackets. a do we are a makeup person going along? >> i think there will be makeup

there. >> hair dryer? anyway, we'll be in the senate hearing room.. it's all wood. there's a witness stand -- >> those little microphones. >> joe's going to look like bart simpson going to church on sunday. >> exactly. we'll have members of the obama administration and industry experts. it is a "squawk" hearing, six senators at one time talking about the issues of the day. i hope they don't grill us. we'll be grilling them. >> filibuster. >> i may filibuster. >> we can ask them about cash for clunkers which is coming up against this deadline. a number of key economic releases coming out this week, building up to friday's big jobs report. last week we got the gdp figures that showed the economy shrunk modestly last quarter. what are economists expecting for the rest of the year? we have our senior economics reporter steve liesman here. he has the answer and more. >> i'm so excited about this week.

tomorrow senate, and friday the jobs report and i'm excited with my 9-year-old about this thing. i'm most excited about this snap survey we did by cnbc of economists. they're more opt migsic about the second half of the year after the better than expected gdp report for the second quarter. they are optimistic on the jobs front. we surveyed economists over the weekend, who had nothing it to do but crunch numbers and increased their third quarter outlook by one percentage. the this follows the better than expected 1% fall off in the second quarter. economists citing less inventory clearance, site increase in building, and auto production, along with government spending. for the second half of the year they see 2.6% growth versus 3.7% average decline. that's a big, big swing. joel naroff has a high of 4.6%

but downgraded it for the fourth quarter saying some is borrowed from future quarters. big caution, we're still on the slow road to job creation. >> you're going to see first is growth turn positive. and then you're going to see the pace of job losses slow maturely for -- they've already slowed significantly, as you said. they'll slow maturely. private forecasters suggest you'll see unemployment start to come down maybe beginning second half of next year. >> the numbers for friday. my us in 275 after a minus 467. the unemployment rate ticking up to 9.6% and a very, very slight increase in hourly earnings. alan greenspan said he was worried about housing, and downgraded housing surprises could have a spiraling effect in the banking system. he disagreed with something you've been talking about,

becky. he said the cash for clunkers program six months ago would not have had the effect it had today. >> because had you to get through -- >> we did not have the confidence to go bu the show rooms and even with a -- nobody's approved. who's right or right? finally -- >> does that mean he likes the cash for clunkers program? thinks it's a good deal -- >> you know the way he talks. he goes, i don't like them anyway but this program set out to do. i explained the whole thing to my 9-year-old, the fibro thing and i went through the taxpayers versus this -- he goes, of course we have to pay them. >> the contract? >> won't we lose more money if we don't? >> right. >> the taxpayers. so a 9-year-old gets it -- >> we are now in a position of holding a major chunk of citigroup as taxpayers. >> pay the guys $100 million so they can give $2 million profit to the bank. if i 9-year-old gets it i wonder who is the pay czar over at the

obama administration gets it. >> if you want to, you could connect the dot from the middle class and what they had to pay for $4 gas going right into this guy who made $100 million last year, too. it was -- >> do you know he made it on the long side? >> to. i don't know -- >> you don't know where -- >> he should have made it on both sides. it doesn't matter. >> this is a guy who doesn't want to be in it. he's probably going to leave anyway, right? mr. hall, he'll be in -- >> who knows. he may be -- i don't know. >> you could argue, joe, in their purest form the traders and hedge fund operators make sure we pay the best possible price. they are essentially -- >> huh?? >> i'm not sure i buy that. >> i don't know. >> hang on. they make sure that on the downside it is as low as it can be and on the upside it is -- >> really? did the hunt brothers make sure i paid the most appropriate price for silver and soybeans -- >> were you out buying silver back then? >> i wasn't.

>> so you don't agree these guys help drive -- >> that's what they're supposed to do, unless -- >> not always. >> unless so many etfs and pension plans are buying -- it has no fundamental on -- >> so you're making an argument for curving the trading operations of these -- >> i'd like price discovery to be the main -- not momentum trading. >> you can trade these commodities if you qualify, just make it transparent. if you want to speculate, let us know. >> let us know you're running it up to $150. >> that was after the 2008 payd payday. now he want another 100 insure our guest host is rich bernstein, former merrill lynch chief strategist, ceo of rich bernstein capital management and a cnbc contributor. good to see you, rich. >> thank you. >> in hindsight, we're up about 50%.

is there any way the work you do, your cautious approach to things, reasoned approach s there any way you could have had an unequivocal buy signal three months ago or six months ago when we were on those lows? >> unequivocal? >> yes. >> no. that's just not my personality. >> true. >> i always think you have to have a very balanced approach to the markets so i would not have come in and pounding the table saying, buy, buy, buy, buy, buy. you know, if you're asking politely what did i miss? i think what i missed was still the element of speculation liquidity that's in the markets. i think that if we look at what's happened here -- and i personally think although the markets are in a momentum phase and i think they're going to go higher, i think it's a reasonable question to ask, where are the markets relative to the economy? when the leadership and the stock market is late cycle, like material companies and energy companies and things like that, but we haven't even started the

recovery yet, there's going to be a question there. i think that's what i missed. i don't think this is ending shortly. i think there's still time to get on the band wagon here. but i think we want to do it in a very prudent manner. >> paulson has been the opposite -- >> which paulson in. >> jim. he was in barron's with the overshoot on the downside was brought on by, you know, a once in a generation financial calamity. now we're just reasonable at 15 times earnings. you know, we'll have him on. you could say he wrote it down 14,000, too, never really felt -- he always felt sangwin about prospects. what do we do now? >> i say people should be normally weighted, not super

weighted, not under weighted, but even and the leadership in the market right now is the old leadership. you've never had a new, true long-term bull market with the old leadership taking place in the new market. it's always -- there's always a change in leadership because the economic back drop changes.s. we haven't seen that. we're seeing china, energy companies, material companies, commodities, it's the exact same stuff. >> some of the blue chips joined in in the last -- >> they have. >> a little higher quality stuff rather than the bounce. >> that's right. but the other thing is that everything is still highly correlated. look what's going on. the dollar goes down, stock market goes up, commodities go up, ee emerging markets. there's two trades, economy is going up or down. that's the only trade out there. when you have such dichotomy it seems like there's a place for treasuries in portfolio. hedge fund are completely correlated -- >> what about oil?

>> you could have put technology in there and taken the gains -- >> one of my colleagues at merrill brian bellsky, who's at oppenheimer saying this is is going to be the growth story of the year. i think he was absolutely right. i think that's probably going to be -- i think it's long in the tooth right now but i still think that's the leadership right now. but the fact that people are still very, very hot on china, very, very hot on commodities has got to make one worry. if commodities go up dramatically from here, what happens to the consumer in the united states? >> right. >> you can have cash for clunkers but you have to get a lot more fuel -- >> oil's over $70 today based on, you know, on the recovery, which seems to be self-limiting. >> what steve was saying before about the speculation, one has to wonder how much t.a.r.p. money has gone into bank balance sheets to speculate, right? because the amount of speculation commodities on bank balance sheets is much larger than what you get from the cftc.

you know, cftc is one thing, but unless the otc markets are much, much bigger. you know -- >> i heard that directly, richard, one of the things banks is doing is lending to the speculators to speculate in the oil markets because it's -- >> oh, absolutely. >> it's an asset-based loan they get. it's secured. >> absolutely. i mean, just the swaps. when i was in merrill we did some work -- for the bank of international settlements gets you information on commodity-related swaps. there was a point in '08 or early '09, i don't remember exactly when, when the total value of swaps on bank balance sheets was 2 1/2 times the sales of all the material energy companies in the world. so how could one argue there's no speculation if you're hedging 2 1/2 times your sales? by definition you're speculating. >> and betting on the future raises the current price, you say? >> well, of course. >> i'm betting on the future -- glo it's futures. >> i'm not betting on the current price. i'm not buying -- >> no, no.

these were swaps, making a bet about the future. >> all right. richard will be with us for the rest of the show. steve, you'll be back in a little bit? >> a little bit. >> if you have any comment or questions, if you want to write in any questions or rich or steve, e-mail us at squawk@cnbc.com. up net next, we have blackrock's bob doll.  time now for today's aflac trivia question. who was the first former little leaguer inducted into the baseball hall of fame? oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh

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now the answer to today's aflac trivia question. who was the first former little leaguer inducted into the baseball hall of fame? answer, pitching great jim "catquiche" hunter, who was inducked in 1987. dow saw the biggest percentage gains since 1989. joining us is bob doll, blackrock's vice chairman and cio of equities. you were quoted over the weekend in barron's when they look

backed at growth funds. growth funds beat the value funds over handily. should we reach much into this? >> i think the value stocks will come back, becky. a lot of the drag in the last year or so in value has been the financial stocks. we know when growth becomes more plentiful and as the economy and earnings improve, that will be the case. that's usually when value stocks begin to outperform.m. so our guess is the nod will go in that direction. >> so have you changed any of your buying patterns as you see this setting up? >> well, we become a little more value-oriented in what we do. we trim technology, which tends to be more growth-oriented, like it for the long term. we've taken some money and added it to energy on the pull back we saw several weeks ago. so our view is that you do want to lean in a value direction. >> you know, bob, we were just talking about energy prices with oil back $70 a barrel. if you're getting into these energy stocks, is it your best

guess that energy prices will continue to climb? >> well, i think if they hold in here, the oil companies can do pretty well, becky. look, oil is, yes, up from 35 to 40 but also down from $145.. and i think we have to look at it from both perspectives. as the emerging markets are recovering, the developed world on the verge of ending its recessions, it's hard to see the price of oil going down a whole bunch. >> if oil does well -- if the oil stocks do well when oil is around $70, when do you start selling some energy stocks? if it goes below $60? >> we saw a period of time where we thought oil was employing to be sustained lower, we would be trimming back. but it's a view that the global economy is showily but surely improving and that means you need some cyclicality and our favorite area remains energy space. we have economic growth, pretty good cash flow on many income

statement. >> it's rich bernstein. >> hi. >> you mentioned value and the technology and sexy stuff. some financials you mentioned and some consumer discretionary things like newspapers and things like that. should people begin nosing around in those more consumer cyclical type stocks now? >> we think it's a hard slog that you can be selective in some of the, for example, dollar retailers, which benefit from the trade down that americans are going through and their buying patterns have done better and will continue, but drop down in quality won't make sense. we think higher quality will do better. we're encouraged what we've seen in the last few weeks on that subject. >> bob, if you're watching for the jobs number this friday, i know that this isn't the number

that you take huge into account when you figure out whether to buy and sell but it seems like the stock market could be setting itself up for a disappointment if we are betting on fewer than 300,000 jobs -- job losses coming in for the month, do you worry that could be something that could set off a pullback and end the momentum? >> there's so much tension on these jobs numbers, you have to be worried every time one is about to be released. i do agree with you that we've come a long way in a short period of time. we could pull back. there's so much cash on the sidelines, i don't think there will be a huge pull back because that cash going to come in. >> have a great week. when we come back we'll preview the big jobs number on friday and the ceo of lowe's joins us on the day they report earnings. tomorrow, "squawk box" is in session. congress racing against the clock to pass health care reform.

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welcome back to "squawk box" on this monday morning. let's take a look at markets. we've been watching futures with very strong moves this morning. in fact, you're talking about the dow up by 88 points above fair value. this comes after we saw some strong bank earnings coming out of london. we'll copy an eye on this s throughout the morning. remember, after the gains this week, people will be watching closely. ford doesn't come with numbers until noon eastern today but the company it said will post it's first year over year increase in about two years..

you can thank the cash for clunkers program for that. phil lebeau will talk with ford sales analyst george pipas at 11:00 on the call. computer chip sales rose 17% in the second quarter compared to the first quarter but they were still down about 20% when you look at the year over year comparisons. again, gains for the sequential quarter, a little bit of a depression, down 20% year over year. ♪ it's the final countdown ♪ the final countdown >> there's steve. >> we could watch that all day. we're starting the final countdown to jobs friday. steve liesman will be right there in grand lake stream, maine, with some of the top

money managers talking top strategist. we'll be live from leen's lodge. here in the meantime with the jobs preview, jack of capital markets, steve liesman and our guest host rich bernstein, cnbc contribut contributor. what did you think of that? did you pose for that? >> that stuff there? absolutely not. >> you were aware that was, built, right? >> no, i was not. i was unpleasantly surprised to see my cast speeded up. you take time. it's all about rhythm and motion. and then the guy who does it, i'm sure at greco's behest end up making fun of me. i thought it was an elegant cast and then they make me look stupid. >> what's the tone going to be on jobs before that number hits? >> you know, i think -- you know, when was the time when joe was making a big thing about minus five and plus 500 with the

five handle?e? now it's the three handle. we downshifted to the place where market wants to see minus three. consensus is minus 275. the closer down to two you get the 9.7% unemployment rate seems baked in the cake.. what i thought was interesting after the revisions to the gdp last week, the minus 1% and the work over the weekend, economists saying third and fourth quarter looks better. along with that comes a sense maybe we can avoid the worst on unemployment. the 10% may be the cap -- talks about 11%, 12%, may be overstated, 15%, may be overstated. not to say the jobs market will get better any time soon but also maybe we return to job growth sooner than, as geithner said, the second half of next year. maybe we can pull that forward. a little bit more, you know, brightness on the jobs picture comes from more brightness on the -- >> rich, do you agree? >> i do. >> really? >> well, i basically agree. i think the initial jobless

claims, which are a leading indicator, had been looking a little better, but we're not at minus 650, minus 700, we're in the fives in terms of national jobless claims. things have improved. i think the key number in friday, the thing i'll be looking at, will be hours worked, the work week. that is a leading indicator in that report. a lot of data is coincident. the one leading indicator is hours worked. if the work week begins to extend and we see it getting longer, that would be very, very bullish because that normally would happen before companies hire more people. they extend the work week, make them work overtime. >> we're 33 or so right now? >> i think it's 32 and change. it's been hitting all-time lows. >> 33 on the button. >> good call. >> let me ask you, jim, what do you think? a, are those things true? b, does it matter if consumption this week comes in extraordinarily weak? >> well, i mean, certainly the

employment numbers seem to be getting less negative. what the employment report does on friday will certainly influence how people perceive the momentum here. we're looking for minus 250, better than your consensus, but certainly still down. on the consumption numbers, certainly one month is not going to make or break views. we already have the retail sales report. in the meantime, we are expecting to see the big jump in auto sales in july.. so whatever the june consumption number shows, july is probably going to look a lot better. >> jack, how about you? weigh in here. do you think we're seeing some sort of manufacturing led rebound in employment that will happen in the second half? >> look at the numbers out of chi china, even the uk. they had a good banking number and report.t. they actually had an uptick in their manufacturing data. again, you're seeing the effects of stimulus. the question is, is there any traction to it? again, today's rally is indicative of money coming in in the beginning of the month. you've got all these asset

allocations. you can see where it's coming from out of the short end of the yield curve. the real question, is there sustainability? is there job growth?? what i'm going to watch -- i think hourly earnings is another key but more importantly, the revision. let's see, if indeed we're seeing that deceleration as we start to bake it into these prices. >> jim, let's say data comes in that confirms the jobs picture is better than we thought two or three months ago. does that mean to you that the consumer is going to be spending as they have historically, given the fact that the credit buble is no longer what we thought. they keep saying they're going to deleverage. their access to decent rates on credit cards, things like that, is obviously limited. >> and, frankly, this won't be the final word. obviously, a negleative for payrolls is not consistent with consumption. we've come from 700,000 negative to hopefully 250,000 on friday. that's a lot of improvement but

we need more. the stabilization and consumption in the first half of the year was fiscal stimulus sustained. >> jim, i was looking, because, you know, everybody's talking about the need for the consumer to pull back and other parts of the economy to take over. the economy is actually more reliant now on the consumer than it had been in the past. if you look at consumption as a percentage of gdp, the percentage has gone up because everything else has fallen down. we've made no progress there.. we still need the consumer to come back but we need to see business investment accelerate, we have to have continued pretty strong government spending, help from trade, help from inventory rebuilding. i don't think it's fair to look the consumer as the person who's going to lead us out -- the thing that's going to lead us out of this. >> one more thing. jack mentioned about average early earnings. i think we're starting -- people are starting to get much more bullish on corporate profits.s. i think if we see a strong

rebound in corporate profits and we don't see a perceived, that's the keyword, perceived c commensurate rise, i think taxes will go up. i think wash, will close loopholes -- >> the obama administration is very reliant right now on a supply side rebound. it needs to have business investment or production lead business investment lead to employment perform of all the turn arounds we've needed, this one needs to be a supply side turn around. >> absolutely true. but inc. it will be too hard with the focus on the fiscal problems and everything else and the deficit -- >> and their pledge not to raise taxes. >> bush got a demand side rebou rebound. obama needs a supply side rebound. >> jack? >> i find it the most ironic thing in the world. that's one of the biggest obstacles this fr this point on. we're get back to election day,

1004 is where the s&p was on 10-04. it's at this point whether we judge whether the market's good or not and i think the market's going to price that. this is a critical week for tech anythings and fundamentalists. >> jim, last word from you. what's the best number you can imagine on friday? >> you know, july is such a wild month for seasonals that it's not inreceivable you could even get a zero or positive. i'm not forecasting that, but really anything is possible. >> a positive -- >> i would be happy with a minus 100 but i forecast -- >> you mean net job creation? >> even if the trend is negative you can always get wild numbers. i don't think the trend is positive yet. again, i think 200, 250 negative is probably a reasonable estimate of the trend right now. on any given morning, anything can happen. >> the seasonals which messed up the weekly jobs number, are they going to mess up this number on friday as well?

>> to a significant degree, no. a lot of autoworkers show up on the books when they're unemployed because they're partly paid by the company. >> you're going to use that up at leen's lodge. that will have them rolling in the aisle. >> the seasonal? >> the bush supply sider got a demand and obama the -- >> ha, ha, ha, ha. >> oh, yeah. >> you have your economy -- you have your economist jokes ready? >> i've been thinking about them. i'm working them out. >> they're the most -- they're like physician cyst jokes. like did you hear about the topspin cork -- >> i'm the original topspin cork. >> the bartender says it's a positive extra analogy. >> yeah. >> but you're going to use that. >> can i make the point f you listen to the economists at leen's lodge this year, last last year you were out of this market, you were expecting a huge downturn. these guys -- we came back with

a holy beep because these guys were so negative. we had four pieces on tape we had to put on. i went to our executive producer, i said, matt, you have no idea how downbeat these guys are. matt said, do it. we did it. if you listened to ez these guys last year, they were out of the market. they were more pessimist than the consensus but not pessimist enough. we'll be pleased to do it again. >> until we get a positive number on friday, you can't feel -- it just seems like the economy is not recovering until -- i guess that's why it's lagging. you're not recovering until the net -- the net result is an addition of people coming back to work. it's weird that minus 250 is still -- >> but look, we want to be on the curve.. we talked about this for a long time. we were off the curve to say this is how a typical recession behaves. now we say as job losses diminish, you can expect this. as inventory builds -- or

declines draw down down, then you get to gdp growth which leads to x, y, and z. >> we have to go. 33 1/2 hour. i like that. earning central added something because we've been working longer hours. >> longer hours. >> jim and jack, thank you for your time. >> quickly. i said at the top of the block that ford would come out with auto sales at noon.. they moved it up to 11:00. that's when their chief auto analyst will be on. when we return on "squawk box," dennis garmen on where he sees oil prices headed, energy position limits, speculateders in the market and whatever else we can throw at him. as we head to break, a look at where gold was trading. it's back to almost 960. tdd#: 1-800-345-2550

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commodities prices waivering this summer. some surprisingly strong earnings reports last week were enough to push oil and copper prices much higher. dennis gartman joins us. great to see you. >> great to be here. thanks. >> we have been watching these volatile commodity prices. it got so crazy for a while over a year ago where you said, forget it, this is a little too chaotic. are we getting back into some of those volatile swings? >> i think you almost are. look at what's going on in crude oil, for example. normally, i watched the spread between the various months, what's known as the cantango. you're moving those differences almost $1.50 over a six-month period of time. these are unusual circumstances. volatility is coming back in in a big way. you're seeing copper prices up

seven, eight, nine cents in a day. gold moving $25 and $30. it's not quite what we saw. it's not the volatility we saw last july and august but it's getting close. >> you know, the other thing, dennis, there are a lot of people who say this is all because of the economic outlook, tied to fundamental things, are we using enough of this copper and oil, or there are other people who say, no, no, no, this is just because there are speculators getting involved again. there's money available for this. what do you think it is? >> i think there's some speculation involved. in the commodities future market for everybody who is long there is somebody who is absolutely short. i think we get a little too concerned about whether speculators are in. if there's a speculator buying, there's probably a speculator selling. >> but is there a lot more money that floods into meez these markets when you start looking at things like etfs, pension funds putting significant amounts of their reserves into some commodity markets where they hadn't been before, does that throw off the normal market

that we may have seen a few years ago? >> every once in a while the long-only funds who have to have derivatives created to accommodate the size, that can happen. we did see that last july and last april, may, june and july, no question. a lot of those funds, though, becky got so burned last year, it took them two years to get in.. they finally built large positions up in may, june and july last year. lost enormous sums of money. the proceed pen tis to step up aggressively and buy again is somewhat reduced. nonetheless, we have seen calpers and large state pension funds say they understand the need to diversify, to own commodities. is there some net in movement of funds? no question. is it as violent and rapid as it was last april, may and june? i doubt that. >> our guest host today is rich bernstein. rich, you have some concerns about watching these commodity prices as they continue to climb. what is that big concern? >> my biggest concern is some of

the markets are already acting like we're in a late cycle. if we see oil prices or gasoline prices start hitting up or input prices like copper, it either means profit margins will be squeezed for corporations because they can't pass on that price increase to a weakened consumer or the consumer itself in terms of things like gasoline feels a tax hiblg, if you will. every cent at the pump is essentially a gas hike to the consumer. so my personal concern is the rise in commodity prices choke off expansion. i think it's bullish if we see lower, the lower gasoline goes the more bullish it is for economic recovery. most people would argue oil is going up reflects the economy is going but i think that's a chicken and egg thing. >> what do you think about that? >> rich is spot on right. gasoline is really the only price consumers see on a consistent basis as they go and fill up their tank. when you start to get over $3,

people have a propensity to stop buying. if you get back to $4, we clearly know that's the shutoff point. it is, in fact, a -- for lack of a better term, a tax increase. you have to be very careful. this economy, i've been on record saying i think the recession has ended, but if you start to put gasoline prices back above $3.50 or $4. the consumer stops completely. he want to save to begin with and he'll cut back swiftly if oil goes higher. can crude oil get much better $75 a barrel? i have my doubts. >> dennis, it's rich. >> hi, rich. >> because commodity prices have started correlating more with equity prices do you think it's wise for these long only funds to treat commodity as a diversifying asset class or should they be looking at something else? >> very good point. i wish they would stop thinking of it as a diversification, at least for this term, this period of time in the economic cycle. the two are running absolutely

co--extensively, one with the other. it's a ramping up of your exposure. if you're long stocks, you are long exactly the same thing. you are long in expectations, the economy is rebounding. i think that's a recent -- i think that's a decent decision but i think you have to be very careful because you've lost the diversification facet you thought you were putting into effect. >> dennis, will you come back and visit in studio again?n? >> any time.e. as soon as i get up to new york, you'll know it. >> great to see you and we'll talk to you soon. when we come back, one of the largest diversified holding companies in the entire company, loews out with earnings this morning. we'll check in with jim tisch, the ceo, to see how the company is working through the recession. u

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take a look at stocks to watch today. hue man that reporting second quarter, three cents ahead of expectation, in line with guidance and revenue slightly ahead of full guidance, 6.10 to 6.20 nongap and thaersz versus a reuters' estimate of 6.03. loews, we'll talk to jim tisch later, second quarter, $1.19 if you take out items but it's

tough to say whether that compares to the 98 cent estimate. revenue was $3.353m was upgraded to buy from neutral at goldman sachs. the target increased to 85 from 78. at least they had a 78 target. the neutral -- i don't know whether we have a chart. 3mf you had stayed at neutral -- i don't know how long goldman had a neutral rating, but 3m has had a huge move. actually, after the company -- there it is. i mean, i don't know how long you're at neutral. but the day the company reported, or the next day, a lot of analysts made positive comments and got out of the neutral and sell company. goldman maybe waited a little while so hopefully no one would notice but -- >> they got to the ge upgrade last week. 3m and ge in a span of a couple of days. >> 40 to 70.

gap -- or e no, ann taylor downgraded to underperformer at cowan. gap upgraded to overweight from equal weight at barclays. jcpenney upgraded to market weight from under weight at thomas weisel, that firm opening up that manhattan storm and what that means. that's kind of a change coming to manhattan to compete with macy's -- >> all quest at that job -- >> maybe it's personal. when we come back in the next hour of "squawk," the ceo of loews, as joe mentioned, jim tisch, will talk about the company's latest results. and senator bob corker on the bill to wind down bank holding. fithe same tools the pros use,

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the cash for clunkers program about to stall.l. >> you don't drive with your eyes. you've got to feel the road. >> but will the senate give it a jumpstart? and how much did it help the big three? we have a sales preview coming down the track. >> i'm embarrassed. i really thought i could feel it. checking into earnings central. >> got room? >> i beg your pardon? >> got room for tonight, mate? >> loews' ceo jim tisch will tell us if the economy it is turning around. >> a single? >> yeah. no, make it a double. i feel lucky today. more power for the fdic, bob corker, member of the banking committee, on his efforts to get the agency more authority to unwind bank holding companies. "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and carl quintanilla and merrill lynch former chief strategist rich bernstein, now host of richard bernstein capital and a cnbc contributor as well. let's check on the markets right now. a big day shaping up, at least pull back a little. we did had sdubl digit gains -- >> triple. >> yeah, triple on the dow jones. given what we did in july, it was a huge month, august starting out in similar fashion, at least so far. i guess the european banks reporting results that weren't -- that were better than expected. that's one of the reasons. we're counting down, as we always say, to the friday unemployment report. expected to be a big negative,

but it's lagging -- >> lagging and declining numbers of job losses. >> so you add up everybody who got hired with everyone who got fired and if you have a net 250,000 it seems like that's not -- >> if you talk to anybody, i talk to my neighbors or anybody else, they're still worried about what's going to happen to their jobs, what they should be spending. >> talking about extending jobless benefits even longer.. you saw the front page of the "times" -- >> they're running out. or if you have a gas guzzler you can get $4500 to li on -- >> they don't send it to you. they send it to the dealer. >> so the dealer gives it -- >> gives you the car. so it is kind of like they just -- simp >> oh, that's better. >> at least that's what -- >> and the dealer doesn't send it to you. >> no, i don't think so. >> it is a new month. that means we get a whole new

slew of economic releases coming up this week. all of it leads up to friday's jobs report. that's the biggy. today we get the institute for supply management. they report on manufacturing. tomorrow we get personal income and spendspending. we also get personal home sales. on wednesday, this is when things really get into high gear to look for the jobs. we get the adp employment report, factory orders and ism nonmanufacturing are coming out. thursday we get the weekly jobless claims and interest rate decisions from the ecb and the boe. on friday, it's the jobs number. forecasters are expecting the data to show that the economy lost more than 300,000 jobs last month, although some in the market are expecting less than 300,000. that's going to be the big question. anything could happen on any of these jobs reports numbers, but right now people are looking for unemployment to climb to 9.6%. meantime, health care, the main topic of debate in washington again this week.

before the house left for a five-week recess, speaker nancy pelosi gave all 256 democrats cards outlining key points of the house's health care proposal. that's an attempt to keep members on message in their home districts. late friday the house energy and commerce committee passed a bill that would let the government negotiate payment rates for a public health insurance option. they would allow states to set up insurance co-ops and protect biotech drugs from generic competition for 12 years. meanwhile, the senate finance committee says it will not vote on legislation before it recesses at the end of this week. now administration officials, including treasury secretary geithner say the white house prefers a bipartisan approach but may move forward without one. we want the full story, so we're taking the show to washington tomorrow. we will be live on capitol hill starting at 6:00 a.m. eastern. we'll be broadcasting -- or cablecasting from a senate hearing room where we will talk to congressional leaders, members of the obama

administration, industry experts. what's the room again, joe? it's in the dirkson building -- >> the energy subcommittee hearing room. >> nice. >> i'm willing to stay here and hold down the fort. >> no, no, no, we need you down in washington. >> i have my machine. i can follow the markets, futures. you can talk -- >> there will be no guests here. >> that's okay. you definitely want me to -- >> yep. come to washington. we know how much you enjoy -- and you might run into senator boxer. >> yeah, great. >> talk about her new novel. >> maybe i will. let's get some insight on all of those things from our guest host, richard bernstein, former strategist of merrill. >> he's wearing a jacket today. >> we will be tomorrow. >> yeah. >> is the health care thing moving in a way that's business-friendly or too early to tell? >> to be honest, i think it's bizarre we're jumping from one extreme to the other extreme e back and forth. as an investor i found it very frustrating to find out who's

going to be a winner and loser. one week, you think managed care doesn't do very well, the next week sentiment changes and they say, well, maybe it will do okay. and i think it's quite bizarre what's going on. >> now on the dem front -- for a while they were trying to align hospital and insurers as their ail lies, now there's word they're going to the districts to run ads demonizing the insurance carriers as profit-generating -- >> my personal point is we have to remember the managed care industry is called the managed care industry. their role is basically to manage the process. it's not like they were inviting everybody in to health care. so that's why i have a very tough time seeing how they do well down the road, just given what they're supposed to do. they're supposed to be the gatekeepers. >> let's get your check on

china. shanghai, pmi out of china, a 12-month high, above 50 yet again. are they really making, building things in china, and is that good? >> well, i think there's two ways to look at this. one is i think china has gotten very, very expensive. i mean, we can talk about the growth in the economy but we're all investors.s. we care about the markets more than the economy. stock market has gotten very, very expensive. it's up to four, four plus book value. it's rarely a good idea to buy stock at such high valuation. the other thing is credit fuel. when the stock market there went down 5%, 6%, 7%, one reason was was there was a rumor government would was going to clampb back on credit creation. the stock market reacted negatively immediately. there's a credit bubble going on there, some say a huge credit bubble but we have to realize they are building capacity. for the inflationists out there,

yes, you may see short-term gain in commodity because of the demand to build this capacity, longer term this will exert deflaegsary pressures on the economy. >> when? >> there could be secular which is one of the reasons we have to worry down the road, not in the neck two weeks, but we have to watch for things like protectionism. deflation and competitiveness and overcapacity leads to protectionism. >> that was something that came up this morning, lou breen saying in the '30s, there was a fear of inflation, and it ran back and then there was a big treasury rally again. >> i like treasuries because i think it's a diversified class out there. i think if you're not an inflationist you can see the path down the road. >> rich, a lot more with you for the rest of the hour. >> the nation's automakers

report july sales. the cash for clunkers has ford on track to report the best numbers in two years. i mean, the clunkers program, it's not a great name, number r one. >> i like it. i remember it -- >> the clunkers program? >> it's good. easy to remember. >> all right. >> what do you want, another acronym or -- >> i want something that sounds classy, something that sounds classy. i french -- i almost said -- the french have it and it's permanent, basically, over there. >> what do they call it? the cash for clunkers. >> yeah, the cash for clunkers. the bill is moving on to the senate. cnbc's phil lebeau is at an auto dealership in lagrange -- is that a zz top song? >> yes. as somebody who grew up in lagrange there's no chicken ranch in lagrange. >> you do -- >> why, you were looking for a chicken ranch and you kobt find

one? what happened? >> oh, good god, this is spiraling out of control. >> it is. >> let's talk about cash for clunkers, guys. >> is the senate going to say yes? is there any way it doesn't happen, phil? what are you hearing? >> there is a chance it won't happen, if you listen to everybody in washington, the secretary of transportation was out, he's indicating he's optimistic we'll see the senate approve another $2 million. the expectation in washington is we'll see the program continue for some time. when you look at what's happened with july sales, i mean, it is remarkable the change we've seen over the last four weeks. beginning of this month, boy, the sales were very weak. now there's been a real sales surge for july. in fact, as you mentioned at the top, ford will be posting its first monthly sales gain in two years. that's not all. later today we expect chrysler to indicate that it's going to be coming out with mortar getted incentives.. remember, it was doubling down on the cash for clunkers 3500 or 45$4500 rebate.

they're not likely to continue that. it will be mortar getted. for the industry, don't be surprised if we see the monthly sales pace topping 11 million vehicles. that's the sales pace. again, all of the success, if you will, for auto sales in july, you can attribute a good chunk to the cash for clunkers program. not only bringing in people who were buying more fuel efficient vehicles. in fact, eight of the top ten models bought in the program have been four cylinder, compact cars. the senate is to vote this week on an additional $2 billion for the clunkers program. here's what the transportation secretary had to say about his outlook for the program. >> i believe the senate will do this because of how wildly popular this is. and i'm sure senators are hearing from their constituents all over america, particularly those who have already gone into the dealerships and purchased an

automobile. >> take a look at shares of ford, which have been rocketing over the last month. thanks in part to better than expected reporting of earnings or a lower than expected loss in the second quarter in july. speak of ford, we'll hear from ford sales chief george pipas. ford reports july sales at 11:00. we'll hear from george pipas at 11:10. when you talk with george and ask him the question s this the beginning of a sustainable build in momentum for auto sales? there's some optimism there. in the past you'd talk to him and he'd say, we're really not sure. they're really starting to see the sustained sales building. in other words, we will likely see more people coming into showrooms as the economy improves. they're already noticing it at ford and some other automakers as well.l. don't miss that first on cnbc coming up at 11:10. >> phil, if you talk to these -- there you go. there's your music for you. if you talk to these guys and d the auto dealers and you assume

that -- >> he can't help himself. >> no, he can't. >> they don't get additional funding, are they optimistic about what they're seeing?? do they think people will continue to come in? >> yes, they do. sales will tail off if cash for clunkers runs dry in the next day or two. if it continues for the next month on two, the sales pace may not be as strong as in july because you had a lot of sales written up in advance of the program. the pipeline was stuck. so what we're expecting to see today will likely continue in august and in september if the program continues. even if the program doesn't continue, there's been a churning of the market. 35% of the people who have been coming into ford dealerships, they don't qualify for the program but they're interested in looking for a new car. there's indication there's pent if up demand, the economy is improving, stock market is improving, people feel more comfortable going out to look at a new car. >> they don't qualify because they don't have a big enough gas

guzzler, clunker or credit rating? >> no, credit's not the issue. when you talk to autonation they tell you higher than average percentage of people are coming in who qualify. that's not the issue. the issue is do you have an official clunker. i drive an old car. it doesn't qualify.y. you have to one that really does not meet the fuel standards. >> phil, thank you. we'll see you later this morning as well. appreciate it. >> okay. >> we'll also have much more with our guest host, richard bernstein, over the next hour. jim paulson of wells capital management will be joining us to talk about if it is time to stick with stocks for the long haul. up next, though, oh, boy, we thought this was over. we're checking back into earnings central. we have the ceo of loews, jim tisch, he'll talk to us about profits and performance in a tough economy. in this afternoon don't miss an exclusive consideration with johnson & johnson ceo bill weldon. i've been growing algae for 35 years. most people try to get rid of algae, and we're trying to grow it.

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earnings central -- >> earnings central? >> uh-huh. >> oh, boy. old habits die hard, don't they? >> a nightmare -- >> they did that just for us, didn't they? health insurer humana posting a better than expected second quarter profit revenue and beating the street, boosting higher premiums from medicare and insurance programs. that stock going to be a nice winner today. loews corporation also out with second quarter earnings earlier this morning. the company actually earning $1.19 a share. when you strip out some one-time items. joining us right now is jim tisch, president and ceo of loews corporation. jim, it's good to see you this morning. >> good morning, becky. good to see you. >> good morning let's talk about your earnings number. first of all, there's a little confusion. we're talking about how you earned $1.19 a share when you

strip out items. if you include everything it was 78 cents. the street was at 98 cent. the wires are saying this was a larger than expected loss. what do you know about what the analyst know and how we should be reading this? >> my guess is they're looking at net income which includes realized capital losses. if you exclude capital losses the earnings would be $1.19. >> what does the street know about and what does the analyst on the street not know, is the question? the stock was trading higher last time i looked. >> i guess -- well, the street doesn't adjust -- they don't -- they don't try to predict capital gains and losses. we have capital losses of $178 million but we had unrealized appreciation in our portfolio of over $3 billion. >> why don't you tell us about what you saw at cna financial. that's obviously been -- that's something people have been focusing on because it's a

mortgage-backed security holdings there. >> cna had a terrific quarter. their earnings were very strong. for cna they came in at about $300 million. before capital gains and losses. and everything was just going well. the new management team has been doing an extraordinary job rebuilding the business, the investment portfolio performed very well. and for the tenth consecutive quarter the company released reserves meaning the actuary believes the company is overreserved. >> what do you see when you look out there at what's happening in the energy markets? >> well, diamond offshore has a very strong backlog, about $8.6 billion worth of backlog.

our semisubmersibles are doing very well. the jack up market isn't doing as well because of gas prices in the united states as well as because of just the large number of jack ups that have been built over the last several years. the semisubmersible market is carrying the day. we saw some weakness in the past quarter, i think, reflective of the fact oil prices traded down to $35 a barrel in the winter. but now with oil prices at double that amount, my guess is that over the next several quarters, we're going to see the oil companies start to get confidence again and come back to contract, to use semisubmersibles and jack ups. >> over the weekend we heard from a lot of different people. greenspan saying he thinks we're nearing the end of the recession and several people in the obama administration saying, we could be nearing some sort of a bottom but that they think it's going

to take quite a while to pull out of this. you have your finger in a lot of different areas of business. what -- where do things stand from your perspective in terms of the broader economy? >> listen, i agree with them. i think that we have been through the worst but i think the problem now is that we're not going to have the explosive type growth coming off the bottom of a recession. typically coming off a recession you would expect 4% to 6% growth year over year for the first year or two of the recovery. my guess is that we'll be lucky to have 1% to 2% growth over the next year or so on a year over year basis. and the reason for that is that we're still in the process of liquidating enormous amounts of debt. we've had -- we had an enormous accumulation over the past 50 years of debt. it went from 120% of gdp to 160% of gdp. and i think it was the debt that actually caused the decline in

the economy. and we're now going through this debt liquidation process that will probably take two or three or four years. it will be painful because without an increase in credit, we're not going to see significant economic growth. >> jim, thank you very much. it's good to talk to you. >> good to talk to you. >> we will see you soon. jim tisch, president and ceo of loews. coming up, giving the fdic more power.. bob corker will talk about a new measure he's back. medicare.

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five big days ahead for the economy. steve liesman's theme song is playing. he'll be along. we'll head to trading pits of chicago to check in with rick santelli. oof!

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welcome back to "squawk box" here on cnbc. first in business worldwide. we are one hour away from the opening bell.. we've got a heavy week of economic data week. personal income and spending comes tomorrow. on wednesday we get the adp

employment report. thursday, jobless claims.. it all leads up to friday's big number for the jobs data. right now, let's set up the week with rick santelli and john brady at the cme group and steve liesman in studio and our guest host, richard bernstein. rick, we haven't heard from you so why don't you weigh in, tell us out of all those numbers, what's going to be be the most important? the jobs? >> reporter: i think the unemployment rate. prior to the credit cries, the unemployment rate was the fodder of the 6:00 news. not that there's anything wrong with the 6:00 news, but pretty much an overview, easy to get your arms around. now the same dynamic plays to the population at large and the psyche of the consumer.r. and i think some of the anxieties out there. so that's what i would look at. also keep in mind, the current programs in place, cash for clunkers, one, whether it's renewed or not, is going to make the future that much more doisy to protect. there are short-term issues going on that could elevate

certain metrics but in the context of several to six quarters it goes difficult to predict. one thing most are all agreeing on, that is the unemployment rate isn't going to peak at any time soon. >> one of the points you just made, rich was speaking earlier and you talked about how difficult it is as an investor when the signals out of washington are mixed. >> they are mixed. rick raised a very good point in terms of the unemployment rate and the individual investor psychology that goes along with that. i think until the unemployment rate peaks and begins to fall over, we probably won't see too much participation from the individual investor. if we start to see that rolling over, i think we'll see consumer confidence go up and we'll see the individual investor actually come back to the marketplace. >> you know, john braid y we were talking earlier this morning about the market expectations for this number on friday. and, obviously, people are looking for a better number than we've seen in many months.

if you're talking about job losses of under $300,000. it's still job losses as a net loss. and what happens if that number's a little higher. ? how is the market set up if that number is a bigger loss than expected. >> well, becky, i think the unfortunate part of the july data set as it speckically relate to the unemployment number is the fact that july saw a lot of seasonal adjustments within the auto production system. there was a lot of statistical noise, as you know, within the weekly jobless claim numbers. you take the seasonal distort n distortions mixed in with the birth/death adjustment, fire revisions it will be a difficult number to trade off of. when i say number, i mean specifically the nonfarm payroll number. this week on thursday will be the first week in the last four in which the jobless claims series will be a clean number. meaning that the number will not be affected by seasonal distortions or by auto plant retooling.g. we would perhaps suggest the

weekly jobless claims on thursday will be the cleaner number as it relates to net job losses and gains. as your distinguished guest host suggested, the unemployment rate as most policy makers has acknowledged is probably going to 10.5 prst by the least in the middle of 2010. we don't think the market will trade much off the nonfarm payroll. >> steve? >> just a little disagreement with john. a lot of economists thought last week was the first clean one we had. of all the data coming out, what's interesting, once again, if you want the heads up on what's happening in the jobs market, the weekly jobs claim, is probably the number one leading indicator of the job market. and i think it's interesting what richard said, was that people need the unemployment t rate to come down to get back into the market. well f you waited for that, you lost the 50% move in the stock market. you missed the improvement that jobless claims gave us, even though some was noisy. we tried to point out which ones

were noisy indicators, which ones were not. follow the jobless claims, then follow temp employment, then follow wage and income. finally -- in fact, i'm going to do this for tomorrow. i'm going to look at which indicators turn when relative to the end of the recession. we'll do that. >> steve, you're assuming that many are continuing to view the markets in a somewhat logical fashion benchmarked against pregovernment intervention history. i disagree. i think there's many investors out there. i'm surrounded by quite a few who have jumped in with both feet on equities and still think that the economy is still very, very dicey. that the transmission mechanisms are all screwed up. >> really quickly, guys, want to mention breaking news we're just getting from apple that eric schmidt, the ceo of google, will be stepping down from apple's board of directors, a position he's had since august of 2006. the quote here from steve jobs, apple ceo, unfortunately, as

google enters more of apple's core business with android and chrome os, eric's ability as a board member will be diminished as he'll have to recuse himself from board meetings due to conflict of interest. >> the government is looking into the relationship between apple's iphone as at&t whether or not -- because they gave the stiff arm to google that would allow you to make long distance calls for much cheaper. >> different phone number aall the different phones. this is probably -- i mean f we had -- good morning, he would have said -- goldman would have said, oh, yeah, i was expecting this. >> not goldman sachs. >> no. it's a sign google's tentacles are so large it's amazing -- >> it's amazing they were on that long, they could co-exist. >> there's been a whole theme called digital convergence.

everything is coming together. i think that's what we're seeing here. >> i'm doing it. i ordered the s-top plugged directly into my computer -- my television. >> was he on the apple board to begin with because google was competing with microsoft and jobs has always looked as microsoft so you figure my enemy -- >> bill gates is not on apple's board. >> al gore. >> well, i would hope the inveteraner of the internet would be on apple's board. i mean, come on. he invented -- i mean, get something for that. >> yeah. >> gentlemen, thank you very much. we'll talk to you again soon. reminder, steve liesman will be live in grand lake stream, maine, friday with some of the top forecasters and money managers. he'll be talking fishinging. more importantly, the economy. >> is "final countdown" redundant? >> sort of, isn't it in. >> no, not necessarily.y. you can count down to the

opening bell. then you count down to the closing bell. the final countdown means the last countdown forever. >> forever. like art cashin said, end of the world. >> is that your single best idea? >> what? >> that's a good one, isn't it? single best idea? that's what i'm saying..o exactly the same thing. >> exact same thing. >> very ironic. >> what? >> we're going to jim goldman. jim, good morning to you. >> good morning, guys. >> good morning. >> eric schmidt leaving the board, how big of a deal is it? >> i think it's a big deal. he has been so publicly against any kind of departure from apple's board, not understanding why there was any issue, any kind of conflict. but, you know, those of us who have been covering this company for some time have constantly harping on the conflicts. there have been so many of them ranging from everything from the g-phone and iphone to operating

systems and net books and google moving into that direction of an operating system itself that competes with the mac os. all of these issues and eric schmidt has always said, look, i'll just recuse myself any time there is any kind of a conflict. well, you know, everybody seemed to wonder, well, what's he been doing? you have to recuse yourself from so many different issues on so many different days that it stood to reason that his basic -- his time was -- his days were numbered. there was no question about it. >> i'll tell you what he was doing, he was, a mole. >> that's what i was going to say, wasn't he operating behind enemy lines all this time in. >> yes, keep your friends close and enemies closer. everybody wondered, you have other shared board members, al gore who's an adviser to eric  schmidt, also sitting on apple's board. arthur levinson. you have so many various relationships here.

it was just a matter of time. you're facing government scrutiny now as far as shared board members are concerned. the government is taking a very active role in silicone valley right now. we're talking about the -- >> also in the financials, backe of america's board.. look at that. >> yeah, but they've always played that role there, it seems. here in silicone valley, you know, you've always had microsoft as an antitrust issue and more and more google. now apple facing fcc scrutiny over the apps store and various antitrust scrutiny investigations, whatever level you want to call it. i think now companies are getting so sensitive to those issues that they're taking an active role in saying, hey, look, you know, before this goes any further, let's go ahead and do what we need to do first before we're told to do so. >> jim, it's rich bernstein. does this refrequent maybe the companies aren't the nimble growth stories they used to be and now their growth opportunities are fewer and furor and fighting over the same

turf? >> rich, i think that's just --- >> they're just mature companies now? >> that's a really good point except i don't necessarily think it's a question of maturity. i think it's a question of everybody looking at the same areas for exceptional growth. i mean, we're talking about net books, mobile computing and mobile devices and google and apple and microsoft and research in motion and all these companies that have demonstrated so much growth excitement. that's where they want to focus their time and attention. yeah, you're going to have a lot of overlap. why would you risk any kind of ridiculous overlap where you have shared board members who, you know, as you were just saying, could potentially act as moles. the interesting part here is that eric schmidt has said over and over, and recently as saturday, this is not something he thought he needed to do as far as leaving apple is concerned. >> so do you think -- bottom line is -- if he wasn't pushed, he was nudged. >> i think he was probably nudged. i think that that's probably,

you know, a meelgt of the mindsl apple's board, as we have learned over the past year or two, is such a quirky, strange kind of group of people anyway.. you know, they've got a very directed sense of where this company ought to go under the leadership of steve jobs. i think this was a meeting of the minds. i think they probably all realize what the current climate is in washington, what the current climate is in silicone valley, what the competitive landscape is mobily. and i think that they said, hey, look, you know, enough is enough. google, you go your way. apple, we'll go our way. you know, we'll just figure out how we're going to compete from here forward. >> well, they navigated the jobs' health issue successfully for their own purposes.s. you have to think they might -- they might have some idea when they're doing. jim, we'll talk to you later. thanks for the insight, jim goldman, talking about eric smid resigning from the apple board. now let's turn to our next guest for insight into the major market rally since march.

jim paulson, wells capital management, chief financial strategist. were you watching earlier or were your ears burning? >> i don't think i was. >> we were talking about you. i almost went over all six of your points you gave baron's for that -- when we see you in print we think -- >> i have nothing to say then. >> yeah.h. i thought it was a good piece, jim. i made the point that maybe you were a little bit too sangwin as everything was hitting the fan but you maintained a lot of calm at the bottom and you've been bullish the entire time. it's now coming to pass, 50% anyway. and you say we're just back to a reasonable level here. now we can decide whether to buy or to stay bullish or not. >> yeah. i think so, joe. you can look at this as, up 50% or basically i think you crashed in september, october, and you've been forming a big bottom

ever since. i think it's a bottom we can now launch. i think of all the reasons i laid out there, the biggest one that keeps coming over to me is just this legacy of doubt that's been left by the intensity of this crisis we've been through. we've had at least three months now of very good continuous information coming from wall street, from main street, from earnings. universely they say for the moe part things are getting better if not crisis ending. yet there's just so much doubt that we're out of this. and i think that's a good thing to keep this thing going. at the end of the year there was very little thought we would be recovering by the third quarter. which is now looking like it's going to happen. now there's very little doubt that even if we recover it will be a strong recovery. even if it is, it will be sustainable. i think that as long as we keep climbing that wall of worry, the odds are we could go into the upside. >> yeah.

you know, we went up the first 35 or 40. then we got a horrific employment report and all bets are off and the double dippers were in vogue. at the very best, an "l" or double dip. then all of a sudden july came and we rasped it back up above 9,000. do you think fekd go to 11,000 now? >> i don't know, jim. we're knocking on the door of 1,000, we have to see if we can open the door. i think going from 700 to 1,000 on the s&p was really diligence mu . you start to convert people to the idea that, oh, maybe this is over and i think there could be a point where we hit a bear conversion where it sort of has a gap upward movement at some point. i don't know where that will take place but i think that's another possibility. it may be easier moving from 1,000 to 1300.

>> jim, it's rich bernstein. >> hi, rich. >> there was one thing recently that i think kind of set some caution, the private equity guys, certainly among the smartest on the street r going to issue a lot of equity very quick quickly. what does that tell about you valuation and should we worry about valuation a little bit here? >> well, you know, rich, i guess i think that we're -- when i look at it i see an average valuation on an absolute basis. you know, we're around that 15 multiple area which is kind of average going back to 1870. what i also think is that the two most important variables for valuation, infrags and interest rates r extraordinarily below normal or much better than on average. so we almost have price stability in core prices, co-inflation at 1.7% headed down, wages inflation headed down as well. we have some of the lowest

interest rates we've ever had. i think if you have an average valuation in an extraordinary environment that that, to me, makes a very compelling evaluation case. i think there's a fair amount of room. i also think, rich, this upcoming recovery is going to be less driven by valuation and more driven by earnings. i know that that's really foreign to what people are thinking. i think the operating leverage that corporate america has created because they were so fearful of preparing themselves for living through the second coming of the great depression, they're so lean and mean that we're going to see some tremendous profit leverages. the economy and top line sales recover. i'm more concerned about earnings-driven companies than i am about valuation at the moment. >> all right, jim, we appreciate it. >> rock star. >> yeah. >> i mean, baron's is on the phone, is that what do you when they call? >> jong lang, he's -- >> i know, but do they call and say, can i talk to you about the markets or something?

is it the same way we call you? >> pretty much the same, pretty much. i stumble and he write it up nice. >> you can't do where we say, wow, everything is going to be okay for us, for our kid. >> i'm just happy it's better now. >> at the darkest days, you were a voice of calmdom. on the way down you're a voice of calm, too. >> these rose-colored glasses are great. >> right. >> thanks, jim. >> thank you. >> i was kidding. >> this is you. >> it's been an intense 18 months for the nation's banking system and the fdic has been on the front lines from the very start. now senator bob cork waner willk to us about banks efforts, talk taxes, cash for clunkers and

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our next guest wants to give the fdic authority to wind down and liquidate bank holding

companies, not just put them into conservatorship. joining us from capitol hill is bob corker from tennessee. senator, good morning. >> good morning.g. good to be with you. >> we're coming down there tomorrow. we're bringing the whole show. >> good. you can help us. we have a lot of sticky issues right now. >> do you have any advice on how we should behave ourselves on the hill?? >> well, i would not stay long. i think it might influence your program negatively. >> we don't want any of that to rub off and stick to us. talk to us about this plan, fdic bill you have going. the government wants to be able to put them in some sort of receivership. your idea is to not have that t option but only toly question date them? >> yeah, the administration, strangely, in their reg reform has put forth the notion of companies being too big to fail. they want the ability for the treasury secretary to take taxpayer money and to be able to keep these companies going. this is a bipartisan effort. senator warner from virginia and myself have said, no, we think

failing companies ought to have the ability to fail and unwind. and i think most of you know, everyone in the country knows today that the fdic has not had the ability to unwind complex bank holding companies.s. we know that as we talk this through, we're going to put other companies in the category of a systemic risk to our country. we haven't debated that yet. this bill can be broadened to take into account both entities. but i think everybody from ben bernanke to most folks in this country realize that one of the frailties that we had during this problem we've had over the last year is we haven't had the about to unwind these companies. it's created moral hazard. >> you just want to keep the government from turning these things into zombis, if that happens? >> that's exactly right. we saw what happened, for instance, with aig. there was really no ability to deal with a company like that other than to put taxpayers' money into it.

as we define more broadly what is a systemic risk, this legislation can be broadened to take those companies in. but right now we still, for a large banking entity, i won't mention names, some of which have had great troubles, we have no ability within our country today to unwind them in an orderly way. this big would create that mechanism. >> senator, i have to ask the obvious question then. do you think that secretary paulson made a mistake last fall bailing out these companies. >> actually again, that is the purpose for this legislation. there was not a vehicle for them to use. you can go in -- the fdic can go into a commercial bank, but if it's a complex bank holding company that has operations all around the world, there was actually not a mechanism to unwind. so it really left the administration and others with only one choice, prop them up, figure out some other solution. there really wasn't a way to deal with them in a way that didn't disrupt the marketplace. so this is really to keep future

secretaries from being in that position to actually have the fdic to have the legal authority town wind them. and i think had we done that, had we had this in place, by the way, much of what we have seen happen over the last year would not have happened. >> any idea if chairman bair supports this idea?? >> no, sheila bair is for this. we have communicated nonstop with her office to get it right. i think you saw chairman bernanke the other day on a pbs special saying that we have to have the ability to unwind these companies. and this creates that for bank holding companies again, over time, as we move through this, will broaden this to take it into account other entities that pose systemic risk. but what the administration wants to do is actually draw a bright line and say that there are some companies that are just too important to fail. and this is an effort to say, no, there are people on both sides of the aisle who think that theory is old and over. and we need to really wind these

companies down. >> yeah. you're going to be on recess after this week. you're going to go back to your district. you might get some companies about health care. >> we're going to get a lot, i hope. >> what's your strategy going on in, are you going to wear kevlar? >> actually, i want to see appropriate health care take place. there are ways for creating access for all americans to have affordable health care in a way that is budget neutral. we can do that through the employer exclusion. the notion, though, of taking $400 billion from medicare, which is insolvent, and everyone knows that it is, and take that money to leverage a whole new health care system is ridiculous. and it's hard for me to believe that this administration is proposing that, trying to get states to expand medicaid in our own state of tennessee what has been proposed is over $400 million a year, if not -- but we can solve this in an appropriate way, hopefully in september after people get an earful back

in their states, we'll come together. >> senator, quickly, cash for clunkers. will you vote for more money? >> you know, if this is something we can take from the $787 billion stimulus plan, some of which won't be spent for three or four years, if we can take it from that and use it today in a way that's paid for, i would support it. if it's just adding another $2 billion to our debt, no. >> senator, we'll talk to you soon. >> thank you. >> all right.. >> think about that, yeah. >> we have more "squawk box" in just a second. it's hevy open ho. 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. go to chevy.com for details.

tomorrow, "squawk" is in session. we will live from capitol hill starting at 6:30 eastern time. i'd like to thank our guest host today. see you again soon. >> that's great. >> that does it for us today. see you from washington tomorrow. "squawk on the street" is next. this is cnbc.com news now. >> google ceo eric schmidt resigned from apple's board board of directors. this as google enters more of aing's core businesses. they say microsoft gained another percentage point of market share in july. the share is now up to 9.4%. forth will release the sales figures in two hours and will

report the first year-to-year sales increase in almost two years. that's cnbc.com news now. i'm courtney reagan. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. boy, the bulls are coming out swinging on this first trading day of august. coming off the best july since 19 1987, i amg told. is that an 8 or a 9? >> i think that's a 9. >> 1997, looked like -- >> it is a small font. >> signs of economic improvement coming in from around the world, including our own cnbc survey of economists. >> and a good monday morning. component of that data better than expected manufacturing results. >> yep. >> everyone is looking for that. and what that is doing in the

immediate term is -- i don't understand fully the crude trade. very few people do at this point. >> i don't get it, either. >> it's at $71.03. it's above $1.60. at the highest level since july 1 sglst. >> all consumers are short oil. >> right. >> anyway. the futures, let's check them out. up 910. nine above fair value. 70 points on the dow at the open. if it stays that way. >> so let's get straight to our market reporters. we're going to open north of $91.71. how about that, bertha? >> yeah, we saw the futures jump this morning. in fact, on the back of better than expected manufacturing data coming out of china and coming out of the euro zone. in britain for the first time since march of 2000 8g they saw it