good morning. another day, another record. investors shrugged aside some less than stellar news as the  s&p 500 finishes at its highest level since early october. hope on the horizon, treasury secretary tim geithner says good signs are ahead for both the economy and the financial system. do i need to do a little music? i can't do both. friday's finish, asian markets swinging overnight, european stocks guarding the day is strong. u.s. equity futures. will you do it? thanks, mac. there it is. at "squawk box" begins right now. nice work.

>> good morning, everybody. welcome to "squawk box" right here on cnbc. i'm becky quick along with joe kernen. carl is out today. we have a few major economic releases on the agenda today. we're going to be starting at 8:30 eastern time with july's consumer price index. yes, that's right, the cpi is coming out today. and economists are looking for the headline number on cpi to be unchanged. the core component is seen ticking higher by 0.1%. people are going to be watching this closely, though, to see where inflation stands along the way. coming up at 9:15, we're got industrial production. and then at 9:55, consumer sentiment. so plenty of numbers for these markets to chew over as we head into the weekend. >> biggest number may be tiger, but we'll talk about these government things, too. we've got the pga president coming on later today to talk about the longest course in

history, in the hour of a major long, almost 7,700. tim geithner sees good signs in the financial markets. in an interview with the wall street journal, he promises that the obama administration will not allow wall street to return to old habits such as taking excessive risks. he says plans to overhaul financial market regulations are on track even though we've read articles that they're mired or stuck a little bit. in his words, the big banks are running with much less leverage now. they have much more conservative liquidity cushions and there's been a significant shrinking of their balance sheets, getting rid of bad assets. the weakest part of the system just don't exist any more. at the same time, he admits that the administration is concerned about the potential for populist anger, especially as banks resume paying high salaries and bonuses and still funding. that is as much as is needed. >> at least some of the banks.

remember, treasury has gotten to the point where it's naming names. but what was interesting, he says the weakest parts of the system don't exist any more, that these banks have cleaned up their balance sheets, the next paragraph in the wall street journal says some banks including those that received government bailout money are enning record profits, increasing pay, ramping up risks. goldman sachs recently recorded its most profitable quarter ever and boosted its degree of risk taking as measured by how many money it could lose in a day. people are worried about systemic risks still. >> goldman wasn't lehman and goldman wasn't bear stearns, so they weren't the poster child for at least not knowing how to manage the risk. >> but if you get back to the question of what's too big to fail, if you could lose more money than ever before in a single day, what does that mean about whether the government would have to -- >> well, i don't think their

leverage is back to where it was, either. the notion that you can cut risk and still have the same lending activity that we had before the crisis, it doesn't -- it seems like one is mutually exclusive of the other. so either you have less risk and then you're not going to have this free money flowing in all data of the economy. >> or less growth. >> yeah. if you want less risk and less coverage, then you're not going to have the same coverage. so we've got to live with one or the other. >> yep. i don't know how i feel about that. anyway, speaking of regulation, the obama administration wants larger banks to pay more for oversight. this approach is intended to try and help cover the costs of tougher regulation and a new consumer financial protection agency. "the washington post" reports that the latest plan would make banks with more than $10 billion in assets pay higher fees while smaller banks might pay lower fees. right now, it's determined by

whether banks are overseen by state or federal officials. that seems fair. if you're going to put risk into the system, you should have to pay. >> if you've been thinking about the fed's balance sheet, what did it do this week? maybe this is -- the fed's balance sheet, did it expand or contract? >> i would say it contracted. >> nope, it expanded. >> oh, okay. well, it contracted the week before. >> yes. >> the direct overnight lending to banks slowed to a daily rate of $106 billion from $107.8 in the previous week. i know what you're thinking. what about the discount windows average borrowings a day? i've got that for you right here. $33.9 billion. and as you are probably aware, it was $35 billion average the week before and it was down from there. do you know it was 35 the week before? >> no.

>> you do now. there's a new survey out, too. >> yeah. there is a new survey out today. it ranks the top paid executives in the united states last year. the report is by research group. at the top of the list, blackstone's group steven schwarzman, his $7.02 million pay came from investing equity grants that he received back when the company went public in 2007. a regulatory filing says he had a base val iry of $357,000 last year. he bumped oracle's larry ellison down to number two on the list. ellison brought home $5.52 million. oil and natural gas companies seemed to pay their bosses big bucks, as well. their leaders represented 7 of the ten highest paid ceo.

the heads of ox dental petroleum, hesitate, ultra petroleum, chesapeake energy and xto energy. >> that's interesting. >> as oil prices -- >> i remember one of the poster childs for compensation in oil was out at ox dental. you see $150 oil and a lot of the profits are based on that and the salaries are based on the profits, but how much does the decision the ceo makes have to do with winning those huge commodities when the market goes up and down? schwarzman, i understand what he's saying. it's a loosery to say it all happened in one year. >> but you have to count it as compensation at some point. >> you do. there's some years where he made his $350,000 salary. and then you've got ellison,

what he's done at oracle -- he's a guy that is not opm here, it's not other people's money. he was an entrepreneur. he's a guy that he made it, he made it big and it's great to live in a country where you can make it big like larry emily son and get the biggest job on the planet. and when someone's average shot the wake goes up and you splashed the guy. and he thought he was doing pretty well, but he wasn't. >> it's interesting to keep track of this and see who is mistaking what. >> it is. but apparently the united states isn't the only one where we've go got these big pay packages. in the uk, government reported ministers are so unhappy with watered down plans to curb bankers paying bonuses that they're considering new laws to keep them in check.

>> bank of america's merrill lynch unit is offering signing packages gator than those handed out in the bull market of 2006 and 2007. merrill is trying to replace financial advisers who left in the last year. and that's one of the questions, if you get to get the right people in twlb do you have to pay? >> clunker rebates to factory orders as dealers complained. the automotive news says the decision came from the national highway traffic safety administration. the dealers have only received payments for 2% of the vouchers drop request. that doesn't seem like it's timely. many dealers have been rejected from the program after applying for reasons due to red tape. so there's red tape. >> and you have to write on both sides, cash for clunkers and apparently sometimes they're

writing it on one side. and the dealers are saying, wait a second, we put out the money, we're losing the cars, when are you going to pay us? boeing reportedly ordered halting at a fuel plant in italy. a report on an industry website cites a letter by boeing officials telling employees to stop work after problems were found. boeing has no official comment on this. it is unclear if the work has are he assumed at the factory. but at this point, the dream liner is more than two years behind schedule and a lot of people say it's because they have hundreds of different places around the globe where they've outsourced a lot of this work. >> becky, u.s. prosecutors placing 150 million wealthy clients by actions of ubs.

becky, 150 criminal complaints will be filed as a result of an agreement with the ubs swiss bank. in february, it was part of a settlement, so they were forced to do this. >> yes. >> what's going on in venezuela? >> i'm glad you asked that, joe. venezuelan president hugo chavez is bailing out the island nation of antigua to the tune of $15.2 million. sanford was an teagueo's largest private employer. they were charged with running an $18 billion ponzi scheme. stanford investors have sued the antigua government for $24 billion, charging that it was stanford's full time partner in crime. again, hugo chavez, though, stepping in to help him out.

>> i know. >> it's like where he buys the heating oil. >> he's closing down the golf courses. supposedly -- this is what i've heard. now, charles barclay has the worst swing in the united states, apparently, charles barclay. >> the basketball player? >> yeah. he shoots 150. supposedly his swing looks like tiger's compared to hugo chavez's swing. so there's a reason this guy wants to close down the golf clubs. i've got buildup of talk of things other than reading. but i'm ready, if channel 4 is looking for someone. i am ready after that a block. anyway, there are the futures this morning, about 6 points to 7 points of up southward

pressure as far as the dow is concerned. we had big plans yesterday for the averages. but not as good as we've seen, perhaps, in the last couple of days. we're trying to turn positive. >> i can't believe it was positive yesterday after some of the numbers we saw. that was some lousy data when you start looking at retame sales much worse than expected, jobless claims coming in higher instead of lower. >> the weirdest article i read today was europe recovers u.s. lags. that has never really happened before. >> germany and france. >> yeah, germany and france. maybe it's partly because the consumer here maybe was more stretched, more leveraged prior to this than maybe in germany. but they point out subsidies in germany are going to run out for sectors that have done okay. >> it is choser to asia where china is propelling the entire world economy with 14% to 15%.

if but you know, you've still got the uk worse than the u.s. italy, worse than the u.s. but germany, that program is going to run out over there and those are really clunkers because they're renaults. anyway, look at the oil markets this morning. they seem to be in tandem with the stock market. crude oil, $70.50. gasoline, on route 46, a slow, steady creep higher as we get to the end of the summer. that makes no sense. 3.58% on the ten-year, which hasn't born out what a lot of inflation hawks have been worried about. that is a 4% plus number. we haven't seen it yet. and there is the dollar against the yen, down a little bit today. 1.43 almost on the euro. let's check out gold today.

gold is around the 9.60 level. up $1.auto. to the overseas markets, christine tan is standing by in singapore. tell our viewers what's happening over there, christine. >> joe, mixed session here in asia. really got a chance to react to the gtp numbers yesterday. but the fall in the chinese stock markets today, let investors take advantage of the closing high. take a look at the slide we saw in the china market today. the shanghai composite lost 2.9%. lots of concern there about suppliers coming on to the market. financial shares got dragged down on talks that one major chinese brokerage would list in shanghai. the sell-off in china is knocking out the hong kong market, as well. but the hang seng managed to erase earlier losses to climb higher.

that's it from asia. becky, back to you. >> christine, thank you very much. let's get the pulse of the market on the economy this friday morning. julia coranado and patricia chadwick, president of ravengate partners. patricia, i want to start things off with you. we have seen the markets push higher even in the face of bad economic numbers we got yesterd yesterday. i've heard, though, that people worry this low volume that you're seeing right now in the stock market means that you could see the knees get kicked out from underneath this rally at some point. do you worry about that? >> i do, very much so. i mean, i think there's a disconnect between what's going on in the economy right now and what's going on in the stock market. we are seeing the recession seep

a bit. but, in fact, the market is acting as though we're going to have a v-shaped recovery. and i think we're much more in an environment of what i would call a u-shaped recovery, which may mean a whole bunch of little ws along the way. and i think that this market is going to peter out, but you know, i've been saying that i thought it was getting ahead of itself for a while. we actually have deflation in the consumer's balance sheets. deflation is not a good sign for the economy or for the stock market. so i do think we're ahead of ourselves. but sometimes i have to defer to those that are wiser than i. and i was with a very good friend of mine from merrill lynch last night, john sullivan, and he says there is euphoria in this market and it just can't last and i thought that was a great way of describing it. >> so you're waiting for the drop just about every day? >> maybe it's the end of the

summer. usually they say go away in may and come back at the end of the summer. maybe we get our srm rally and then people start to realize that it's going to be a tough selling season. and i think the consumer will safe rather than spend and that means slow economic growth. so that's the way i view it. what's the good news? we don't have inflation. but deflation is worse than inflation. >> julia, what's your forecast for what we're headed? do you see this as a u-recovery, a v-recovery, a w-recovery? and what do you think about the consumer? >> i'm very much on the same page as patricia and i think it was exemplified yesterday. which was an extremely conser conservative consumer. they buy only what they need when they need it. that's what walmart was saying. that's what we're seeing in the numbers. if you look at what drives consumer spending, none of it

looks good. they've lost a time of wealth. they're losing jobs. credit is extremely tight and they're just not ready to go out there and spend with any kind of abandon. and i think -- i agree. it seems like the euphoria in the market is a little bit disconnected from the driver of the economy, which is the u.s. consumer. >> you know, we're going to be getting numbers today, julia. we're looking at industrial production, the consumer price index, consumer sentiment. for so long, we've been getting used, i guess, to getting positive numbers on these things. what are you expecting today? >> well, i think on industrial production, we are going to see some positive numbers. and it's all linked to the auto sector. we've seen the cash for clunkers response. we know that automakers production levels has been below even the very depressed levels of sales. so we are expecting some bounce there in the industrial production. but i think on the consumer prices, that's where we're starting to see the risks. and patricia mentioned this, as

well. very soft reading on inflation. we're looking for 0.1%. i think that's where the consensus is at, as well. flat reading on headline. we've soon nominal gdp contracting for three quarters. even though the markets started to worry a bit about inflation, i think that's extremely premature. i think we're expecting to see long-term disinflation in core consumer prices. >> patricia, we were just talking about what we saw yesterday from both france and germany, the gdp turning positive. >> yes. >> when you look around the globe, do you think that that's an area that is going to continue to see better growth or do you worry this is going to be a head shake and a one off? >> i think it's important to remember that france and germany really weren't the leaders of the european movement in the up market over the last few years. it was ireland, it was spain, and so it's not surprising their economies didn't go down as much and they're likely to come back first. but i think that a lot of this

is, you know, a production cycle and then if the consumer doesn't step up at the end and we don't get final demand, you're going to see production, you know, slow down. but i don't think that it's france and germany that are leading the world. i just think that they have a smaller pullback and, therefore, you know, it's a bit of a surprise on the upside. you know, we may have a bit of a surprise even in the u.s. over the next few months. but i think the long-term trend, just look, foreclosures are continuing to go up right now. the mortgages that we were hoping to revamp .8 million, we've revamped 200,000. so there are so many economic woes that are still facing us and i just think globally the economies of the world are just going to go along very slowly. >> patricia, if you're worried about the economies around the globe, if you're worried that the stock market has gotten ahead of itself, where do you put your money? >> you sit on the sidelines. fixed income, i don't think

interest rates are going to be going up. so i think fixed income will give you a modest return, but a nice return. and i think you can -- i have a lot of fixed income. corporate bonds are fine. i mean, you know, the economy is not going to get worse. it's just not going to get better at a fast rate. >> interesting, that 30-year treasury auction yesterday did better than expected. julia, the dollar after looking liekt was going to post gains, people thought after that report last week that this was a real sign that the dollar could tick higher for some time has been giving background lately. when you look at the economies around the globe, what do you think it foretells of the dollar? >> well, it doesn't look like a good outlook for the dollar. i think the numbers out of europe were, you know, potentially misleading in the sense that a lot of stimulus was going into those countries and i think we could see some payback there. i don't think europe is going to be charging ahead or leading the recovery. but asia and, you know, certain latin american countries

certainly look much better. they don't have the debt overhangs. they don't have the financial sector damage. so they could recover in more of a v-shaped fashion and, of course, the u.s. budget outlook is pretty horrendous. and so i think that doesn't bode well for the dollar, either. >> julia, all those people who were saying at the begin ofg this week that the dollar could be due for another 15% correction, another 15% gain, you think that's super premature? >> yeah, i think that's very premature. >> julia, patricia, thank you very much for your time this weekend. >> looking at -- that's better. >> i noticed there was a little kas chaos on the side. >> it's better, isn't it? you write in here, you've got a complaint -- >> somebody wrote in for that? >> yes.n nathan, driving him crazy. that's much better. much better. where do you watch your cnbc? >> you know what?

nathan is a man of your own heart. >> oh, yes. >> if you open your closet door, joe goes crazy. joe has to shut it. >> but where is cnbc seen? >> in my office and at home. >> where is it measured? >> only at home. >> only at home. coming up, we're going to talk about nielson. get it together, would you? if you don't, they're going to get ratings another way. and that's going to be a story that we're going to talk about when we come back. plus, becky is going to bring you 15 or 20 stories that you need to know in 60 seconds flat. you've got to see it to believe it, next. i may do some upgrades and downgrades. and as we head to break, a look at yesterday's winners and losers. you're the colon lady!

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k today. still to come, we have this morning's top stories, lots of them. also, the picture from the futures pits. we're just getting started on this friday morning. stick around opinion

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♪ i'm walking on sunshine and don't it feel good ♪ >> good morning. welcome back to "squawk box" here on cnbc. >> temper tantrum. >> i'm joe kernen along with becky quick. carl is off today. happy music. a few major economic release owes today's agenda. we'll start at 8:30. with july's consumer price index. economists expect headline cpi to be unchanged. the core component is seen ticking higher by 0.1%. at 9:15, industrial production. but we'll be off the air by

then, so it's not nearly as important. then at 9:55, consumer sentiment. so let's get right to the markets. the futures are indicating a little bit of a upward move, four points, five points based on the dow, as you can see there. a little bit more of a move based on the s&p. we still get questions about fair value. if the number to the left is less negative than the number to the right, then it is indicated higher. i think that's the easiest way. >> it just means the number is going to open a little higher. >> but not the nasdaq. the nasdaq, as you can see, is a enough number. >> we are talking about a flat open. we'll talk about anything at this point. >> let's look at the oil boards. the oil board is up 19 cents. $70.71 for oil. there's gas, rbro gas at 2.02.

if you're interested in where brent is, it's a couple of dollars higher than ours.a the ten-year, ticking higher than it was earlier, but the price is up so it's down from yesterday. here is the dollar. you can see it's down against the again, gaining slightly against the euro. and the pound, gold, earlier i saw was trading higher. it's been in that 9:50 to 9:60 range for a while. let's go to the futures pits with lotus markets.com, it seems like buyers come in towards the close and we end up with a positive. some people have said that that means there is a certain group that thinks they've missed this rally and they finally throw in the towel at the end of the day and get in. is it that much or is it just slow trading in the summer?

>> i think when you see those dan rallies, it's mostly short covering as well as some investors who might have missed it. but the volume itself has been so anemic that you can't see those moves. when you say those moves, you know at least during this period of time, shorts cover, some of the longer get back in and you can't drive a whole lot of information from it. these longer term trades that we'll put on in february are start to go liquidate. we're starting to see that about a month ago. we're starting to see that continue. but that's always during the middle of the day. >> well, when the big players aren't in, it doesn't mean that the market doesn't move. sometimes it can move more. people that couldn't most of move it normally are able to do that. is there anything today, any number that they might key off of? >> i want to watch this consumer confidence. given the disappointment in retail sales yesterday, i think that was a big -- there was a lot of conversation about that yesterday amongst traders that are here and are working because it was disapointing with the

cash for clunkers program. and some of the comments out of walmart about a new normal of frugality out of the consumers of the way the normal consumer would spend as we are potentially come out of this recession. >> yeah, i think that is a word. is it a word? >> uh-huh. >> pretty good one. >> do you look at europe recovering quicker than us story, bob? >> yeah. >> i'm trying to -- you know, the journal try toes manufacture news sometimes, as well. do you believe this? that would be different. that would be different than previous recessions. >> it would be different. i glanced at it. all i can think of is if we pull back down, we'll pull them down. so potentially europe coming out ahead of us didn't seem to make sense to me. it would obviously be different. what's more likely to happen is if the u.s. doesn't recover, we'll pull them back down and they'll never really come back out of it. double dip recession is a big fear here, i think.

but it's really time for inveriers to sit back and wait for the summer doldrums to come to an end. i think we'll have a rally toward the end of the year. >> it's hard to imagine that -- you know, we should be able to sell europe more goods if they're recovering. it seems like a lot of their economy is dependent on our consumers, though, so i don't see how this can continue to work that way. but these are -- you know, you look and it's like a seesaw. >> it's just germany and france, though. it's not ireland or spain -- >> and they had clunkers and some government subsidies that are going to run out. it's tough to make a lead story where definitive ly and that could have been shown to have a head stake. >> that's exactly what i mean.

>> they're also saying that the consumers in europe may have to start spending. they had more savings before and now they spent some of them. they may have to start saving. >> chinese stocks this week suffered the worst losses that they've seen in five months because people are concerned about the liquidity. >> all right, bob, here is -- you might want to listen, bob, because -- >> listening. >> -- we in the media think the wofld revolves around us. and this is the most interesting story for me to take, believe it or not. media giants are now going to form a consortium to challeng n nielson's ratings. they don'tmaker health clubs, brokerage offices, they don't measure restaurants. so our ratings here, at least 50% undermeasured, i would say.

>> i would agree, yeah. >> and it's not just media giants. you have p&g, at&t and unilever also involved. >> because they spend the most on advertising dollars. >> right. and there could be reportedly measured contracts awarded. i've been told by cable executives not only do they know who is watching what, they know within seconds, like if someone comes on that people like, they can measure -- >> nelson breaks it down into 15-minute quarter periods. but cable industries know to the second when you turn on, when you turn off and then they can go back and mine down that data. >> but with nielson, you're talking about worlwide. so fragmented is the cable universe at this point? so 5,000. you can triple one day or have a third the next day. so you just wonder, you know, how accurate, you know, all of it is. if you could do it with set top data, you would have a much

better idea and then, you know -- >> especially in the internet age where you can see what every person clicks on for every single page along the way. it's just a measure t better way of measuring with better accuracy. >> all right. >> bob, i don't know if you're still there, but listen to this. we've got something a little different for you. joe, do you want some news? >> i guess. >> do you want to get set? set your clock. we're going to do six stories in 60 seconds. ready? >> i thought they were joking. okay. go ahead. >> on your mark, get set, go. warehouses hers selling 150,000 acres of timberland in oregon for $300 million. retail research groups mtv reports video sales fell 29% in july compared to the year before. netscape founder mark andrewson is backing a new internet browser backed by rockmelt. whatever that is. warner brothers says it will

have direct relationships with mail order subvendors. mcgraw-hill, an online textbook rental company chegg.com are teaming up to create a shared-revenue model. blackstone is having an earnings in july. did we do it? >> i'm full! no more. i can't -- >> 57. i did it three seconds less. >> i'm full! i got too much news this morning. you've given me too much to chew on. >> you just wait. you just wait, buddy boy. the morning is just starting. >> there's more? >> sure is. >> you know a lot more than when you started. incredible. >> and that's what you should get. if you have any comments or questions on anything you see here at squawk, e-mail us. we're going to take a break, but then we'll have the headlines making stories outside the world of business. ( siren blaring )

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time now for a check on the world of news outside the world of business. monica novotny joins us. good to see you this friday morning, joe. former presidential candidate john edwards is expecteded to admit today that he fathered a child with his former mistress. last year, the former senator and vice presidential nominee acknowledged his affair with reall hunter. speculation rose about the paternity of her daughter. an italian tourist on a boat

in the hudson captured the video of a crash that killed nine people. michael phelps was driving an suv that collided with a car last night. phelps was not hurt. the other driver was shaken up and taken to the hospital. police say no citation was issued and no alcohol was not involved. one man is quitting the world, he says, by isolating himself on an uninhabited island off the coast of scott legion. he says the empty island makes it easier for him to go cold temperatureky. they did say, as you can see from that video, he had a few things with him. they said he was taking essential items. but i just wondered, did he sneak something in there? >> i bet he didn't. if you go to those streams -- >> do you think he means it? 30 cigarettes a day, that's what he was smoking, he said. >> but he brought food and that

means he'll be porking up a little because -- >> you eat more when you're trying to quit, right? >> yes, you do. nice to see you, monica. we usually have alex witt on friday. did you make a mistake? did you forget today was friday? >> no. you know, i just got up extra early just to be with you guys. >> ahh. >> you can tell that we missed you -- i mean, we like alex, too. >> of course. >> but we were wondering where you've been. you know, i get ready, here is the news outside the world of business with m -- alex witt. so it's good that you're here. thank you. >> appreciate it. have a nice weekend, guys. >> that baby, by the way, looked a lot like john edwards. it almost looked like they put his head on top of the little -- i don't know, that was not that earth shattering, monica, that maybe he could have been involved. >> maybe. >> that's just me. get me out of this. go ahead. >>. coming up, listen to this, joe, we're going to have more of

the stories that have us squawking this morning, like why hundreds of video game fanatics lined up last night. and then trump, a last nate name that is synonymous with the board room. today we are looking for a squawk apprentice on our own and is we're turning the tables on ivanka. you're hired as our guest host at the top of the hour. 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,

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welcome back. let's take a look at the futures at this futures this hour. you'll see a little mixed open. for the most part you're talking flat across the board. futures slightly above value. nasdaq just below. at this point you're still talking about a relatively flat open. we have data coming up at 8:30, the cpi. we'll get things started with ?ç this. meantime, while most of the east coast is just getting out of bed there are hundreds if not thousands of gamers that are still playing the latest version of maddon football after picking it up at midnight last night. darren is at a gamestop in manhattan and he has that story. >> reporter: any company that can debut a product and have it sell as well as last year certainly has to be happy with itself. nan lists are projecting m inin 2010. since 1989 this franchise has

been going, 75 million games sold, generating more than $2 billion in sales. with fans wanting the latest roster update and cool new features, which has the ability to plot out an entire season with a different player for each nfl team. this is something even in this economy gamers have to have. >> a lot of people don't have money they're spending in this space. they're just, a little more careful about the money they're spending. so we want to make sure we take, i guess, the guesswork or the question out of that. >> reporter: electronic arts sure could use that boost, which shares down better than 56% since last year. npd reporting that video game software sales slide down 26% in july as compared to last year. earlier reports from here say that there are fewer preorders for the game but maybe that will pick up when this store opens a little bit later on today. maybe the one negative here is that the game sells better in

the more realistic versions when you talk about playstation and xbox as opposed to the wii, that's a negative because the wii is the best selling console. the price for the xbox and playstation version, $60. people might say that's a little high but think about it, if you started playing at midnight, as hundreds or maybe thousands of gamers have. now we're down to $8.50 an hour. becky, joe? >> $8.50 an hour? we're glad we have you here this morning because we wanted to ask you about the news last night. eagles picking up michael vick for two years. can michael vick's reputation be rehabilitated by the nfl? >> reporter: yeah, you know, we'll see. i think he's going to have to rehabilitate himself, that's the key. he started with the humane society and doing the two speeches that he did over the past week. but we'll have to see. the press conference is at 11:00

a.m. eastern time. how does he react to this? we thought the first reaction was going to be on "60 minutes" they got the exclusive for this sunday but obviously now he's going to address the entire philadelphia press and the whole world today. we'll have to see how he reacts. i mean, it's all about the reaction. he's got to address all his critics and almost become friends with all his critics, peta, the people for the ethical treatment of animals, had a press release that was harsh and expected. let's see if he can work with them. i don't think fans will walk away. what's going to happen with the sponsors? it's all based on his reaction now. i will say one thing. the contract is, reported at $1.6 million for the first year and a team option on the second year for $5.2 million. what does that mean? well, it means there were other real offers out there because the veteran minimum for michael vick would have been a combined

$1.38 million for both years. so the eagles will pay him handsomely if he can stay on this team. >> thank you very much. it's great to see you this morning. >> reporter: okay. in the papers proper this morning, lead story, new york times, finding on drugs may help fight against cancer. i was fascinated, and i urge you, if you have an interest, and i've always had an interest because it's such a complex disease, and so many different diseases, and you will understand most of the workings of the cell, cellular biology and molecular biology. one of the things, becky, over the years that's been most frustrating is that chemo can kill 99% of the cells and cancer can recur. they've found that stem cells don't -- may not be killed by standard chemotherapy. the stem cells are able to regenerate and repopulate other

areas. and then the cancer recurs and then it eventually kills you. so researchers at several different places, one of my former professors, bob weinberg, who we've had on the show, a great molecular biology researchers over the years, in fact, he first postulated the existence of a ponca gene when i was there, but if it works, if you find a chemical that kills the stem cells used in conjunction with something that kills the tumor proper with chemotherapy, sort of like you do with hiv. a combination of drugs. it may be a way to tackle cancer. they thought it was important to make it the lead story. >> definitely something worth checking out. when we come back on "squawk box" this morning, we'll have more of our top stories of the day. plus, ivanka trump walks onto the set. she's a busy woman this day,

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good morning. more signs the recession may be winding down. stocks rallying late in the day. will it be more of the same as we head into the weekend? today's focus? earnings from retailer jcpenney and cpi data. the outgoing head of the

federal finance agency joins us to talk about how the government is making home affordable praem is faring. and special guest host ivanka trump will be here to discuss real estate, the markets and the deal to buy back the trump atlantic city casinos as the second hour of "squawk box" begins right now. good morning, everyone, welcome back to "squawk box" right here on cnbc. i'm becky quick along with joe kernen. carl has the day off. in studio with us today, ivanka trump, the executive vice president of development and acquisitions at the trump organization. we've got a lot to talk to her about today. everything from casinos to jewelry to what's been happening with commercial real estate. we'll get to that in a moment. >> terrific. >> in the meantime let's take a look at the markets this morning. we've been watching the futures, which have been mixed to flat this morning. you're talking about those dow futures and the s&p futures slightly better than fair value.

the nasdaq is just below fair value. you do have plenty of data points coming today. at 8:30 we'll get cpi numbers coming out. at 9:15 we get industrial production numbers. at 9:55 we get consumer sentiment, these are all numbers the market will be digesting. on oil prices, we've been watching oil prices tick higher as the dollar's been weaker. right now the crude oil price is up 23 cents to $73.75 a barrel. the ten-year note, we've been watching the yields coming back down. at this point it's at 3.597%. that's down a little bit. the 30-year treasuries action yesterday went a little better than expected. if you've watching the dollar, it's facing a pull back after strength earlier in the weak. it's down against the yen, slightly higher than the euro and pound but people are

watching the yen number closely. gold prices, a little higher because of the weakness of the dollar at this point, up by $1.50 to $958 an ounce. >> if the treasury secretary speaks, we need to listen. tim geithner sees good signs for the economy and financial markets. he had an interview with the wall street journal. he promises the obama administration won't allow wall street to return to such old habits as taking on excessive risks. he says it plans to overhaul the financial markets are on track, regulations are on track, alth we have seen some scuttlebutt in the papers that he's not getting to where he wants to be as quickly and running into some resistance. in his words, you can read it with me, the big banks are running with much less leverage now, much more conservative liquidity cushions and there's been a significant shrinking of their balance sheets getting rid of bad assets, cleaning things up. the weakest parts of the system don't exist anymore. like loans. at the same time geithner admits

the administration is concerned about the potential for populous anger, especially as banks continue paying high bonuses and salaries. that wasn't part -- i said that. >> you mean the loans and -- >> yes. obama administration wants larger banks to pay more for oversight, an approach intended to help cover the cost of tougher regulation. t"the washington post" proposes the latest plan would make banks with more than $10 billion in assets pay higher fees. the smaller banks might pay lower fees. right now rates for banks are determined by whether they're overseen by federal or state officials. under the plan on the table right now, unregulated consumer financial firms like mortgage lenders, they would have to start kicking in their fair share as well as they would be expected to pay for oversight for the very first time. our guest host today, ivanka trump, with us for the next two

hours. executive vice president of development and acquisitions for the trump organization. also an author "the trump card" due out in october. i can't believe your dad never used the trump card. >> pretty amazed, right? >> how many books -- he's done -- >> now i don't think he can unless he's well to go with "the trump card 2" which i have a feeling he wouldn't be. >> we didn't mention your jewelry line, because i thought those were diamonds when you came stroling in from a distance. >> they diamond and rock crystal. this is an entry level piece, starting at around $500. >> you're talking to me. journalist -- >> i like that you thought it was a diamond. a massive diamond. what time is it? 6:00 in the morning. >> i can't see that well either, ivanka. where should we start? do you see -- we can't call them green shoots. we tried crocuses, then they were dead, then they came back.

do you see positive signs emerging? >> i hear positive talk, which is nice and comforting. it's nice to watch you in the morning and feel good as i drink my coffee. >> happy talk? >> i mean, in general, look at what the stock market's doing. one wants to believe that that's predicated on something real by way of the fundamentals. i'm not totally sure it is. to hear geithner speak and hear significant risk has been taken out of the system but see unemployment rising, to know that credit cards is an issue, that we've only started to begin to deal with, to know that people are defaulting left and right on their mortgages. and the fact that the commercial mortgage risk hasn't even really entered the system yet. i just don't really know how to believe that this was a v-shaped recovery as opposed to a "w" recovery as opposed to a "ww". >> we had someone said a "w" starts with a "v." that's a scary thought. >> that's very true. >> i thought about it for a while. i thought, you can't have a "v"

without a "w." today the journal it's all about europe. there are fears europe may have a double dip as well. so that -- i just wonder whether that keeps us all honest, the fear of what's not going to happen. usually it's not a double dip and probably not different this time. do you think it's a real probability? >> i think consumer spending habits have changed, at least in the short term. i think people are much more careful in how they consume and what they consume and much more protective of the cash they're making. it's a good thing and bad thing. it's good for the health of their own personal financial situation and bad for a fast recovery of the economy when we need people to spend. and to create a stimulus that isn't just handed over by the government. i don't know. i'm hopeful this is a "v" but i have a feeling we'll come out very slowly. so i think the market is acting a bit irrationally and i think

the market is, a bit optimistic. >> you see this on the front lines. you mentioned the earrings are a lower price point. had you to adjust from what you see from consumers directly. >> i think everyone has to adjust. our consumers are still coming, that's a gra great validation in the real estate world as to the product we sell, in my diamond industry as to the product we sell there. with that said, people are much more pensiv. someone buyingen apartment comes back two, three, four, times just to make sure it's a good investment. there's less impulse and immediacy to purchase, consume and buy. one thing we're doing with the jewelry company is creating a platform for growth at which we can enter higher end department stores, an area to give us more output, more point of sale but at a somewhat lower price level. >> the other thing that concerns me is if you're worried about a

double dip, you see things in the commercial real estate market we don't. what are you seeing behind the scenes that really concerns you? >> well, i think there are -- a massive deleveraging has to occur. this is occurring across all industries or hasn't yet occurred in some industries, like in the commercial real estate industry. there is a tremendous amount of leverage that has to be dealt with. the banks aren't there where they're giving their borrowers significant discounts even those willing to pay for that privilege. there has to somehow be a rationalization of that system. it's not going just going to happen by a slow recovery of the markets. rents aren't going to suddenly spring back. it's going to be a slow process, a rather tedious process. at the end of the day, commercial real estate isn't so difficult to understand. you know, when people aren't hiring, they don't need office space. when people don't need office space, they don't pay high rent.

there's vacancies. it's a problem and lags the economy. >> what kind of pressure have you seen to this point just in terms of rent prices, in terms of what you can get, let's say, in the new york market? >> it's significantly down. there's much more vakency, especially in mid town, in the core, and class "a" type office space. it isn't as bad as a lot of people talk about. if you need a large amount of space it's still rather difficult to find large bulks of space. firms are think thinking about relocating, taking advantage of the discount, taking advantage of the fact that it really is their market in terms of making a deal. i'm hopeful it starts to recover but i think that doesn't offset the fact that all of these purchases were way overlevered. signing a lease, especially when you have to put down a significant amount of money to attract tenants, is difficult. >> have you met with any bankers

recently? >> the positive is that bankers are starting to call again and solicit business, which is nice. there was effectively radio silence for a while because they couldn't even pretend to be in the business of lending money. now people are starting to reengage, starting to renurture those relationships -- >> pretending -- >> pretending to be in the business of banking. >> are they in the business -- still not, but pretending? >> no, no. i mean -- nobody's making loans that are substantial or that are reasonable in terms of what they're requesting for that consideration. >> we'll talk more. we want to talk about these casinos, whether you're glad you got them back. you must be -- >> well, we're not there yet -- >> you want to be in business in the casinos in atlantic city? >> i think the casino industry is a great example of where it is total deleveraging occurring across the board. i think every day i read about these companies that three years ago were at the gold standard. they were making money hand over

fist and now experiencing major difficulties, some of the best run companies. >> the stocks are -- i mean, it's been something like -- las vegas sands, to watch that go from the bubble back to reality and gm -- >> they were all extremely overleveraged, dealing with a consumer that is less willing to open their wallet. they're dealing especially in atlantic city in an environment where there's tremendous competition. competition they're not used to facing. so it's definitely a challenge. we feel that, back involved in the company and we haven't managed this company for years, so, involved in the management of a company under a private structure, with a rational depth structure and with this ultimately platform for growth, by lef rajjing the advantages the trump organization brings to the table and actually utilizing them, except just maintaining the brands on the building without the infrastructure and support of my family and organization, we believe we're well positioned to grow. and the management and board of directors agree because they

unanimously voted in favor of our proposal. >> it gets dicey here. we'll have more. your father in his book wrote about how great your mother was at managing these things. what do you think, can you bring her back? >> they're both phenomenal. i get in the helicopter and fly down to atlantic city and i'm thinking, i'm almost channelling my mother because i know she was doing the exact same thing 20 years before. so it is -- she's definitely somebody i'll call for advice. >>. >> we have a lot more to talk about. if you have any questions or comments, anything you'd like to write in, go ahead and e-mail us at squawk@cnbc.com. the futures this morning, as we mentioned, right about in line. at this point you're talking about those dow futures, 11 points above fair value. up next, steve liesman reels in a big fish from the fed and asks about the risk of the united states becoming the next

japan. also, he'll talk about the job the fed has done handling the economic downturn. later this morning, the commercial real estate outlook from our "squawk" friend and real estate mogul richard lefrak. time now for today's aflac trivia question. on this day in 1971, what famous pitcher threw the first no-hitter of his career for the st. louis cardinals? 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 aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac!

now the answer to today's aflac trivia question. on this day in 171 which famous pitcher threw the first no-hitter of his career for the st. louis cardinals? the answer, bob gibson. we did have a strong showing in yesterday's auction of 30-year bonds. it could indicate investors are aren't sure about an economic recovery. the auction fetched a high yield of 4.5%, higher than expected. the auction concluded with $75 billion record quarterly refunded. demand was high from those who made up 48%. buying. a little surprising, i guess. we have steve liesman here. >> we'll talk to him in a

moment. a new survey today rates the top executives in usa last year by the independent research group corporate library. at the top of the list, blackstone, steven schwartzman. the bul of his pay came from $69.8 million came from the investing of grabts when the company went public. he had a base salary of $350,000 last year. the company disputes the survey number. they say the stock he owns should not be considered xhengs. he bumped oracle's gary ellison down to number two, who brought home $557 million. oil and natural gas companies pay their bosses pretty big bucks. the leaders represented seven of the ten highest paid ceos.

they all took in more than $100 million in total realized compensation. >> steve, you're here? you have a package? >> yes. >> can i talk to you about something? >> sure. >> 4.5% f you were worried about the dollar, why on earth would you agree to 30 years at 4.5%, if you were worried about an immeant collapse, you wouldn't buy those, right? >> yes. >> so we're still waiting for forrers foreigners to mroe us off and it's not here yet, right? >> the guys out there are buying the bonds, the guys that see u.s. fixed income markets as the most liquid, the most deep, the places to go when you're concerned about the global economy and also that the idea the dollar is relatively not a bad currency when you look at, at, the problems they have in europe, notwithstanding the recent quarterly growth numbers.

there's an entirely different side to the argument. that is really reflected in market prices. >> i thought it was important to talk about that. they want us to talk about what you found out last week about bernanke or something? >> no, no. here's the deal. second year in a row, harvey roseman sits down and gives me an interview in maine. because there's a fed meeting coming up we have to embargo the interview until afterward. this is the earliest possible moment, the earliest possible second we can bring you -- >> this is a first on cnbc. >> first on cnbc. and harvey is well regarded. really a bright guy who's been around the fed for a long time, he's very outspoken. he thinks fed programs aren't working as well as they could and he thinks there's a chance the fed could miss the turn and overshoot on inflation. harvey rosenbloom. >> in order for monetary policy to have traction, when the fed eases policy, lowers interest rates that's supposed to

stimulate lending. the banks are not doing very much lending. as a result the fed has to put too much medicine into the patient because the tube through which the medicine is, administered are crimped. and the too big to fail banks are crimping each of those tubes through which monetary policy is, carried out. there are several banks that are very large, have a short capital position, if i can use that expression. and, therefore, are basically under an understanding that they can't grow their balance sheet. so in many cases they're deleveraging or shrinking their balance sheet. so the fed is getting the opposite effect of what they're intending. >> how serious is the threat of a japanese-style lost decade if we don't deal with our banking system? >> considerable less because we have a way of addressing these things. some has been addressed already and it's continuing, addressed.

there is proposed legislation to deal with this, which probably will help. it will put a greater tax on very, very large complex organizations so that the market isn't helping them to grow. and to become even more big and more complex. so that is -- will be a step in the right direction. these are long-term problems requiring long-term solutions. >> reporter: how much concern should people have that the fed will not make the right decision when it comes time to raise interest rates? >> it's not a matter of when they're going to make that decision. we all know that, you know, the fed has been talking about exit strategy. they're not, he can police it's because everybody recognizes the fed has said publicly we're way off from having to exit this. right now it's still monetary stimulus that has to be applied. one the lessons everybody knows from japan and other cases is you don't start taking away medicine from the patient too soon. >> reporter: do you feel the

track record of the federal reserve over the several decades you've been at the fed is one that tells you, we can rely on the fed to make the right decision at the right time? >> absolutely. the fed is always going to be a little bit slow to pull the plug in terms of tightening monetary policy. they want to be sure the economy has traction. what does it mean? it might mean inflation might end up, oh, perhaps half a percentage point higher than it otherwise would have been for maybe six months to a year. in the greater scheme of things, that is not a big deal and the fed will address that problem later with a slightly tighter monetary policy than they might have had. the fed has always tried to make sure, at least over my career, that there's enough traction in the economy so that you don't tighten monetary policy too, too fast. >> he said if you look over the long haul, 2 .5% annual

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a few major economic releases on the agenda, starting with july's cpi. economists expect it to be unchanged. industrial production at 9:55. consumer sentiment, that's what the traders said he would be watching for, consumer sentiment most important of the day. we'll see. still to come, fhfa director james lockhath will be joining us in studio. we'll talk about housing, why he decided to leave his post. we'll talk about the state of fannie and freddie. later, real estate developer richard la photographic will be here.

as we head to break, let's take a look at oil prices. up 25 cents. $70.77. "squawk box" will be right back.

welcome back to "squawk box." let's take a look at the market. we've been watching the futures. you'll see the dow futures are a little better than fair value. right now you're talking about up 15 points above fair value. watching this through the morning as we continue to get earnings. abercrombie & fitch out with a bigger loss for the quarter. wale hear from jcpenney later this morning. still watching the economic agenda, we'll get the july consumer price index about an hour from now. at 9:15 eastern time the federal reserve is out with the latest read on industrial production and factory capacity utilitization. at 9:55, consumer sentiment. apple's board will be meeting on tuesday, according to the washington journal. eric schmidt recently left the board after the two parties decided google's participation

in apple's market represented competition. that came after republic raised it's prior offer and after southwest pilots failed to reach an agreement on how seniority list would be combined in the event of a deal. since the inception of the government's making affordable home refinancing, fannie mae and freddie mac have refinanced 1.9 million mortgage loans. joining us is james lockhart. it's great to see you on set. >> great to see you. >> you'lling leaving your post. why did you decide to step down? >> i've been at it for -- this post for about three years. and social security for 4 1/2 before that. i've been in the government for 7 1/2 years so it's about time to leave. >> you're going back to the finance world? >> i hope so.

we're starting to see signs of stabilization in the mortgage market. i couldn't leave during an administration change but it's time to go. >> i couldn't imagine a more stressful climate to live the past two years. >> we continue to watch foreclosure rates climb. what do you see? >> when i see signs of stabilization, things like housing prices are starting to stabilize. serious delinquencies and foreclosures will continue to rise for a while. if we can get this affordable home program work more effectively, we'll see more stabilization. >> you've refinanced about 1.9 million mortgage loans? >> so far this year about 2.9, but in the last four months about 1.9, fannie and freddie have. and most importantly, they're starting to refinance people that are under water. and that's going to be very helpful. >> jim, did you have any

pressure to leave? >> no. >> none? >> none from the obama administration? >> no. >> would they welcome you? the reason i'm asking, i'm not prying to pry, but we're trying to figure out what happens with bernanke. the skulgt bucuttlebutt is they he's done a good job but others think the administration wants their own guy. >> i told them since i arrived i was going to leave. i've been telling them for the last three months that i wanted to leave but they haven't gotten a replacement. >> the low pay, of all the foreclosures, you're escaping, right? >> something like that, yes. >> i asked him when he came on how long he had left. it was weird. you had it down to the minute, 42 days, 15 hours and -- no, that's not true. >> that's not true. i mean, it's really been a real challenge, especially the last year. putting fannie and freddie into conservatorship was a tough thing to do but necessary. the good news is they're doing

their job. >> but bleeding cash, right? >> they are bleeding at the moment from really the mortgages they made in '06 and '07. and everybody has made some very bad mortgages. and so they're not really bleeding a lot of cash but they are seeing a lot of foreclosures. >> they're asking for a lot of cash. >> right. >> $10.5 billion that fannie asked for last week? >> they did. you know, they're continuing to put up reserves for future losses, yes. >> but they are the ones single-handedly keeping the refinancing effort alive for these mortgages. >> right, right. >> very important. >> in the single family world, their market share is 70%. in the multifamily world it's 80%. >> which is just staggering. >> when do you think we'll see the -- those two companies, fannie and freddie, start to turn the corner? >> we'll start to see it within the next year or so. their resefbs have to go up as foreclosures continue to happen.

at some point we'll start to see the turn. and the new business they're writing should be very profitable. >> the most important number that you watch for them, would it be the unemployment rate? >> housing prices and unemployment are the two key. right now unemployment's probably becoming more important now that housing prices are starting to stabilize. >> and where do you think we'll actually see unemployment rates peak and when? >> i don't make judgments like that. it's hard to say, really. it's a lagging indicator, as are foreclosures. and so, you know, they're just going to take a while. >> you may may not make predictions but somebody inside fannie and freddie have to be making predictions like that. what are their predictions? >> we don't make them as an agency. at this point, you know, they're not making any significant projections. their view is really that we're -- you know, and my view is that we're bumping along the bottom here. it's going to take a while. we may be bumping along the

bottom for the next 6 to 12 months, but we're getting there. >> long ago fannie and freddie made millionaires out a lot of stockholders. i watch it in the '80s and in the '90s. they seemed to have everything. they had the implicit government backing and yet they're operating as a private entity. i mean, it was an incredible business model. well, now we know it was too good to be true. what has to happen to -- for those entities to, again, become profitable businesses? >> well, i mean, the key problem they had, they were allowed to leverage themselves at 100 to 1. we're talking about banks at 12 to 1, leveraged these days. they were allowed to leverage themselves at 100 to 1. that has to be changed. we finally got legislation last july to give us the ability to do that but it's much too late. what has to change is we have to rethink the mortgage market in this country, the secondary mortgage market in particular

going forward. fannie and freddie should be able to play an extremely important part but it has to be done with a much stronger balance sheet. much better mortgages, made, higher underwriting standards. >> if we eventually had roubini on and his ultimate drop in housing was 40%. we're not there yet. he thinks we still might get there. how much more money would the u.s. be on the hook for if this didn't improve and we went down 40. how much do you think we'd are to sink in here? >> the commitment to fannie and freddie is $200 billion each and they're about $50 billion each. one -- almost any stress test we've done they haven't gone through the $00 billion. certainly in those kinds of numbers, they get very close. >> roubini was talking about an additional additional 13. >> 40 total. >> the stress test has never been run on numbers quite as

pessimistic as someone like roubini? >> we've run pretty stressy stress tests. we get pretty close to 200 in those kind of numbers. >> what do you mean you're going to go into private? are you going to a pe firm or -- >> i've been talking to a few people -- i announced last week it's been hard to talk to anybody. certainly private equity might be one area and financial services. one thing i would like to do is continue to help the recovery. i think a lot of the private equity firms at this point are bringing equity into the market that's very helpful. >> what's the biggest challenge your successor is going to face? >> restructure fannie and freddie. the administration says they're going to come up with proposals next february so a lot of the time will be working on various alternatives for fannie and freddie. the rest is -- these are two giant financial services firms.

we're the conservator of it. so we get involved in sort of the major management decisions as well. and it's -- it's sort of an interesting challenge trying to manage two at the same time that are competitors. >> yeah. james, we want to thank you very much for joining us today. >> thank you. >> we appreciate your time. >> come back when you're a private citizen and you can really talk. >> i'll be happy to. >> you can really dish because we want to hear -- >> he'll be buying all the mortgages on the secondary market. we'll learn about it. >> we want to know where all the bodies are buried. >> be happy to. >> sounds good. we have a promise then. coming up, your "market minute" we'll get you up to speed on the early morning trading. are you ready to freak out? richard lefrak is in the boardroom getting ready to join us with his insights on commercial real estate. hi, may i help you? yes, i hear progressive has lots of discounts on car insurance.

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all right, everybody. let's take a look at the markets right now. you're going to see the dow futures have been improving a little bit through the course of the morning. you're talking about the dow futures about 23 points above

fair value. the s&p is up as well. . the nasdaq showing a little improvement as well. we'll keep an eye on this. you have a bumpk of numbers coming up, including the cpi hitting at 8:30 looking for july consumer price numbers. oil prices have been ticking higher as the dollar's under pressure. up 67 cents to $71.13. ten-year note is yielding 6.0 %, yielding slightly higher over the last hour or so. if you take a look at currencies, the dollar is weaker across the board. that's been sending commodity prices a little higher. you saw already with oil prices what's been happening. let's take a look at gold prices as well as the dollar continues to weaken. gold's up by $4.30. our next guest is seeing new signs of trouble in capital markets. now more with richard la photograph

you basically own something the size of queens, right, if we added all you're stuff together? you're like the lefrak borough. >> more or less. i just now have holdings in new jersey. you have wonderful space. >> i'm looking at the notes, and very troubling, obviously. mortgage markets you say remain frozen. you talked about the shadow -- >> yeah, the shadow banks just -- it evaporated. >> is that why still? >> they were supplying about 35% of the capital in the industry, so they just disappeared. i mean, it's like that's it, they're off the charts, off the maps. >> securitization of all of these -- >> mortgages basically disappeared other than, you know, fannie and freddie-backed paper and so forth. but in addition, many of the traditional institutions, what we call portfolio lenders, lenders who hold mortgages in their own portfolio, are reducing their holdings now because they want to get their assets in the real estate space down. so they're also basically, other

than for their very best customers, kind of out of the market. and there's a huge gap today in terms of what's going to be needed. numbers i saw between 2010 and 20 11, it looks like there's $800 billion of refinancing that has to be accomplished. and we're going to need to reequityize those properties in the neighborhood of $750 billion, which is wholesome amount of money. >> and that smacks of opportunity for potential investors to come in. don't know if you're experiencing this, but we're looking at a tremendous amount of opportunities that should be opportunities but they're just not there yet. everyone's sort of keeping their powder dry but it doesn't really seem to be -- the opportunities haven't come to frugs yet in the commercial real estate market. >> no, they haven't. and unless there's seller financing that comes with the transaction or unless an

institution has come hold of the real estate, there's no way to finance it. unless you come in with an all-cash deal and feel the returns are there, but there's a huge mismatch between sellers' expectations and buyer's expectations. >> and these lenders are not working with the borrows to get the appropriate amount of leverag leverages. it's like they're looking at each other, staring at each other, not working through the structure. >> with the cnbs, the ground zero of the problems, nobody actually knows who owns the mortgages. there's no actual clear legal path to talk to anybody because there are special services, master services and these loans have been sliced and diced in a million ways and vb who owns pieces of these loans has a different agenda in terms of how they want to deal with it. because they're not speaking with one voice. >> richard, what could the federal government or the fed have done? we're -- this week we heard that

the fed is almost at a point to start pulling back on some of these extraordinary facilities. it's not fixed. could they have done anything or are you on your own? >> if you're in a residential space, fannie and freddie actually work. multi-family, which is basically commercial end of residential housing, they have fannie and freddie. they underwrite things in a relatively conservative way. if you look at their problems, they're mostly in the single family home market, not in the multifamily home market, although there are -- there was some aggressive underwriting. will is no such thing as fannie and freddie for, you know, retail, office, hotel. and our industry may be foolishly became reliant on the mortgage suecuritization outlet

and it just disappeared. so where do you go? >> you're not talking about a return, you're talking about an entirely new way of working. >> well it was supposed to the taos amount of proceeds available are relatively meager. it's a very conservative program in terms of the amount of proceeds that are available. there's still a huge gap between what the talf will do and what's needed in the industry. >> richard, everyone talks about the cnbs problem and the fact there is no one to negotiate or no mechanism to lever these properties or delever these properties. do you think one of the things the government can do is properly embolden the special servicers to make the

adjustments necessary to rationalize the markets? >> obviously, that's something that has to be done. because the special services will not actually get a grip on anything until it defaults. >> and they hao dog in the fight, you know. >> and, you know, so -- and so the chronology is that you have to fail before you get them involved. you can't go to them a year in advance and say, let's try to work something out. let's see what we can do to make this thing work. you have to actually fail first before they'll really talk to you. >> are you coming in again for a guest host? >> i'm coming in in september. >> september. because we didn't -- >> is that good for you? >> no. tomorrow would not be too soon. we want to talk ppip, bank united. you have irons all over the place but we don't have time. >> i'll be here in the middle of september. but i'll be watching. >> i know you will. >> faithfully every day. >> and you now have a lot of other things you have to do. because of your appearances here, now you judge beauty

pageants and things and -- like you're a name now, bake after, on. >> yes. i've been altered into the ranks of beauty contests. >> and does very well at them. >> so i hope -- >> you have a great sense for beauty. >> i get dressed properly and say, your honor -- >> we need a new title. hopefully, depending on how everything sorts itself out, i may have some interesting -- >> will you have a ppip story by then? have you done anything? >> actually, we are -- together with wilbur we're in the middle middle of a money raise right now. >> it's taking forever. >> yes, because the bureaucracy -- >> that's going to run health care? >> the very same guys that are going to on do you cado your ca- >> yeah, we have that going for us.

that's my only editorial comment. thank you. >> always fun to see you. >> see you in september. >> ivanka, congratulations. >> thank you. >> oh, yeah, we didn't talk about that. you are engaged. >> i am engaged, yes. soon-to-be married. >> breaking hearts all over america. >> richard, do you think he'll invite me back after -- >> carl didn't even show up today. he was beside himself. >> quickly, jcpenney earnings are out, broke even for the quarter which is better than the street was expecting. street was looking for one cent a loss a share. company says they've been able to manage very well in what they call a very tough climate. they say they're focused on trying to win customers and managing businesses to try to maintain financial strength neps say that in view of the better than expected second quarter operating expenses and because they're raising their expectations, see the see expectations for further gross margin improvement in the second

half. they're talking about 2009 full year earning guidance between 75 to 90 cent a year. earlier it was 50 to 65 cent a share. the street is looking for 89 cents a share. the street was already at the higher numbers. the bid/ask is under a little pressure. coming up on "squawk box," we will have more from our guest host, ivanka trump. also, game over for the gaming industry? nbd is out with latest sales report. it's not pretty. stick with us on "squawk box." we've got the premarket info you need before you make your trades. "stocks to watch" are coming up next.

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rough month for the video game industry. we've done my part in my family. ndp reports sales were down in july. sales of hardware, software and accessories fell for a fifth straight month in july. console revenue, 37% drop to roughly $280 million. sales of the anyone anyone toe wii down 54%. sony playstation 3 sales down 45%. >> it's remarkable. >> remember, for a while, it was the one supposed to be recession-proof. people were doing it all over the place. >> same with television ratings.

>> you can take back used ones if you don't like them instead of -- it's 50 bucks for a new one. here's so you stocks to watch. let's look at jcpenney. the numbers were above expectations, that's make more sense right there. now it's higher. they hit revenues, too they hit revenue and raised their guidance significantly but it's where the street already was. >> abercrombie says 30 cents including items for a loss. so the estimate was for six. obviously, that's not the clean number. if you miss by -- obviously, it's not. revenue, $648 million, above also. citigroup upgraded to buy all the way from underperform at bank of america/merrill lynch. wow. now $4. genworth downgraded from sell at

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this hour on "squawk box," from her father's boardroom to the "squawk" boardroom, ivanka trump is today's guest host. >> i think the market is acting a bit irrationally and i think the market is, overly optimistic. >> the economy, the markets, the future of the feds, it's all on the agenda for pimco ceo mohamed el erian. and pga championship is in full swing. but golf sponsors are in the rough. >> you, you, you! >> the ceo of the pga of america on the "squawk" green.

>> no, no, no, no, no. >> get high and let it fly. >> that bogie got under that one. >> "squawk box" starts right now. ♪ i'm all right don't nobody worry about me ♪ ♪ you've got to give me a sign why don't you just let me be ♪ >> speaking to me. that's vijay's shot, by the way, was yesterday. so that was a really up to the minute little collage there -- or montage, whatever it was, of the pga. and then we went back to "dad "caddyshack." welcome back to "squawk box." i'm joe kernen along with becky quick. carl quintanilla is off today. our guest host, still miss, miss ivanka trump.

>> i think it's breaking news. in case nothing else important happens today, i am getting married in october. >> you're getting married in october. less than 30 minutes from the cpi. future at this hour are -- have improved a little bit. now they de-improved. that's okay. down about six, as you can see on the dow. that would be up about 14 points from where fair value is. so could be a positive opening at least at 9:30. let's check on the morning's top headlines. treasury secretary tim geithner sees some guide signs for the economy and financial markets. he gave an interview to "the wall street journal" where he promises the obama administration will not allow wall street to go back to hold habits like taking on excessive risks. all of those plans, he says, they are on track. "the washington post" reports that the obama administration wants to make banks with more than $10 billion in assets pay higher regular

fees while smaller banks might pay lower fees. boeing's reportedly ordering work halted at a fuselage assembly plant in italy. that's where work is, done on the 787 dreamliner aircraft. boeing has no official statement. it's unclear whether the work has resumed. >> i would have put in a boeing bid/ask because it's down $1.50 -- >> where did it close? >> $45.50 ask, $46 bid. that is significant -- >> ask and you shall receive. >> yeah. the last thing we saw -- or heard was that area around the wing that we were going to -- they said, you know, we've looked at this and we think we should reinforce this area around the wings. at the time we said, take your time. whatever you need to do, reinforce away.

now the fuselage, i don't know -- >> i think it's a similar area. i don't know if it's 100% but near that area where the wing connects. i'm touching my -- >> yeah, you are. >> with your plane. >> but they talked about how this could impact 25 planes out there including the two they were planned on scheduling the first few flights with. they told us in september they would give us the new flight schedule as to when they'll start operating with these things. a lot of questions. >> the flying wasn't scarying enough, it's not great hearing this, especially -- boeing is not in a situation where it can afford to be making these kind of -- >> exactly. >> you have to get it right during this time. engineering has to get it right. >> and we've seen how many -- this has been like a soap opera but it's a brand new plane. >> there's always changes. >> it's more modular, different materials, and supposedly a heck of a plane but there have been some delays which has hurt the sto

stock. the other people who are ordering these planes don't want them right now anyway. >> that's why boeing can't afford these delays. these are people not chited to accept the delivery. >> let's head to the futures pits in chicago for a check on the markets this morning. jack is here now. he's the ceo of ind indexfuturesgroup.com. chief executive officer. >> you like that, joe, don't you? >> you know i do. except the ceo rapt we've gotten lately. are you one of those guys, flying on jets, paying yourself huge bonuses? >> no. >> come on. >> i fly coach when i fly. where i come from ph.d. means pop has dough.b i'm an army kid from the north side of chicago. remember that. >> we have moved higher. you still feel there's a day of reckoning down the road? >> i feel as if we're getting to that make or break point right here as far as the market goes.

i'll explain that. remember when what i was saying earlier, the market will end up getting to voting, right around election day. you couple that with the fact that you look at a chart, if you look at that october '07 high and the march '09 low, a perfect retracement is right here, 1015, 1016 in the s&p. so when i say this is make or break time, remember, i'm not a stubborn man, regardless of what my wife says. when it gets through this level you have to do a little re-evaluation. you are getting into that period, september and october, that is notoriously rough for the market. if there was time to be looking at protection, to protection what you have, this is the time. that's what i'm preaching to people. >> we've talked about this euro recovering fast -- europe recovering faster than u.s. article a bit today, jack. does that -- that would be -- that would be different than most previous recovers? >> it's funny you bring that up, only because i do a lot of

business in europe and i talk to them. it's a question of who you ask. if you ask the french and the germans, they'll say, oh, we're out of a recession. talk to the spanish, talk to the greeks, talk to the italians or the portuguese. they're more of a confederacy over there. when you start to break it down you realize, things aren't as rosy as they would appear to be, from what they're saying. that's one of the things we have to keep in mind. one thing i'm always aware of is the fact that history has taught us a lot of lessons. one is back in '29 the depression didn't start with the market falling in '29. it really started when there was a major european bank that failed in '32. i'm not saying that's going to happen but we have to be very cognizant of the interdependency, especially what's going on in europe. >> it's so interdependent. we need to buy their stuff, they need -- it doesn't seem right. i know they're closer to china but is that doesn't seem like an answer either. i think it's more government subsidies that will run out over there. >> eventually. you and i know that the free market cannot end up prospering

with the government doing this much work for a prolonged period of time. eventually there has to be an exit strategy on all front. you have to have growth. we can't get excited about losing 250,000 jobs. we have to get excited about creating 250,000 jobs. we have to get to that point. >> thanks, jack. >> thank you. let's turn to our guest host, ivanka trump. ivanka, joe talked about some things you're expecting in october but you also have a big book coming out called "the trump card". >> it's, published by simon and chuter and out october 15th. >> what's the book layout? >> effectively business advice book but told from the vantage point of someone who's younger and remembers the experience of looking for a job, of interviewing for jobs, working within a family company, who has had both the grunt work type experience when i was working elsewhere in either internships or my first job and also the management experience. so, able to talk about my

experiences on both sides of the coin and lend some advice in a noncondescending way. i think most of the books out there that are business related are told from the vantage point of a 60 or 70-year-old man reflecting on a career. i think it's hard for somebody my age, i'm 27, to sort of relate in totalitality to that advice. >> that's an interesting perspective, to come at this from somebody who has a variety of different experiences, but is still learning along the way. what's something you took away from this latest downturn? what's a lesson you learned? >> you know, i think that you need to see a climate like this to totally understand risk. and i think part of the problem was, you know, i was talking to a friend of mine who runs one of the largest hedge funds in the country. and he was saying that, you know, the problem with this hires -- the hires that graduated in my year from university is that they had never seen this type of downturn so they didn't know how to model

rick. i would say in the last 18 months i probably learned more in all the cumulative years combined because i remember the flipside and i'll remember that going into experiences going forward and viewing opportunities. >> ivanka asked me to recount some spergss during the depression when she came in, give her some insight as to what happened back in that period. >> you managed. you survived and are stronger than ever. >> i got through and i'm stronger. but thanks for asking. you know, you want to educate yourself, go ahead. >> directly from the serious. >> ivanka will with be with us for the rest of the program. we'll talk more about the trump casinos as well. coming up, we'll talk about outrage in america. why town halls are quickly becoming the hot bed for debate. rankingsings of america's best paid ceos. we'll tell you the names you need to know.

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awe new survey ranks the top paid ceos. at the top of the list is plaque stone he's stephen schwarzman. oil companies seem to pay top bucks as well.

take a look at the list. occidental petroleum, hess, ultrapetroleum and chesapeake energy, xto energy. >> we're in the wrong business. >> real estate no longer. >> $100 million for those guys. >> each. >> even the president says, we want people that do well to make a lot of money but that's kind of -- those guys aren't the intraprurns that founded those company. it's opm, other people's money. are they that good, $100 million? >> this is out of character for you, joe. are you feeling okay this morning? >> no. i think if you're larry ellison you can make a half a billion dollars, if you want. but when you're sort of installed at an oil company as a ceo and prices go to $150 and you're presiding over the fortunes of the oil company as that happens, i don't think that you're really -- talented to the tune of $100 million. >> i agree with that.

>> you do? >> i do agree with that. the founders of these companies, not the -- >> i understand that. but the ceo guy that comes in is -- >> rides the wave. >> -- as a custodian and rides the wave out of that. i thought you were saying i was wrong -- >> no, no, no. you started going down a route like you were arguing they deserved the high salaries. >> no. everyone want to do as well as they possibly can. i don't want to live in a place where you're rushing it to the bottom, hoping you make less. a lot of people would like to take us there. congress may be in the middle of its august recess but it's been anything but a quiet summer among the constituents. health care reform speaking here across the country. it's been sparking a very fiery debate. joining us is david gregory, the moderator of nbc's "meet the press." david, i know you're going to be focusing for an entire hour this sunday on what's been happening with the health care debate.

"the journal" point out today that unions and other supporters of the democratic plan are going to be sending their members to over 400 event around the country. you just have to wonder with all the screaming back and foer, what kind of fallout that's going to have on health care reform. >> it's true. i want to say the odds are joe is worth $100 million because i don't want that to be left unsaid. >> you watch the show, then, david. >> exactly, right. i mean, this is -- talk about doing the best you can, come on. look, it's true. and i think you've got those organizations on the left who are going to go out and try to mobilize a little bit. the president himself will be out in montana today. he wants to try to put a face on these town hall meetings, that are different from what we've seen so far. the white house recognizes it's got a problem. it's got approval ratings on health care back where bill clinton was in 1993. that's an ominous sign. the debate is, overtaken by thing that are not part of the bill. the debate about death panel. even the debate about public

option is so far down the line on what's actually possible at the end of this thing. it's not where the white house wants to be. they have to move into a position where the president can say exactly what he's for, what he's against and try to mobilize the support for this thing because of real fears out there. i mean, it's not just crazy people at town hall meetings who are making claims that are beyond the pail, it's real concern. people showing up at town hall meetings are really worried about what happens to their benefi benefits? what happens to medicare? some real issues out there. >> this is ivanka speaking. the problem for me, not, in the health care industry, there's a total lack of misunderstanding. you have the various pundits out there talking about the bill and not doing a very good job of explaining anything other than sort of their side and their interpretation of the argument. is your program t weekend going to sort of distill things for somebody who just wants to understand what is in these different bills? >> absolutely. that's really what we want to

do, devote the hour to it, to talk about what's fact, what's fiction, what the real impact is on people, where -- what the real issues are. and also an aspect of where's the personal responsibility here in this debate? most americans are no idea what their health care benefits are actually worth, about what they're spending in the health care system. most americans get health care through their employers. and their employers have not really been leading the charge in terms of saying, you know, what reform ought to be. and that's a real issue because they're not even informing their employees about what the size and the scope of their benefit is. so this becomes a real issue and a real part of the debate. >> david, is there a sense behind the scenes that the administration is thinking about kind of reining back what it's asking for or are they still in this to fight to the finish to try to get what they set out -- with the universal health care coverage? >> certainly they want more

access, near universal health care. that's for sure. that's a bedrock principle. if you noticed, there's a lot still vague about what the president will and won't accept. there's a reason for that. they learned the lessons of 1993. now they don't want to come in and dictate exactly what they want. they're trying to walk that line. i think the white house is positioning itself to compromise where it can and where -- >> but, david -- >> -- almost anywhere and claim victory. >> but the president, i don't think, because of certain elements that may be further left -- the left wing elements of his party, he cannot compromise on the public plan. the public plan is something he's never said he's willing really to compromise. that's what -- that's the lightning rod at all these meetings. >> i know, but here's the problem with that, joe, is that the idea that the public plan has taken on a lot more power than it actually has. the public plan is part of the house bills. it is not in that same way part of the senate legislation. it's unlikely to make it all the way through. i mean, you talk to democrats who are involved in this. they say you're not going to get a public plan the way the

president has talked about. they may do this co-op idea. i think that thing has a lot more power -- >> there's a lot of guys on the left that won't vote for it if you take the teeth out of the public plan and make it a co-op. on the left they at least treten they won't. >> no, no, you're right. there's to question about that. that's the other side of this fight the white house has to worry about. >> i think that's the thing that people at these town hall meetings, that's the element they're most concerned about,  that the public plan becomes not competitive but predatory on all the private plans and then within five years or however long we're left with single payor and that's the real fear of a lot of these people that are yelling at these -- by the way, you see the left is now saying, yell twice as hard and -- >> right, right. >> hit back twice as hard. u. unions are organizing. they're going to meet head on. i don't know what's going to happen at these meetings. >> total chaos. we'll need a moderator.

>> that's right. we'll need a moderator. >> do you get the sen the obama administration wishes they would have handcrafted the legislation and sent it through or -- >> i think there's a divided view about this. the truth is it's very difficult to come to congress and say, do this. i mean, the president tried that just with a deadline. you saw what happened there. so, i mean, i think the strategy, whether this is wise or not, is to let this work its course, let some of the anger spill out, and then come in at the end of the summer, beginning of fall and say, this is what we're going to zero in on and actually campaign for it. i mean, to joe's point, he does have to worry about elements on the left as well about those who think he might cave on this. people who are part of the health care fight going back decades have always come around to the idea of some kind of incremental reform. >> we all want that. >> and ted kennedy has fought for that over the years, even after it failed in 1993. so it's just -- it's so

interesting. joe, you bring up the idea, even if it's a single payor program, i think there's evidence that suggests that, in fact, that lowers costs -- >> administrative costs, definitely. but not as good at controlling, you know, the outcome and then you have the medicare fraud issue. they cover just about anything you send in there. >> it's also the role of the government and economy. we've had this stimulus debate. you have an anti-government crowd who is worried about this in any respect. my goodness, what would have happened if you had had private accounts in social security through this economic downturn and the market? people feel vindicated by that. >> we've talked about private departments would be like, ah, i'm not going into that neighborhood. you wonder if the police department was forprofit, it is, it's an argument that's going to get louder and louder between government and private sector, david, after what's happened for the last couple of years, magnified the feelings on

both sides. >> right, right. look, the president's got to get into a position where he can make an argument about, a, if we don't get this kind of reform and how much we end up paying. >> david, thank you very much. david will wrap it up for you this weekend on nbc's "meet the press" on sunday morning. check your local listing times. there you can see it, there's the lineup. >> i'll be watching, david. >> i might, too. coming up, breaking economic news, first the pga championship teed off yesterday. sponsorships by corporate america come under fire. we'll head to hazelteen for the money story on the greens. when this hotel added aflac to compliment their benefits package aflac! it made a big splash with the employees yeaaaahhhh! find out more at

aflac!... ...forbusiness.com (laughter)

pga championship teeg off at hass hazeltine in minnesota. it's expected to generate $50 million for the state's economy. joe is joining us. you probably heard every sing. one of those puns we used to intro. welcome. i watched yesterday. what a great course, what a leaderboard and seems like things are right in the world with tiger picking up where he left off last week. >> joe, i tell you, we couldn't have had a better leaderboard than having bridgestone put

tiger and padraig together. you get here to the twin cities you wouldn't know we've had any economic downturn. >> i don't know if you saw the piece in the journal the other day that none of the tents have any names on them. one guy kiddingly said that, i'm just going to put t.a.r.p. recipient on the signs so you would know not to ask who was sponsoring the table. >> well, i'd actually point you to the american express learning center, the savings ben usa performance center, two pat rons, the pga of america who are proudly activating, they're using pga professionals to give expert lessons and analysis. you know, we can even help you with your golf game, joe. >> no, no, no. i've tried everything. do you have a psychiatric unit maybe that could -- that's what i need, or i might actually need

surgery, a lobotmy. i understand what you're saying. you have to put the face on, joe. but can you give us any examples of what we're talking about, where either the recession or the stigma of sponsoring a golf tournament has come to fore with the pga this year? >> yeah. something that tim mentioned and david faye and i all worked on. certainly the rhetoric around northern trust sponsorship earlier this year was, in our words, inexcusable. sports marketing work, it's proven to be year over year one of the most efficient ways of developing relationships with your customers, building your brand with a great demographic. we see that as a cycle. but we have to be smart. we're not immune from it in the golf business. so whether you're running a major championship that rely on corporate support or running a resort, you know, golf community that relies on corporate

meetings and business travel, you know, wie got to adjust. we've got to take some of the costs out of running these championships and provide probably a lower point of entry for companies to come in and still do their entertaining. because it works when you get customers and prospects out there in a major championship and see 98 of the top 100 players in the world. >> thank you. we have data hitting at 8:30 so we have to play it safe. we have to get to that on time. tiger in the lead. he doesn't usually relinquish it. we'll have to watch. thank you for your time. >> and, joe, a shout out from cory pavin, our ryder cup captain, his opponent is warming up in the background. >> say hi from me. watching the future right now, the dow futures are up by 16 points above fair value. we're looking for those numbers to be flat.

cpi, flat for the month of july. rick santelli is standing by at the cme group in chicago. steve liesman is in studio with us. rick, take it away with the cpi numbers for july. >> here they are. no big surprises. unchanged on headline. if you strip out food and energy, it was up 0.1. these will almost identical to the overall expect takings. let's look at year over year. year over year headline is down 2.1. maybe that's a little further down than most would have expected. year over year after the year we've had with the volatility in commodities may not be the best meertdic. ex-food and energy it's up 0.5 year over year. there isn't really meat in these numbers. if you remember, if you remember where the prices started to get volatile to the upside in commodities, this might be one of the last numbers that looks so tame. i'm not saying infrags alation commodity prices are one in the

same, next month might be the month to look at. after supply, when everybody's got pockets full of securities, they of course like data like this. it is rallying a bit. maybe some secondary market buying of some issues that were tough to jump on like the ten-year in front of the statement. the dollar index hasn't had a good week. only down a bit today. the pre-opening equities have moved zero based on these numbers. back to you. >> all right. let's get more reaction from steve liesman. steve, what do you see? >> let's pick up on your interesting point that you raised in the last hour. why would anybody buy a 30-year bond at 4.5%. >> if you're worried about the dollar. >> the dollar and inflation. let's do a quick calculation on the numbers rick gave us with the year over year inflation rate at minus 2.1. nobody expects that to be the inflation rate over the 30-year period. let's say the inflation rate is minus 2.1%. take out your pen, joe, because

i know you can't do this in your head. >> i can't compound that. >> what's the real rate on the 30-year bond? >> 4 -- >> no, positive 4.5, plus negative 2.1. >> oh. >> then 6.6% real yield. why would you buy that? where are you getting a real yield of 6.6% -- >> wait a minute. rick even said this is probably the end of where you're going to be seeing that kind of drop -- >> he says -- he said that -- he stated that. we can sit here and defend that. >> wait a second. you're the one who -- >> that's what he's leading into here. >> steve, you and i have been fight being this number for year. >> debating. >> do you look at the headline number or the ex-food and energy? it was up 1.5% when you took out -- >> i prefer the cpu rather than the cpi. i'm simply bringing up a point here. when you consider why -- just to answer joe's question. >> you're bathi baiting rick.

>> steve is right. steve is right. the only difference s you notice when he wants to make the bond look better he'll look at data that's a year out. but when he's looking at the economy, he wants to go the rate of change. so he looks at the near. so the year over year daish. >> there's a reason for that, rick. there's a reason. if you look at the year over year rate, i miss the trend in the economy. that's why we bring it in tighter -- >> that's why i'm so not green shoots about the economy because i think that the rate of change isn't necessarily the only metric. that's why i agree with you in this instance. >> i agree with you that we're probably going to see the inflation numbers go the other way next month because we had a big decline in gasoline prices. that's reversed itself in august. it's also -- i do prefer to look at the headline. let's just use the core number. 4.5. what was the year over year core number, rick? >> your core was 1.5. >> 1.5, okay, take that out. that's a 3% real yield.

you and i both known you can go back in the 200-year of capitalism and 3% is the real yield you generally get. >> as we knew it. as we knew it. >> as we knew it. 3%'s the number. it's about right at 4.5. >> rick, you have to admit, though, that the notion that for 30 years 4.5% is going to do it, given what we're seeing in washington -- >> joe, you know how many years i've been saying, would you lend your money for ten years or 30 years to uncle sam at blah blah rate? trust me, 4.40 is looking good. . we were at lot lower at point in the past. there's always an issue there, and the issue we're well aware of at this point in time are the credit issues. there was a point when you would only buy something that was u.s.-based or sovereign based. look at how t-bills are finding boatloads. people to buy them at no interest. so the amount of credit, will the entity be there to give you your biannual payments? never before have we understood

why sovereign debt has a premium. but now we have to also realize that the price to try to fix everything that has gone wrong in the world is going to put so many more of those sovereign pieces of paper out there, maybe the game is chaking and maybe your argument is actually better made today than six months ago. >> for investors, the big question is inflation or deflation. and where do you decide -- >> steve, i think that's number one, to go to top three. i think number two is right on its heels and that's how much of this paper is out there today and how much will be out there every other week? >> it's the same question, rick. >> not really, not really. >> let me explain. my view is that you only care about how much paper is out there to the extent to which it causes inflation or deflation. >> oh, i don't know. >> what do you think would happen to the price of ford focus if over the next 12 months they made 10 million of them? >> it would go down. >> well, there you go. >> depend how much you were getting in cash for clunkers?

if they raised the amount -- by the way,dy read this morning, in case you're interested, the cash for clunkers is treated by the bls as a reduction in the price. so that would be something that would tend to dampen on inflation, even though as rick said, government is putting money into the economy, especially. >> ivanka, real quick. >> no, i just -- it's hard for me, a pramatist that this much money is dumped into the economy and we're not going to experience inflation. i can't imagine that not to be possible. >> steve, rick, thank you very much. ivan ivanka's staying with us for the rest. show. cpi numbers flat for the month. the treasuries have been rallying. you've been talking about the dollar under more pressure. in fact, it's sitting at a one-week low verse the yen. when we return, "squawk" icon and rebel, pimco's mohamed el erian. we'll go from future fed moves to the state of the economic recovery.

coming up next, a "squawk" icon and rebel who can tackle everything from the economy to the future of the fed. he's mohamed el erian, ceo of pimco. his perspective on the markets when we come back.

welcome back, everyone. our next guest is looking for the markets to come off what he is calling a sugar high they've been on recently. joining us from newport beach is mohamed el erian, pimco's cio and co-ceo. you've been calling this a sugar high. what do you mean? >> what i mean by that is that the market has gotten way ahead of the reality on the ground. just to paraphrase what art

cashin said on your show yesterday, the market and economics are not reconciled right now. think of it in term of the analogy that bill gross brought up yesterday. the market is looking at the economy, on a rocket. this rocket is meant to take the economy to a higher level of growth and employment. the first booster came in the form of enormous monetary and fiscal stimulus. the second booster that we're going through now is the inventory cycle. that's going to help the gdp numbers over the next quarter. then what? the then what needs final demand. needs the consumer. needs spending. needs income. and if you look at yesterday's employment number, if you look at yesterday's retail sales number, it suggests that is still sluggish. so we are yet to see a durable and sustainable recovery, but the market has gotten ahead of the purpose by pricing that in. >> you still have a lot of stimulus coming from the government next year. in fact, the bulk of the federal

stimulus package hasn't even kicked in yet. >> the key stimulus has come to -- into the consumer. a colleague of ours selma parker looks at disposable xhk versus real income. you see disposable income has gone up because of the stimulus but the real income of people is stagnating. so don't undercommitment how much stimulus has already made it to the consumer and that has helped enormously in the last few months. i'm not sure that if you look into the third and fourth quarter you get as much stimulus impact on the economy. that's a concern. >> we had cashin and what he said. we had berini on, larry had him on, he's looking for 1700 on the s&p. he said that if you used the coincident indicators or just used the -- you know, the consensus thinking at any point in time, if you use that to make market decisions, you'd be always bearish. >> 1700 not this year but over

the next three years. >> over the next three years. you would always be bearish. that's why you're never right. if you use what's happening right now, you know, it will never work and the market trades up for a totally different reason. 1700 within two or three years just based on things we have no idea about right now. i mean, it sounds like you're fixated on this sugar high on coincident indicators. >> no, joe, i'm looking forward. i'm seeing the high frequency data has been acted as a head fake for many in the market. we're looking forward to 2010. we're very much looking forward. that's what pimco does, looks forward in 2010 and says our current valuations warranted by where the economy -- where investors are likely to go? think about it at the level of a company. yes, we've had higher than expected profit growth. but why? it's all come from the cost side? it hasn't come from the revenue side. the walmart numbers were the same yesterday. there's a limit to how much you can squeeze from the cost side. joe, pimco's all about looking

forward. we often get accused of, too early, not too late as you accuse us, but too early in terms of our evaluation. >> and your a bond house, though. we're talking about equities here. >> how do you -- >> one day i'll convince you we're an investment house. >> mohamed, how are you? >> very good. >> how do you rationalize what geithner was saying in his interview with "the wall street journal"? i don't know how he can say a significant amount of risk is now out of the system and that -- and that things will be sort of month positive and on a going forward basis. to me they're still, like you said, a tremendous amount of risk in the system and the other shoe hasn't dropped yet. >> yeah. as to what he sees, which is regulated banking system, has been de-risked. he talks about the amount of leverage, much less, which also means the amount of credit going out is much less. what he sees is the formal banking system. what you see, ivanka, and you spoke about earlier today, is

what's happening in commercial real estate, the difficulty of renegotiating contracts that no longer make sense in this new world. and you see something very different. you see something that's the day-to-day of trying to keep people in commercial real estate, of trying to keep people in residential real estate that's outside the formal banking system. and we have this two-speed economy where on the one hand there's been a lot of progress made in de-risking the banking system but there's still a lot of risk out there in other sectors that haven't yet been resolved. >> earlier this week there were a lot of people positing that the dollar was due for a big jump, maybe 15%, but we've watched it weaken over the last several sessions, and this morning at the lowest levels of the week against the yen. should we worry about the dollar? >> that's a critical point. no one wants to say it out loud but a weaker dollar over time is

part of the global solution. it allows a shift, the rebalancing that everybody needs. it allows asia, in particular, to consume more and allows the u.s. to produce more. so a lower dollar over time would facilitate that. the problem is that it needs to be an orderly process. it needs to go down slowly. if it goes down too fast, it will be disruptive. i think it's good news that you're getting a gradual reduction in the value of the dollar. it's part of the global solution. we just have to make sure it remains order early. >> i know you don't get the journal, what did you tell me, until 9:00 our time. i'm not going to ask you about bill gross's new house, even though it's in there. i am employing to ask you about the notion that france and germany are going to recovery -- or are recovering more quickly than us this time around. is that real? will it be long lasting? would it be different from previous recovers? >> joe, this is killing you. this is the fourth time you

raised it this morning. i can see it's absolutely killing you. >> and you went to school over in england. i know. i know that. >> i went to school in paris, so, you know, i know this is killing you. >> you're a reverse zenophobe. go ahead. >> germany and france is benefitting from a massive stimulus but they have two other advantages which has allowed for faster pick up. they don't have as much leverage and they're more exposed to asian growth. asian growth has been quite boring recently. what you're getting is a bounce in germany and france but the questions out there are the same as the questions out here which is, is it sustainable? more generally, joe, think geographicicly. as you go east from the uk to china -- >> better and better. >> yeah.

because the initial conditions were not as bad. there wasn't as much debt in the system when they went into the recession. the recession. >> germany and france continuing to subsidize these and continuing to sort of -- are they talking about sort of second stimulus as we are as well? >> they are looking at it, slow on the fiscal side because they have more constraints than we have here. we have here an ability to move much faster on monitoring physical policy. they are going to have to deal with the same question as here which is when you get employment and wage growth in order to sustain a recovery. >> thank you for joining us this morning. >> thank you. just keep on reminding joe that germany and france are bouncing back faster. >> i will. >> a good american. >> cream always rises to the top. you just remember that, too. thanks. it is good to see you. >> i'm hoping they end up like the mets. anyway, next up -- i will definitely hear from him on

that. hugo chavez is at it again. bailing out an island. details when we return. 

hugo chavez is bailing out the island nation of antigua and

barbuda to the tune of $50 million. the nation was hard hit by the scandal with alan stanford. the firm was charged with running an $8 billion ponzi scheme in january and shut down. the roll of the dice with our guest host, ivanka trump. before we go to the break, check out gold prices this morning. we have been seeing weakness in the dollar. right now gold prices up by $1.80. $958.30 an ounce. 

some final thoughts now from our guest host, ivanka -- do i have to say trump. >> there aren't too many other ivankas unless you go to random areas of eastern europe. we are in the clear. >> what's the julewelry line's name? >> ivanka trump. that would not have been good for business. >> he was lucky to get that name. that was part of this. that was a great name, you know. >> phenomenal. >> trump people. >> trump cars. >> you have a new ceo. >> we did.