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our thanks again to senator bill frist. that does it for us. right now, it's time for "squawk on the street." >> live from the financial capital of the world, this is it, the one and only "squawk on the street." good morning, everybody. i'm mark haines. stocks open flat to maybe a little lower. federal reserve kicks off a

two-day monetary policy meeting. >> good morning, everyone. i'm erin burnett, the fed likely to take into account second quarter productivity. we got those numbers just a few moments ago, it was the biggest 1yu6r7 in six year, labor costs plunging at the fastest pace in nine. >> sounds like they're laying off a lot of people and squeezing the rest. >> and capacity is, well, that a doozy of a thing for the feds. so we'll see what they make of it. but as mark said, futures rather now ticking lower. >> check it out. we're down 520 is what i've got here. so that one on your screen will change in a moment. and we get a break as we close almost three above fair value. we're not that far below fair value. 20 points on the dow maybe. >> let's get more on those productivity figures. senior economics reporter steve liesman has more. steve, this is a tough one. >> mixed blessing, you're right. on the one hand, productive tifty is a good thing.

on the other hand, it's short-term negative for jobs, the question is are we squeezing workers more and are did we essentially as you might expect lay off the less productive workers first leaving higher output workers in the workforce? let's look at the numbers blowing the doors off the estimate. 6.4% is the number. estimate is 5.5%. q10.3 brs. in general, this economy is much more productive during this recession than it typically is. rewriting the textbook about how productivity works during a recession. you can see that surge right there, the biggest number in six years. we did a quick calculation of average quarterly productivity during recessions. you can see here what's happened has become more of the rule. in general, we thought during recessions, employers are reluctant to fire workers, so productivity goes down. it looks like we are very fast now to fire people out there and that helps keep productivity as well, folks, as profits up.

so ultimately this is good for profits. one way you see this is in unit labor cost, which are falling precipitously here, down 548%. after 2.7% decline, that's going to hurt consumer spending but might show up for a while in the earnings reports we get next quarter. so a very, very mixed blessing. economists like to see productivity but not right now during a recession. mr. haines? >> let's find out how this morning's news is playing out premarket. bob pisani at the big board. >> we did get mixed economic news, but china's factory output also below expectation though still pretty robust. we had a real setback for cit. they are delaying their earnings report, they raised that dreaded substantial doubt issue about their ability to continue as a going concern them. delayed following that second quarter report. saying they might, might file for bankruptcy if they can't complete their debt tender offer. this is disappointing.

last week, we said they made progress on the restructuring effort and look ed like things were going well for that debt tender offer, apparently there are some issues there. finally, lyon's gate did very well. terrific numbers out of there them. way better than expected. stronger tv and film revenue. tv guide acquisition, this is company that moans "mad men" and "nurse jackie" both very well. fannie mae and freddie mac, most actively traded stacks down here after doubling last week. trader talk. how are we looking at the nasdaq? >> negative right now. down 0.2 of 1%. the south china morning post has an article on microsoft and how it's going to up its efforts, maybe there will be an effort to take some market share with the big yahoo! search relationship. also unconfirmed reports, we'll see what we can get on it, that dell might be releasing a mobile phone in china very soon.

biggest move of the day, small company, when something moves 80% you have to talk about it. avanir, it basically deals with uncontrollable lasting crying. it may sound funny but it affects a million people, positive results. huge today, 81% today. amgen outperforms at the $70 price target. a couple of upgrades and downgrades. echo star at citi to buy from sell. up 4.3%. jetblue, upgraded to a buy and brightpoint is also a buy at citi up 6.3% in premarket trading. just a quick note on fossil. good earns but q3 guidance way below expect air, that's why they're under compression right now. big surprise for me. el nesto downtown. >> interesting day downtown. price of crude has been up a

little bit, down a little bit in this early going here today. two news items on the crude front, if you will. most notably opec cutting 2010 opec oil forecast for $1.6 billion. they had seen demand going down by 380,000 barrels a day. they now see it dropping 480,000 barrels per day to 27.97. at the same time, kuwait saying they arrested six al qaeda members for a bomb plot that was targeting u.s. bases and other important institution. as i said, oil stock above or below the 70, 71 dollar per barrel. we're seeing a bid in gasoline but little change here today. same for natural gas and also heating oil here today we've got to watch the dollar, the stock market and of course when inventories come out tomorrow. let's get to rick santelli now at cme. >> thanks, nesto we're looking at supply today. one month bill, $35 billion.

interest rates moving a bit lower. have we reached point where investors are going to buy back in the treasuries if prices move down enough? enough of a concession? that's probably part of it. i think also think there's a darker side to the increased product tifrty. many looked at that labor report as a big positive last week, but maybe having second thoughts. traders not only talking supply but housing again. you notice how it's bubbling up. moving down aggressively in different parts of the country, same parts we all know about. articles about the ginny, the new freddie and fannie. the dollar down a bit but holding pretty well all things considered, mark haines, back to you. >> rick santelli, back to you. gains in asia overnight. let's take a look. j japan's nikkei up 0.6 of a 1%.

hang seng closing above 21,000 for the first time in about a year. shanghai composite up 0. 5% after four straight losing sessions. what's happening in europe? i believe guy johnson has some answers. guy? >> with session lows here, marx we are moving lower as we speak and most of the main european markets are lower. there are a few exceptions as you can see. italy on the flat line at the moment, but london down 0.6 of 1 1%. xetra dax down 1% and paris down 0.6 of 1% as well. let me show you the session chart. this is what the stoxx 600 looks right now trading down poi 0.7 of 1%. let me talk to you about a couple of world number one companies. these are the biggest in their field. intercontinental is the world's

largest hotelier. it says it sees no sign of a recovery in the hotel sector at the moment and it going to take at least two years for that recovery to emerge. that is exactly the kind of news we had hoped for. we are starting to see a pickup of people traveling through heath low in london t does seem the hotel sector looks very weak. picking up on the productivity report, adecco is saying it still sees considerable weakness in the united states and considerable weakness in europe and again, it doesn't see a recovery at this point in time when it comes to staffing. that kind of fits with the productivity report we just had out. that's the message we're getting from europe, it's not exactly bright today. we are trading lower. mark and erin, back to you. >> thank you very much, sir. up next, bernie madoff's cfo expected to plead guilty to fraud charges today. who else could be bringing down

with him? other employees, more of the fadeoff family? we'll guy to mary thompson outside courthouse. >> this is what everybody has been waiting for. then the fab report, checking out china's economic data. buzz from beyond the trading floor on this first day of the fomc meeting, we'll be right back.

bernard madoff's former right hand man expected to enter a guilty plea today.

expected to be crucial in unlocking the mystery that still surrounds the $65 billion ponzi scheme. mary thompson has more outside courthouse. what do you think we can find out from frank depascale and when? >> we'll find out when the hearing is held. for 33 years, he worked side by side with bernie madoff, today he follows him into federal court where according to a filing by the u.s. attorney's office he is expected to plead guilty to yet to be disclosed champs, part part of a deal the former cfo has struck with the government. here's investigative journalist and author, aaron arvlidnind. >> i think he's going to give up pretty much everything. he's been cooperating since the beginning. there's some tension between the fbi and prosecutor, the fbi would like to go after everyone and prosecutors need proof and

dipa krch dipac dipacali is the guy. >> his lawyer declined comments as did the u.s. attorney's office called to his home in new jersey were not returned. initially hired decades ago. dipascali rose through the ranks in in madoff's secretive 17th floor office in the lipstick building two floors above his legitimate business. since turning himself in to authority, madoff has consistently maintained. he acted alone. for many victims, mr. dipascali was the face of the business, he answered calls about accounts that have proved to be worthless. also had close ties to the hedge fund community, some of those fund, of course, reported to have been feeder funds for madoff's ponzi scheme. as i said earlier, the hearing will start at 3:00.

at that time, we're going to know what charges the u.s. attorney's office has filed against mr. dipascali when the charging document is filed and we'll have a better idea about what kind of deal, if any, he has struck with the government. now let's go my colleague david faber, for the faber report. >> thanks, mary. of course, we'll be watching that closely. should be very interesting perhaps. well, we will certainly learn more. changing tacts entirely, i thought i would actually move to china. i'm not going to move myself to china, although i would recently visiting the world's third largest economy, yes, that's right. but china also focused perhaps more than it's ever been on u.s. investors and investors around the world, in part because its economy is growing at a much faster rate, well, growing at all is the key here, than much of the world and many are hoping that the emerging consumer economy will

help fuel exports are countries like our own. also a lot of concern about whether or not china by mandating banks lend enormous amounts of fueling another bubble, all which of is why today or yesterday, actually, today, it's still tuesday there. when we got the july statistic al report from china, a lot of people pay attention. they release kind of almost all of it at the same time from the national bureau of statisticses of china, they call it the major economic indicators of july. export, no surprise, one of the largest drops on record but that's been the case more or less most year, down 23%. of course that's a reflection of what is going on right here with people not big nearly as much stuff. imports also down though not as much did result still in a significant trade surplus of over $10 million. there's the key. industrial production up almost

11% was a bit lower than a number of analysts had estimated but nothing, not way out of the ball park by any means. now here's an interesting stat that others are watching as well. because in the first half of the year, china's banks were lending at a rate of 60% of gdp. 1.2 trillion of lending in the first half, but look at that it fell to $52 billion that is for july. and it's for july, but of course, you would not get anywhere near $1.1 trillion where you multiply that over the next six mochlts the concern had been that the world's third largest economy had been creating a bubble in that economy. which would ultimately result in a lot of bad things and a lot of bad things for the world conceivably if that was the case. so some look at that plung in bank lending. some of it may be seasonal but it also maybe that they are pulling back on the reins a little bit. because having your banks lend 60% of gdp in a given year could

be pretty dangerous. we'll see. data is in line with the strong growth momentum in the economy will likely moderate a bit, but we're still talking about as much as 9% gdp growth for the year in china. given that incredible stimulus that came from all those banks lending all that money. as for jpmorgan, they think a decent recovery in exports should sustain the trend pace growth in the second half of '09. again, as i said, imagine that 9% gdp growth is hard to even conceive of. mark, back to you. up next, the word on the street, the buzz beyond the trading floor as we count down to that open iing bell. later, how not to let complacency catch you offguard. that's your edge. and a different look at two big names in the news. that's coming up in a couple of moments. we're talking about citi and gm. we'll be right back.to now netw. population: 49 million. right now 1.2 million people are on sprint mobile broadband.

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hi, we're back. let's check out how the futures look light now. down, actually, closed a few minutes ago. closed down 5.90, three points below fair value. looking at a 20 point drop on the dow at the o joining me here on the floor. bernie mcsherry. good morning, good to see you. >> good morning, mark. >> i continue to have the same thing to say. this market is resilient, it just won't go down. >> it is amazing, we've all been expecting some kind of pullback,

virtually every pro. i wouldn't be surprised to see a little 150idways. we've had a big meal, maybe we need to digest it on the couch for a little bit. >> but that's different saying we should take stuff off the table, we're overextend. >> i agree. buy and hold investors got burned so badly over the last year or so, they've been creeping back into the market over the last couple of month, but they'll be spooked at the first sign of trouble. so if there is a pullback, it could be a sharp one. not a major wurngs but five or 10% easily. >> what mark of the market looks best? >> technology has had a good run, i'm looking at health care. with the debate going on over the next couple of months? >> there's a do bait? >> we'll see thousand all plays out. but there's going to be reaction to headlines and trading opportunities. i'm not saying park your money there, but play and be nimble, there's some chances. >> i would welcome a did he bait an health care instead of the

scare stuff they're throw iing us. bernie, thank you very much. back upstairs to erin. >> the buzz beyond the big board as we get ready for the bell. doug is with us from the capital group. >> good morning, erin. >> what are you watching today? >> we're looking forward to the fed meeting tomorrow and i know we have a retail sales number on thursday. we have consumer sentiment on friday and a bunch of retailers are disclosing earnings this week so that's what we have to look forward to. >> and any names in particular standing out to you today, especially as we look at a name like cit, which granted trades at such a low level that a big percentage plunge may not mean a whole lot, but what sticks out? >> on thursday, we have walmart reporting, it's a quarterly report. that's something we have to look for. jcpenney, we have. kohl's, so all the major retailers are bunched today. wednesday, thur, friday, erin. that's going to be important for the market.

retail sales are released on thursday also. you put them all together, there's stuff on the horizon. i don't think the fed meet is going to be that big of a deal tomorrow. >> doug, thank you very much. we're going take a break. on the other side, a final countdown to the opening bell, plus news out of citi that we think matters an a different take on general motors. we'll be right back.

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plus get $100 cash when you open an account. all right. you're watching cnbc's "squawk on the street" and we are live. from the financial capital of the universe. the opening bell is going to ring in two minutes. 2 1/2 minutes. and the futures, as i said, 20 to a drop of maybe 20 on the dow. >> we, as promised, wanted to take a look at two big names with an alternative take. gm, big headloin of the day, the volt, the car on which they have bet -- our taxpayer future, the

volt, gets 230 miles a gallon. keep in mind, the battery pack only has 40 mile range so it switches over to gasoline. >> it's got a gasoline engine. >> it's a very small gasoline n engine. so you would need to -- rate. so there's some issues there, clearly. >> and it can only go 40 miles on the battery. >> on the battery before you have to recharge. so that in of itself is something to think about. but more important, i've been talking to auto parts executive, specifically focussing can on drive trains and engines. they are very frustrated on this whole push to electric vehicles. they sayfy actually want to think about them as going green and emitting less co2 into the atmosphere. they say their that is just an utterly false proposition, given the way our system is structured. right now, our electricity grid is powered by coal. sophie look at it equal, the way it's structured now with our grid and how it's powered.

an electric vehicle from start to finish, emits just as much, in fact, more than a gasoline powered vehicle. it isn't fixable and you can change it but it it goes to show you when you put all your eggs in one basket and assume, let's go electric, that's the panacea, it's not that simple. >> no, no, i see the trade-off. >> right. chl >> i don't know, i would have to see the data, the numbers. >> you could change the way we power the grid, do clean coal, but it's not as simple as they say. one final thing on citigroup, they still have that t.a.r.p. money. they say total loans notice second quarter up with 8% from the first quarter. and consumer loans were up 22%. >> all right. >> so just something to keep in mind. we were talking about this, how there's going to be a huge surge in modifications by the banks of emergencies because they've been poingd for not doing as many. would that mean they would make a lot of modifications that were poor.

looks good. >> history of modifications has not been good so far? >> no. >> here on the big board, morane stanley analysts ticker ms doing the honors. at the nasdaq, the chaka khan foundation to educate and empower children. >> our market reporters are standing by. so let's get straight to them, we're down about 11, mr. pisani. >> futures went out at their lows for the day. if you look in europe, germany weak weakening, down 1.5%. england uk down 0.8%, the ftse. so no surprise we're weakening here. we did get mixed economic news. q2 stronger than expected. q1 revised downward. factory output, still robust. so watch stocks that are roaring. here's fannie mae and freddie mac, doubled essentially on short squeeze.

we'll see if they move up today, but looks like they're opening to the positive side here again. the volume has been titanic. they were market leaders in terms of volume early are this morning. we'll talking talk about cit, waiting for the own, $1.48, just opened right now. down 29 cents. that's down a little over 30% here. the disappointment here is they have delayed their second quarter filing. they won't be filing for a little while. they raised that dreaded substantial doubt phrase about their ability to continue with the going concern here. they've talk and facts they might have to file for bankruptcy if they can't complete their debt tender offer. remember, last week, they can come out and said they made progress on the restructuring. implied their debt tender offer met the minimum condition, so we'll check on that and get you more news on that lyon's gate is right around the corner here. right over here, around the corner here, earnings better than expect the remember, they make "nurse jackie" and produce

"mad men" which has been a huge hit. lower cost on that tv guide acquisition as well. opening to the up side. how are we looking at the nasdaq? >> we're down, by the way. chaka khan, child of the '80s. she has not aged a day. recognized for her charitable efforts today, but has not boostd the stock market, down 0.5%. research in motion, down 1.6. apple down 0.8%. microsoft may be amping up efforts in china. i want it talk about avinir, had a test result for a particular d disorder where there's excessive laughing and crying an really ice lated bought affects 1 million people. it's very successful, up 76%. it's got a small market cap, well human genome, their lupus drug had great results, now at

16.57, now with a $30 price target. you've got to pay attention to small cap biopharma stocks when it comes to test results. citi upgrade to a buy from a sell. jetblue also a buy courtesy of ft and equity. petsmart downgraded it a neutral down 4.3%. let's go down to mr. nesto at the nymex. >> we are at a lowest session today, all trading on a downtick. interestingly and notably, check out price of crude for the september contract. busting briefly below 70 but roaring back literally as i waited to give you this report. last trade just above 70, 70.07. $2 spread between the september and october contract. that doesn't seem to have changed at off. it softened up a little bit. last spread $1.99. there's a lot of things we're

waiting for here. tomorrow's inventory data is going to be big. we're also waiting for the fed decision. also following the stock market, but also notably two geopolitical development, first the arrest of six al qaeda suspects in kuwait, just reminding us that that is always omnipresent, the danger there, they were targeting with a bomb plot, supposedly u.s. military bases and other important institutions. then the second major development is going to be opec trimming in their 2010 demand forecast. it's small, it's slight, some say it was expected but it is a reminder in terms of what is out there. then lastly, the national hurricane center, watching a storm developing off the coast of africa. yes, folks, hurricane season will return as will rick santelli at the cme. >> i tell you what, matt, it's so interesting that today is the first day of a two-day fed meeting. even more interesting that there are people out there point to the fact that fed funds in february are pointing towards a tightening. wolfman, you agree with that?

>> dwre, is actually. absolutely. >> buy the front, sell the back. >> roll it out. >> you keep rolling it. the reason i bring up how ridiculous that sounds is when do the quantitative easing covers wear down,? when s a program supposed to sunset? september. we have a meeting today and tomorrow. well, the market today in the november contract right after the september where they're supposed to sunset, just printed a new all-time high. remember, fed fund futures go up when there's an easing mentality. then they roll the tightening down the road. so is this contract, giving us a clue that quantitative easing is going to be up? well, that's what the markets say, we're going to have to read the statement for this and a couple of meetings down the road but thab we're going the bank of england approach. we'll have to wait and see. mark harngs back to you. >> rick santelli, thank you. markets opening modestly lower.

we're down 30. fed sits down for the first day of its two-day meeting. peter sorentino, larry adams, chief investment strategist deutsche bank. both joining us now. peter, what do you expect out of the fed? >> at this point, i think it's status quo, we're still tentative enough on the economy, they're not going to rock the boat. they're going to give us as much liquidity as we can stand. >> larry, same question. >> i agree. you have to remember that person areky just spoke at the humphrey hawkins, so he's given us the game plan of what the fed is going to do. so i don't expect too many surprise, the one thing that the fed has been consistent with is being transparent. they've pretty much told us what they're going to do. so i don't expect big changes today. >> not worried about the statement, what it might say an inflation versus deflation? no. >> i think it will be pretty consistent. it could be a mimic of what they

reported last time. i don't see major changes to that statement at all. >> okay. >> and peter, in terms of one possible surprise that can come here, it it appears the consensus right now is that the fed will not formally extend all of the programs out there. the hundreds of billions of dollars they are currently spending to bring down mortgage rates. all those program, that's in the statement now, do you think that they -- i mean is that good they're not going to extend it? does that show they have confidence in the stability of the economy? >> erin, the financial system, really, if you look at the spreads between the various credits has healed up remarkably since we hit the bottom and sort of staerd over the abyss there. the spreads on corporate has been financials that closed in remarkably since the beginning of the year. so the risk that the system locks up again is really pretty much going out of everyone's mind at this point. the mortgage market is just going to be a slow grind. this is going to go on for a

couple of years. so the headline risk is always there but i think the programs done their job. it's time to get back to business as usual in the krilt markets and just let the system do what it does best, digest and issue paper. >> one thing it seems as if we don't talk that much right frankly is housing. which is where all of this started. deutsche bank had a report last week that i thought it was pretty shocking. they said housing prices may only come down another 15%, but that means 48% of american mortgages will be underwater by the year 2011. if anything even row motely close to that comes true, how can we be talking about a recovering economy? >> it's a great point that you bring up. one of the things we do think we're in the bottoming process here with the housing market, but clearly, the fed has to keep its eyes on that housing market. one of the things that you've alluded to is they're keeping their eyes on that mortgage r e

rate, if it were to continue to move higher, that could hamper the sales that we've seen in that market. so i think they'll continue to keep mortgage rates lower. in fact, they do move higher, then they may have to get more aggressive with quantitative easing. as far as the report go, yes, some of the numbers are misleading in the market. for example, existing home sales two weeks ago, it came out and it showed an uptick but keep in mind, that was the second weakest june pace we've seen in sales over the last 50 years. so we think it's that a little bit premature to call the end of the housing market, but we do think that moving forward you could see at least start are to stabilize. >> it sound, peter, like both of you feel that the most of the heavy lifting has been done and what is required now is some patience. is that fair? it. >> is. marx the point here is that the economy is going to go through really a secular shift, we're going to move away from the consumer driven side of the

economy and move back to the industrial side. so you know, the fact that the consumer is going to be grinding this out, restructuring their balance sheet for a couple of years is something that we're just going to have to grow to live with. and the market is going to have to adjust itself. the tide is not going to raise all boats here. we're getting very concerned about the run-up in financials and consumer stocks. >> does that lead to you industrials? >> it does. a lot of early cycle industrial, a lot of smaller industrials. we think that's going to be really the trick here is pick out which segments are going to benefit from the change in regulation and evolving economy. >> larry in broad brush stroke, where does it lead to you invest? >> right now, well, we are patient, we are waiting for that pullback. what we've been doing is encouraging people to hedge their portfolios so selling call, buying some puts, doing some if pair trade where is we try and ice late sectors we think are attractive versus sectors that we think are extend at these levels. i think that's appropriate in this part of the cycle.

>> is that the light street pavilion in the picture behind you? >> yes. >> because i know it's a picture, otherwise you would be in the middle of the harbor. peter, larry, thank you very up. >> lai-a-i-g-l-a-i-g-t. >> ll-i-g-h-t. >> i thought it was l-a-il-a-i, sorry. >> great shops and restaurants. and the constellation was great. i love baltimore, great place. >> we've got an interview this afternoon with david roberts, the ceo of carlisle, a big manufacturing company. i had a conversation with him where he told me something both surpri surprising and exciting. we're going to share it with everybody today. >> when? >> on street signs. >> i have to wait. >> 2:00 eastern. >> well, between the tomato

farming. do you use that hanging tomato thing? >> no, don't get me into that. let's just keep going. >> next, david faber will be coming along. david, is going to be looking into the t.a.r.p. report are card we mentioned bref lie before the bell. >> but first, stocks on the move. including cit and mbia, our big mover, we'll bring you up to date. businesses more efficiently,

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. okay. welcome back to "squawk on the street." i'm scott wapner with your real time flash. stocks on the move. what a difference a week mabts for cit. that translates into a 20% loss for cit group today. they've delayed their 10q filing because of ongoing restructuring efforts. last week, we thought they were going well. so today, the company says if it can't complete debt tender, it

may have to file for bankruptcy, shares getting quite a hit this morning. take a look as well at shares of mbia, down 50 cents on that stock. jpmorgan downgrading the stock from underweight to neutral, worrying about quality and potential losses. cdo mortgage backed security related losses may overwhelm capital. take a look at flores as well. upgrade the at wonderlick securities. nonetheless, getting pounded down three bucks this morning. bank of america is up just about 1% as citi raises the price target to 18. let's head over to david faber. what's up, dave? >> man, i tell you, that wapner could be like an auctioneer. i liked that a lot, scott. i hear you over there. it's also nice to have some company. so scott is just over there, i'm not alone, everybody.

it looks like i'm alone. i usually am. what we are going to talk about? let's start with citigroup this morning. the stock passed $4 a share not that long ago, but came back below that magic $4 number. i kid. this morning, big press release, a the lot of pie chart, presentation from citigroup telling all the things that bank is doing with its t.a.r.p. money, if you will. look at that. i mean i'll just let you read that because it's almost impossible to read. but that's all the different efforts they are undertaking. they've taken in $45 billion in t.a.r.p. money, saying this morning, look at what we're doing. $50.8 billion as of june 30 srth what we've put out there. given it is a bank and these are banking kinds of things, you might expect they would be doing this regardless. nonetheless, citi trying to t l tell, well, you would imagine, regulators and investors as well all the different things it's doing in the mortgage market,

the student loan market. by the way, those numbers add up, so a billion for residential loans. 2 billion for supplier financing. 4.5 billion and so forth. my stage manager lou now understands it. he's been studying it very closely there. so that's what we hear from citi. will it help? who knows. they've got kenneth feinberg telling them exactly how much money, maybe the top 100 employees. not just the top 25 will be able to learn. that's been one of the focuses at the bank. but they're weighing in to what they know is certainly a politically charged atmosphere with this latest release. and there's a look at citi by the way, the exchange offer is done, of course. we do own 33%, somewhere in there. roughty 23 billion shares

outsta outsta outstanding, so still a large market. 28 billion in t.a.r.p. money they are using in various ways. all right, before analysts take a look at target. an old favorite we've followed for quite some time, that very significant battle between bill pershing and target itself, lost by pershing and now news that pershing square cut its stake in target. cut its share in options. there's a look at mr. ackman, nonetheless has been selling. its economic interest is lower by a significant amount. 78% to now 4.4%. you can see the stock ticking up a bit, perhaps on that news. erin, back to you. >> david, thank you. >> you're welcome. >> next, supply materials is the last of the big names out with results? tech sector stocks are up about 45% so far this year. hmm. is it going to keep going up,

mark? that is the big question. that's going to be a name a lot of people watch closely, so we'll get right into that. later, we kick off our young and successful entrepreneur series with a baker who is popping out, wracking in the dough. >> she made some cookie, mark is eating them. >> we have ants. >> you're watching "squawk on the street." >> more bid ly obese ants.

zblrthts earn earnings for the tech sector have been. but the only to increase was health care, the best of the drop. applied material reporting after the close today. craig berger is our technology analyst. jim goldman is with us as well. jim, when you look at applied material coming out, one of the last big ones, where do we stand? what does growth come in here?

>> it's a question of that whole thing about you know, less bad news being actually good news. i think we're start to move to that arena now where we are starting to digest good news. applied materials is going to be report a loss on the company's quarter, that's anticipated, but just merely meeting that loss and looking at what this company sees for the back half 2009 is is going to be absolutely key. if this company just goes ahead an meets expectation today, that may not be such good news for the industry, expect aation areo low right now and people are now anticipating because of new figures from the sia and other market research, the chip industry is beginning to turn around and applied materials should be be able to see that for the rest of this year. >> craig, there is better than expected news coming on the consumer side. i know we can break that down to all of its parts but on the corporate are side, a lot of questions there, big capital spending is still dropping. an rather dramatically, as the

fourth quarter last year. but it is still dropping. you would expect it see one of the places that turned around would be in tech. are you seeing that at all? >> what we're seeing on the enterprise side is i.t. budgets have been set for define and they're being disciplined around those spending budgets. so there is some pent-up depanned storage may come through in 2010. but where we've seen strength in define is notebook, netbook, smart phones an consumer application, it's the consumers that want to get online either computers phones and largely been driven out of china and asia as those emerging markets get back to a growth pattern. >> so it's not u.s. and it's not desk tops? >> it's not desk tops. form factor is being reinvented a little bit. but people want mobility. in the u.s., we found people want the apple products if

there's a great product out there, u.s. consumers are willing to buy it but really, the up side strength has been from china and asia getting back to a growth pattern. that suggests as the u.s. economy improves as europe turns the corner and improves it, those will be the 2010 growth drivers that may take the stocks and earnings power up to the next level. >> the winners will be the usual suspects, the wintel companies. >> i prefer qualcomm. it's powering a whole lineup of smartbooks which are like large smart phones to compete with pcs. others could be a broadband and marvel are a few of my preferred larger cap names over in intel where growth is more limited and the low end netbook may

cannibalize its mainstream offering a little bit. >> jim, your view on the consumer side, what is a product hot enough to move the needle for any company? >> apple is probably the only real quality example out there unless you're also selling netbooks and a lot of companies have seen success there. that trick manies through the entire industry, not just hp and dell and others, but google and microsoft and others playing in that sector but apple has by far seen all the cylinders fire, consumers will spend more if the product is worth it. >> thank you so much to both. we'll be back.

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welcome back to "squawk on the street." inventories wholesale inventories, june, down, down 1.7, double expectations, last look, may, was originally released to .8 now down 1.2. so from down.8 to down 1.2. the silver lining, many believe inventory rebuilding is going to give us horsepower and better numbers down the road. the question still lingers outside the cycle of replenishing,there going to be con assumption that takes product off shelf?

i can't answer that, but if you look at the response in the marketplace to the inventory number it isn't showing anything positive, as a matter of fact, after the great productivity numbers which aren't good if you're looking for a job, we've seen the reopen equities. we sought dollar index that was lower move higher and we saw all of that push rates lower. it seems as though anxiety is still the trade, just maybe the dollar index early. remember, these rallies in treasury are occurring the day of supply. highly unusual. mark, back to you. >> thank you, rick santelli. quick check on the markets for you. >> whoa. we kind of lost a little traction here. the dow is now down 80 points. the nasdaq is down worse than that. more than 1%. and s&p is more in line with the dow, down 0.9. >> before we get to market reporters, wasn't to bring your

attention to arlen specter's town hall in lebanon, pennsylvania. we've all heard about these town halls and great debate over who is sponsoring what, how real is the anger? nobody really knows, but this one in particular, you can hear, has been rather contentious. people have been yelling, several audience members have raised their voices at the senator and each other. >> good morning, my name is joe, i'm a public school teacher. >> yes, sir. >> i am looking at the sunday patriot news, sunday august 2, front page. reading the bills requires expertise. one of my roles as a teacher and educator is to teach my children how to think, how to read and how to understand. >> gearing to keep watching this. >> interesting. man is making an interesting point. >> we will provide the understanding -- >> all right. >> government. >> he raises by the way a good

point. >> this is a fascinating topic. the water has been muddied a great deal with scare tactics. i wish that hadn't happened because i really think we need a debate. but a sane, rational debate, not we're going to euthanize your grandparents! . not that kind of crap. >> who said, the former governor of alaska said, sarah palin on her facebook page, the death panel. >> the woman is a total crackpot. that all started, there's a provision in the bill which says medicare will now fund -- if you have an end of life discussion with your doctor. if you want to discuss with your doctor. and that discussion can be keep pumping drugs into me until my last breath or don't resuscitate or a living will.

medicare will now pay for that meeting. somehow, sarah palin gets from that to death panels. >> no and that by the way, these living will issues is a crucial one that can provide a lot of help. there's a whole lot more of this on the medicare. >> but all it is medicare will now pay for that meeting. let's get right to it in the second half hour of trading. kick things off with bob pisani here at the big board. robert? >> hello, mark. here's a real test of the market's resiliency. we had it a couple of weeks ago. market trying to press it down here. s&p 500, we've had an amazing run in the last month. started a month ago. s&p up 10, 12, 14% at the lows of the day here. if we end near the positive territory here today, if that market can come back to flatline that will be a rickett for the bulls at this point to demonstrate market resiliency. where is the leadership? remember the financials, must be one and some of the cyclical stocks like industrials. guess what the market decliners

are. zion went to $18 on friday. is it any surprise they're taking profits? citigroup went to $4. is it any surprise they're taking profits here?ñ it's not. industrial, remember, cyclical, it's very logical what's going on here. big gains in the cyclical names ant last two days weakness. so there is some logic to this. they're trying to test and take some profits. tra tradertalk@cnbc.com. >> turns out that 2000 level might have been resistant. we're talking with phil lebeau about the chevy volt, 200-plus miles a gallon for city driving. i took a smatering of companies that deal with this battery technology. very small company, not directly involved with the volt but i thought i would give viewers and investors.

en. er 1 has been around for 24 years. plugpower is down 2.5%. and advanced is actually a china play, they're based in new york but they're a chinese company. these companies are small. quick look at come bumberland pharmaceuticals. ipo price at the low end of the range. big name, dell down 2%. yahoo! 1.4. research in motion down. qualcomm mentioned positively just a moment ago. mr. pisani mentioned zions down 9%. broad based decline here at the nasdaq. let's go to matty nesto at the nymex. >> it's really what matters today, you wouldn'ting looking to bust through at the lowest month that china announced it had record oil imports last month and refinery run rate was up for the sixth consecutive

month that would bode well with global demand. combine that with news from opec which showed modest weakening forecast next year auchbd yourself a mixed marketplace. you're seeing traders follow the dow lower today. the dollar is somewhat of a story but the right now the focus is the technical levels an whether or not we can hold $69 per barrel. we're seeing weakness 1.5 to 2.5% with was and oil and that's what we're looking at here today, there's every number of factors. the overriding of the fed, no one want fwos get ahead of that but inventory data as well tomorrow. back to you. >> thank you very much, mr mr. nesto. our next guest says americans need to look beyond our borders for growth and companies americans may have never heard of. here to tell us why is the manager of the wintergreen fund

which holds primarily international stocks. it's up 20% so far this year. good to have you with us. >> nice to be here. >> you have a lot of interesting things here but you're saying great wealth creation is going to come from companies americans haven't heard of, they are not based in the united states. brings to mind a recent list of market capitalization of the top ten, only three or four were american. where? where are these companies based an do you have any bets on who they are? >> well, we think that a lot of the wealth will be created in the far east, going forward. we're just trying to figure out at wintergreen, how do we make money off of all this? sometimes the companies are based here in the u.s., somewhere based in hong kong, but a lot of them are actually domiciled outside the united states. >> do they just provide things for people who live there? are they consumer products company? or are they already in the line of biggest company, energy and

banks out of china? >> one exam spell a company called jardine matheson. >> never heard of it. >> 175 years old. it's a trading company, originally scott eye, now in singapore. they not only control land but they control a dairy farm which is food, a food retailer, in the greater aaron region. it trades at a big discount. >> you're saying a control block of hong kong land in the sense that the equal thing would be to say one person controlling a huge block of manhattan. >> exactly. >> i note that two of your top five holdings are tobacco companies. so you're expecting these people to do a lot of puffing. >> you know, we don't have advocate cigarette smoking but people like to smoke cigarettes. >> the profit is where the profit is. >> but you obviously are expecting a the lot of 1340eking in smoking in asia, right?

>> all you have to do is go throughout and you see a the lot of smoking. >> yes, there is. >> companies have huge price power, lots of free cash flow and a good dividend yield. >> when your customer is adoiktd your product, it's easy to have prices. we've seen that in the u.s., prices gone from, i remember -- i'll date myself if i say 25 cents a pack, but i do remember that. what are they now, $10 or something? >> that probably happened in the last year or two with the tax. >> schindler holdings, what is that? >> elevators and escalators. i had to walk up these steps to get here, it would have been nice if there was an escalator. as the world gets urban, there's a lot more getting sold and the maintenance contracts. >> they are based where? >> switzerland. some of the best companies are in switzerland today. >> do you hedge the currency explosion. >> we like being long good currencies because the u.s. printing all these dollar, we have real issues, i think, here

of inflation and currency depreciation. >> one thing i don't see on here is hey, you've got smoking and escalators, i would imagine you then need health care. >> if you smoke too much, you have to take the escalator up to the doctor's office. >> exactly, but it is intere interesting. health care, is it because you don't like it or it doesn't make the top five? >> the issue with health care is increasingly under government control. so the health care companies are losing control of their own destiny. >> all right, we have to leave it there. thank you very much, david. appreciate it. david winters. wintergreen advisers fund, up 20% year-to-date. that certainly does taste good. up next the f 1 c kicking off a meeting. will interest rates be heading the same way? >> what happened to the doublemint twins. and the simple place sideline

cash maybe heading. plus insurance industry has a bone to pick with congress. we'll be back.

good morning, welcome back to "squawk on the street." i'm scott wapner with your real time flash. we begin with fossil because shares are getting haermd. down 11% or association this is, as you know big week for retail. starting out with a womhimper fm

foss fossil. they did beat the forecast, shares not showing that. amg amgen, take a look at those shashs even though it was initiated to outperform at rbc capital. the company said the company, quote, turned the ship around. transports had had a big week last week. jetblue upgraded to buy. yum brands, downgraded from ubs neutral to buy. they also maintain their $38 price target. if you see sugar prices lately. up yesterday on crop worries. sugar futures in general, 28-year high. let's look at hershey, giving a little bit back today. back to you, mr. haines. >> the federal reserve kicks off a two-day meeting today. fomc expected to hold the benchmark rate unchange. let's get to our all-star panel

for a preview of what we can expect from the fed. joining us now is the leader of capital ceo portfolio manager and michelle gerard. i'll start with my old friend michelle. i won't say how long we've known each other. >> let's not start counting back those years. >> we both look really old. >> you can't say things like that. but it started in grade school. >> you're lucky, she's so gracious. >> but what's going to happen? >> i like sort of how we came out of the june meeting, maybe a whole lot of nothing. we're most focused on what they say about treasury buying program and there, you know, online there is not going to be any meaningful expansion of the program. aie mean whether or not they are explicit or implicit about that is maybe some debate but in the end, we just don't see them, the fed is moving toward winding down the balance sheet not sort

of stepping up. so if they even say anything, i think it will be just sort of a signal that the program is in fact in the process of being wound down. >> john, what about you? >> well, you know, we think that the fed would have already begun to raise rates if it wasn't for bernanke's tenuous position with getting reappointed. unfortunately, he's in that spot. so we don't think they'll raise, but we do think they'll signal that they would like to raise and probably begin so towards the end of this year. we think the fed gets to almost 7% by the second quarter of 2011. and that's primarily based on weak gdp and a continuing deterioration of the dollar. which is inflationary as you know. >> michelle, one thing i know you're saying you don't think they're going to extend the buying program of treasuries. what about of mortgages? because there's been so much talk about mortgage rates ticking up. that being a problem. will they make any comments on mortgage backed security buying? >> they don't need to do that there is some discussion about

that possibility in the marketplace, but they still have plenty of room between now and year-end to be able to sort of continue at the buying pace. they actually scaled back a little bit on their weekly purchases. there's just no compelling reason to make an announcement on the mortgage buying program at this time. i mean our suspicion is that that program will probably wind down as we get into year end. it is a bigger issue in the mortgage market because their purchases are really commanding such a bigger space in terms of how much they're buying versus production and the treasury market purchases aren't potentially market moving and the mortgage sector that's true and they will have to do more in terms of how they wind it down, but i don't any compelling reason they have to address that at this meeting. >> john, your fundamental view here, i'm going to go so far as to say is definitely contrarian is that over the next 20 months we're going see interest rates go to 7.5% because of inflation. >> i'll tell you the good news,

gdp is going to remain very weak if it wasn't for the government program, gdp would have been negative 4% or 5% instead of negative 1%. the good news is third quarter will follow gdp down and be around 2.75 on the 30-year which would be a windfall to the consumer in terms of his ability to refinance and make an impact on his bottom line. so it's not all bad news. >> so you're saying that the 30-year going to plunge but the interest rates are going to go to 7.5? >> we think on the short run, the fed funds we think will go to 7, 7.5 by second quarter of 2011, which will be precipitated primarily by a weak dollar. >> oh, so i should definitely go short with treasuries? >> our fund is up 10% this year. we are on the short end of the curve, we are in a position to benefit from rising interest rates. >> well, if you're on any end of the curve, you're going to get

pummeled. >> not necessarily. we own about 45%, 50% of our fund is in high-quality notes tied to libor plus so any bump up in interest rate is a benefit to us. and it definitely helped our fund this year so far. >> michelle, i just weren't to give you a chance to reacts. the fundamental issue of the 7.5 particularly. >> it's the first time i've seen someone more aggressive than we. we do think that when the fed starts raising interest rates which probably won't be until the middle of next year, they've got a long way to go and perhaps surprise people about how quickly they move up. we think we'll be at 5:00% by the end of 2010 and continuing to move higher, some in 2011. but i don't share the view that the fed would be raising tret rates now if it weren't for the renominati renomination, i think this fed is going to be very cautious to make sure the economy is on solid foot brg they hike. that coupled with other reasons, i don't think, puts the time frame from the first hike to the

middle of 2011. >> i don't agree with that. i think the meeting with the chinese and obama last week were probably very clear on the fact they want their money nor liquid and dent want to be out on the curve. as such, they want to stay short on the curve. there a compromise they agreed to buy some tips but they want their money liquid and want to be into the three to six month paper and they're asking the fed to raise interests rates to compensate them for doing so. that along with the fact that obama does want to get re-elected if they're going to raise rates they've got do it sooner than later. or he's going to end up like bush senior and may have a problem getting re-elected. so there's a sense of urgency here. >> now we know where you both stand. that's a good pairing. we'll have you back to talk more about this. thanks to don as well as michelle. >> thank you. all that cash that we know is on the sidelines but some people claim, mark, it's going to come back in the market. we may have found out where it's going. our next guest says it is coming and he's going to say where.

the answer is so simple, it could say something surprising about investors. don't go away.

our next guest says index funds are attracting a lot of that cash on the sidelines. let's let bob frick make the case. his article in the september issue of kiplingers hits newsstands today. let's let you make the case, bob, everyone talking about cash on the sidelines, argue about whether it will come back and in what quantity, but you are seeing it come, where and how do you get there? >> index funds investors never stop putting money in the market which differentiates them from all the people who ran like hell when things went back last fall. so you'll see that investments, by small investors into index funds actually increase in 2008

versus 2007. so it's not like there's a ton of money rushing in it's just that people who buy into the index strategy are sticking to it. >> and so it's just real regular money coming in? >> right. >> it's just a steady stream? >> right. exactly right. there some evidence that big institutional investor whose got burned by their professional money magment in the last year are thinking about index funds now for a big portion of their emergency, but whether that happens or not hasn't really played out. >> bob pisani, what do you say to this? >> first off, i agree. i've been a big proponent of index funds but also etfs and exchange trade funds to get into the market. i read your article and i agree with t here's the point i want it make. why can't actively managed fund really outperforms index funds? my theory here and i want to hear yours, is that the information is so widely available it's that really difficult to do that now. 30 years ago to get an earnings

report was difficult. to get a channel check was almost impossible. now days sitting in kansas you can get information that's astonishing on the internet. i think it's really hard for these actively managed funds to outperform anymore. >> i agree with you completely, so with all the information that's widely available, everybody dealing with the same information, you have to be a genius and there's very few of those around, plus you have this extra burden of the higher fees you have to charge in an actively managed fund, i'm going sound like john bogle here, but overtime those drag down returns, which is why index funds beat most active managers over time. >> what happened though, both of you, just hypotheticalle, you're right, right, it's going to be harder and harder, let's say the whole world goes into index funds? what happens to the market? it's seen a lack of heart, right? or lack of direction, it's just a bunch of money following what, nothing? >> it's 234e6r going to happen, human psychology says most of us

think they can beat the market so there are going to be a vast majority of people in there trading, they're going to be watching little numbers going across the bottom of the screen thinking they can beat the smart people out there. so it's never going to happen. >> by the way, the differential, bob, is on the order of 10. so it's about 10 basis points to get into an s&p index fund. >> right. >> it's actively managed funds typically charge 100 points, a full percentage point to manage. so overtime, that 90 basis points difference makes a huge difference in the amount of money that you keep. >> and as you point out etfs make it so easy to defrl into different parts of the market, they are index in a way, so it's made it so much more easy for people to build just the kind of diversified low cost portfolio they want. >> for the people who are trying to actually do their own picking, would you agree that it's not really stock picking

that outperforms, it's asset class allocation, so i've seen people make great bets on sectors, for example. on energy, versus financials or on stocks versus bonds versus commodities or on picking china over the u.s. some kind of asset class. but picking individual stocks really strikes me as extraordinarily difficult. >> right and there's a world of difference between those two things. i, for example, put some money in vanguard value low, small cap index. ai know that over time that type of stock has outperformed virtually every other stock. >> if anyone wants to track it the vanguard is the vbr. thanks to both of you. we appreciate it. bob and bob. >> all right. >> if you want to read more about index funds, you can find the story in september issue of kiplinger's on newsstands today. the wall street debate not limited to the big guys. we look at one leader who

pocketed a cool $200 million last year. showing just how hard it might be to clamp down on what say is excessive comps. plus an exclusive interview, mike huckman talking to the ceo of novartis, after the attacks on his home, his family. it was truly shocking. mike will talk to the ceo.

mr. evans? this is janice from onstar. i have received an automatic signal you've been in a front-end crash. do you need help? yeah. i'll contact emergency services and stay with you. you okay? yeah. onstar. standard for one year on 14 chevy models.

the street." we've heard a lot over the last few months about a major retrenching on wall street. whether or not it actually occurs and changes in compensation, but there are plenty of firms throughout who are perhaps not on the so-called a-list that are doing just fine nrkts fact, benefiting from this current environment. aaron lucce tichlt i from "the wall street journal" joins us today. tell us how they're benefit frgt problems of the a-list firms? >> there's really two time, the one we profiled this morning schoenfeld, they take risks, while everyone else want treat was running from risk and trying to bring risk in late last year and the first quarter of '09. firms like schoenfeld were putting capital at risk and finding wider spreads and wider volatility that helped them make

better than usual profits in late '08. >> steve schoenfeld had a good year. >> he made $200 million, that's pretty huge compensation package. if you think about it, andrew hall at citigroup had a contract for $100 million and that has created a lot of debate because it's owned in part by the government. schoenfeld is almost like a hedge fund. it's small, it's private, it doesn't really get on the radar screen of many regulatory bodies or the federal government especially the treasury or the fed. so it doesn't have these same issues with compensation and controversy over pay. >> now, any number, of course, wall street firm, as you said, have reined in risk although that varies according to the firm, a number of traders have left. hedge funds dealing with high water marks they haven't reached, not in a position to pay the compensation they did in the past. all of which is a way for me to ask you are these firms finding a lot more talent out there as a result of those two trends? >> right.

it's really a buyers market for these boutiques, first new york, execution, jeffries are bringing their lots of employees from wall street's big firm, lehman, behr, goldman sachs. the big firms have either shed jobs are been acquired by larger banks and there need to be at lot of layoffs so there are lots of lots of ploem employees who are now looking for work and the bu buoy tebs are snapping them up. >> is this a seminal trend or one that will reverse when we get back to more normalize markets? >> that's a really good question jeffries is working to become a bigger firm. it's got a way go at that. but some firms are are trying to make it to the next level. one or two will make it, others will find it tougher going and are better suited to find a

niche and keep profitable in a small nook of wall street not being noticed by the big firms. >> are these niches primarily in equity trading or all sorts of different instruments? >> we found it mostly in equity trading. there are bond bankers trying to start things up. that's tougher going. that's a distressed play, that will take more months to play out. equities guys in liquid public market, just buying and selling, they are all systems go right now. firms like schoenfeld and others primarily deal in equities. >> aaron lucchetti from "the wall street journal," thank you for being with us. back to you, erin. our young and successful series condition off with one entrepreneur who knew how to get to mark's heart. she did, right, mark? or some obese fans i guess running around on our desk. we will explain. wonderlicious.he net.

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we're kicking off a new series on "squawk on the street" called young and successful featuring self-made millionaire entrepreneurs. here's the catch. they're young, very young. leading off is 23-year-old allison ames who was once voted best young chef in america before she got old and gray at age 23 years old. she's a founder of the wonderland bakery in newport beach, california, multi-million dollar business. she's also featured in "the richest kids in america." how they earn it, how they spend it, how you can, too. mark ate most of your cookies already. >> i didn't eat it it. >> where is it then. >> we have ants. >> obese ant, apparently, allison. >> mice, i think it was mice. >> allison, how did you get

started, you were only 17 when you were named best chef in america. >> i was. it's always a passion of mine, baking in the kitchen for family and friend, i loved it. it was a hobby. i was lucky enough to open wonderland. >> so you sent a fuf your exew examples. they're all hand decorated. they say "squawk on the street" on them. >> i'll hold this one up. >> that's the one i was supposed to -- >> what are your most popular sweet, allyson? >> right now, cupcake, cookies are popular, but wedding cake, baby showers, a lot of corporate gifts. so really just depends on the season or holiday. >> how did this get started? in your mom's kitchen? and how did you grow the company? did you have to go out and borrow, did relatives put in money, what happened? >> well, i partnered with my mom, who i was fortunate enough

to have help me as far as financials go. it was my passion. so she helped me open the store and it was really just the dream that got me there and the drive to kind of create a really unique experience, that there was nothing like around. wonderland is -- >> you have a store. it looks like it's in a smal. is it in a mall or stand alone or what? >> it's in like a retail plaza, an open air plaza. and we're in newport beach, in southern california, but we've got retail in store displays all throughout the united states right now and also have a website which we ship nationwide. >> whose idea it was it to leverage the brand into teddy bears and things like that? >> it was my mom and i together, we decided we didn't want it just to be a bakery, we wanted it to be who awhole experience where you can get a mix or an apron and babing set and go home

and create your own memories which i loved to do so much when i was younger, we wanted to make sure that experience could happen for everyone. >> one thing, allyson, we were looking at your clients. in newport beach, there's pimco. bill gross apparent ly likes to eat your cookies. he's a pretty thin guy, which must speak to your cookies are not fattening. what does bill gross eat? >> our sugar cookies, the ones that you have right now are the most popular, those are his favorite. we're fortunate to have a lot of really high d-end celebrity clients, but you know, anyone that has a sweet tooth we can create something great for. >> how many physical locations do you have now? >> right now, we just have the one wonderland location in newport beach but we have got those retail in-store displays. so for example, toy stores

department stortz, they have a setup instore display that has wonderland products like bears and baking sets, so as of right now, we're magswide with a website, too. that's our flagship in newport beach. >> all right. >> well, alyson, thank you very much. marx i want a bite. >> here. >> a bite, geez. thank you very much. >> thank you, allyson. tomorrow you'll meet cameron johnson, a consultant who created 12 online companies by the age 21. he'll share how he did it tomorrow on "squawk on the street" at 10:40 a.m., eastern standard time. those ants were hungry. >> they got to this one. >> all right. >> they're closing in on you. they're coming in from this direction. all right, animal rights activists, some prefer to call them trif terrorists, set fire to the vacation home of the the ceo of

novartis and stole the remains of the ceo's mother. we're talking about some real wackos. mike tuckman joins us with this exclusive. >> those were just the latest in a series of escalating incidents against the novartis ceo, his family and, company and employees over the past several months. joining me live on the phone right now is novartis' chairman and ceo, dr. daniel s have svas. good afternoon to you, i'm assuming it's afternoon but for obvious reasons, given the circumstances, we're not going to talk about where you're at right now. >> good afternoon. i am in switzerland. at home in fact. >> all right. so tell me, given the fact that you're at home, how you and your family, your loved ones are holding up given these recent tobaccos against you? >> of course, it's highly unpleasant to say the least to be attacked so directly and threatened and of course it's

the objective to terrorize and to instill fear. and it has been difficult, i would say, especially for the kids, because it's a completely new experience and it's difficult to deal. but we deal with it. >> how old are your children, sir? >> between 17 and 25. >> and do you believe that these are terrorist attacks or are these animal rights activists? >> when you try to terrorize people and burn their houses, when you desecrate graves and when you make death threats, to me, that way beyond activism and i would call this clearly terrorism. >> we were just looking at a couple of photographs of the flames and the aftermath of the fire at your austrian vacation home. this fire was reportedly set about a week ago in the wee hours of the morning, fortunately, and your family were not there, get butt given

the amount of gasoline the arsonists used here, 16 gallons of gasoline. if you were at home, do you think you would have been able to escape unharmed given the fact that it occurred in the middle of the night when you would have been sleeping? >> that's very difficult to say. it was clear the gasoline was set at the entrance so, it was the entrance and the exit of the house. but, i wouldn't want to speculate if and when one would have have discovered the fire and if and when one could have escaped. >> dr. vasella, the home is replaceable. you said you're going to sell the property so you don't trouble thes dents of that small austrian town, but they also stole the remains of your mother and i believe maybe your sister as well who tragically died, correct me if i'm wrong, when she was 19 years old. how do you feel about that? >> it's also a completely new experience because it's hurting

and a lot of old memories come up of the losses i experienced, especially my sister when she died of cancer after three years. and my father died when i was 13. so all these memories come up and of course, that's the intention, so you try to deal with it in a rational way. but without denying the feelings. >> dr. vasella, we have to go. message for the attackers? >> i think society needs to give the message because these people tried to hinder medical progress and stand in front of new medicines for patients. >> dr. daniel vasella, the chairman and ceo of novartis, thanks again for joining us under these difficult circumstances. erin and mark, back to you guys. >> thank you very much. we've got more coming up on health care reform. don't go away.

all right. the health care system in the u.s. is starting to look more like a battle than a debate. every battle needs a villain,

and our next guest says that's how she is being cast in washington. joining us is karen igmani, the chief lopie lobbyist for the he insurance of america, america's health share plans, and john harwood, chief washington correspondent. inaugi, i want to cut to the chase, because time is short. you have said in the past -- hold on a second. a public plan would drive insurance companies, hospitals and doctors into bankruptcy leaving only the government to provide coverage. how would that happen? >> well, it would happen because we are very focused right now on trying to move forward in health care reform, a public plan would prevent a problem for hospitals. it would make hospitals go bankrupt, because basically it would rely on administered pricing, government rates, which are very low for hospitals, low

for doctors. we in the private sector are subsidizing, and keeping hospitals and doctors able to perform what they do. >> okay. so you think if there is a government plan that doesn't reimburse the hospitals and the doctors enough, and they start going out of business, that the government is not going to react to raise the compensation? >> i think it's going to start a cascade, in effect, where employers will move to a government-run plan. and if we to have a debate about single payer, because i think that's the objective of many, we ought to have that debate straight-up. >> well, does it have to be a single payer? isn't the bottom line here the fact -- >> let me give you an example. >> can i finish my question? >> of course. >> isn't the bottom line here the fact that insurance companies are in it for the profit, not to provide health benefits to people, and the government would not have that profit motive, and therefore, you would find it very difficult to compete. >> every doctor, every hospital, every entity within our health

care system has to be in the black, not the red, to work. number one. >> not the government. not the government. that's the point. >> number two, but the people who perform the services in the health care sector have to be in the black, not the red. >> that's right. >> our profits are 1 cent of every dollar of health care expenditur expenditures, so it's not about profits here. what it's about is whether the system can perform. what we have is a private sector right now, subsidizing the medicare programs, the medicaid program, which are the public programs right now in the health care system. >> your profit margin is 1%, your medical loss ratio is 99? are you kidding? >> we're not talking about medical loss ratios. you asked me a question about profits. our profits are 1 cent out of every health care expenditure dollar. >> okay. >> and which are the lowest of any part of the health care sector. what i think you want to get to is how does the system work most effectively. you asked me a question about public program. in a public program, you have the government paying 85 cents

on the dollar in medicare. even if you make that 90, what you have is the private sector that's subsidizing that differential. we pay 130% of hospital costs. we are keeping hospitals open. we're making it possible for physicians to perform. you actually start a public program, funded at the medicare rate, then you basically -- it means there is a smaller and smaller group of people to subsidize those extra costs. >> john harwood, why is there such tension and anger over putting in a public option? now, i know there are some people who believe that public option, single pay is one step for single payer for the whole system. but why wouldn't they allow that to just be tested? >> well, i think there are a couple of things that are relevant here. and first of all, there is the ideological concern that people who think government ought to be smaller than bigger, and then there is the more narrow concern that karen is expressing about the health of the insurance industry and whether or not the public option would degrade the

quality of health care for everybody else because of the cost shifting that already takes place. what president obama and the democratic leadership in the congress would say is that, in fact, insurance companies are cherry-picking in their practices right now, and that they can -- there are ways in which the insurance industry needs to be reformed. and karen is conceding some of those points in the argument, but drawing the line on the public option. and that's where the fight is occurring right now. >> karen, you really believe having a public option would degrade the quality care? >> i think that having a public option would dismantle what we have now. and if the goal is to let people keep what they have today, i think that turns everything on its head. >> ma'am? >> john said something very important, which is we need insurance market reform. we have proposed those strategies. we think the country can move forward on a bipartisan platform to actually achieve that. >> ma'am? >> that's saying a great deal. >> what we have now doesn't work.

and it's your clients who have been running this system for the last 20, 30, 40 years. and you have done a very poor job of holding down the cost of health care. so a lot of people would say, let's try something else. because you haven't gotten the job done. >> i'm glad you asked me that question. let me give you a straight-up answer. what we have is not working today, because we don't have everybody participating in the system. in the employer market, everybody participants, that works very well. what we're proposing is to have everybody participate so we can completely overhaul what is going on now and the way the rules work. we have been at the front of that line in advocating these changes. in terms of cost containment, you're right. >> but your companies are the ones who have been pushing people out of the system! you can't say you want everybody -- you want everybody as long as they pay whatever you want to charge them. you've been pushing people out of the system. >> our companies have been at the front of the le