the worst since '95 or something like that. >> this week, we'll be hearing from plenty of the retailers. lowe's today, home depot and the limited and target coming out later this week. >> no surprise that oil slipped overnight. we're also in hurricane. we're watching radar pretty closely. claudette churned toward the florida coast yesterday. two other storms, including the first official hurricane of the atlantic season, bill, racing through the atlantic, toward the caribbean islands. but that's no match for what's happening around the globe in terms of market. oil still down 1.72 at 66.79. other markets to watch, the ten-year note. bernanke will speak at jackson hole this week. dollar a relative winner as risk

aversion comes back, up against the euro but down against the yen. the nikkei sold off. relatively stronger dollar typically means generally weaker prices for gold. that's what we've got. down nearly ten bucks to 9.3880. overseas, christine tan in singapore. first we'll go to london and check in with the always dapp p ross westgate. >> global equities currently off at 64 points. down near the session lows. to recap, 1.75%. dax, 2% and for the french market as well. at no surprise when you look at

the sectors does it appear that resources also and then banks as well. there's talk that china's trying to renegotiate some of the iron ore contracts. bhp bulletin and rio tinto saying they do not see a contract at establishing industry-wide price. the sector is down, that is the one that most embodies what is going on with risk appetite. a day of risk appetite, the market is weaker. u.k. banks lower today. we've got barclays down 3% at the moment. reports they're attempting to recruit five jpmorgan investment bankers with a bonus package worth 30 million pounds. the rest of europe are talking

about cracking down on the bonus culture. it appears it's very necessary to implement if you're going to hire the right staff. two ways of looking at this sell-off. one is we've had a very good run recently. on bad news, wield see profit taking. the retail sales data was a reason to do that. you also made the point it is august and volumes are light. i think we have to start this and see if it continues to three or four days and may be something more serious. it comes on the back of good gdp data. christine, over to you. >> ross, good to see you. a sell-off in asia as markets react to the poor confidence data. even the news of japan pulling out of recession does nothing to calm investors. analysts say the recovery in japan could lose steam once the stimulus package wears out. the shanghai market suffered the

most, tanking 5.8%, biggest daily percentage fall in nine months. all the optimistic about china leading the world out of recovery a bit overdone.. news emerging from china that the sovereign wealth fund buying up to $2 billion of u.s. mortgages, a sign that the housing market may have bottomed out in the u.s. hong kong bore the brunt of the slump. china led the losses. the indian market down 4%. becky, i'm sending it back to you. >> christine tan standing by for us in asia. let's get to the u.s. markets. david restler is the chief economist and the chief strategist at d.a. strategies.

do you chalk this up to the idea we have run so far so fast? >> we've had a big rally coming off the market in the march lows. i think expectations have gotten a little bit ahead of the reality as to where spending will be post stimulus. normally fairly difficult months, especially during years that the markets had a big spring. a little bit of both. we were looking for the market to have maybe a 3, 4, 5% pullback. we're getting that now. we've noticed that the asian markets starting a slowdown ten days ago. the trader will want profits. all in all, late summer activity. >> fred, you you wouldn't necessarily be counseling people as they watch this to make sure they kind of jump on board. you would tell people to sell

into this because you think there is more to come? >> most of the clients on the west coast are long-term investors and are patient and value oriented. what we've done is told them to basically average in what they were guided in to put in this spring. if the market pulls back, 3, 4, 5%, put more in and come back around thanksgiving with a final wave. we're still looking with a market to end the higher.. >> let's talk about the consumer. that is what so many people are worried about now. we've seen concerns about confidence numbers on friday. where do you think we stand right now? >> i think the consumer is the big challenge. the confidence numbers were disappointing. so too were the retail sales numbers for july. part of that though in july and august is the transition month. we get earlier school year starts in some states than in the past. then later this year than usual. in addition, we have the state sales tax holidays.

those are taking effect later than usual. i think that we may have shifted normal spending from july to august. certainly people are out buying cars. >> you don't think all is lost. >> all is not lost. if people think this goes from 0% consumer spending to 3 to 4, they're wrong. it will be to maybe two. i think we're looking at an economy that will have a jump in growth rate terms but then back to sluggish 2 penalty.5 growth. >> you mentioned auto sales. one is that auto sales are great because they're getting people back in show rooms and making consumers spend on everything, opening their wallets and convincing them it's a good idea to spend. others say it's stealing ford

auto sales. >> the normal replacement rate would be something like 100,000 cars a week. they would be to be replaced simple toe maintain or 200,000 a week to maintain the quality of the rolling stock. and we're not -- we haven't done that for many months. we've got a lot of pent-up demand because there are a lot of clunkers out there. >> is this the gift that keeps giving and gets people to spend in other places? >> i think it's borrow something from the past that didn't occur. it's borrowing some from the future that might occur. it's getting people in the show rooms. they say, you know what? i wanted to trade it, it's not working.g. i'm going to trade it anyway. >> fred, when you look around at what's been working. technology has been on a run. financials have improved greatly. where are the areas you see the most potential room for growth? >> we like technology and

energy. during this pullback, we're keeping an eye on some of the consumer growth, some of the more stable growth areas. we continue to love the companies that have been able to raise their dividends during this period, doing it out of cash flow as opposed to normal borrowing. we're looking for what we call the dividend achievers. global companies with decent balance sheets, low multiples. that can span consumer growth. it can span high grade technology, can span energy. we'd be avoid happening the big banks. >> that is similar to what we saw on the cover of baron's this weekend.d. they took out 12 stocks as potentially growing 20%. names like exxonmobil, comcast and proctor and gamble. is that your line of thinking as well? >> that's exactly our line of thinking. we've had that portfolio in place. look at the stocks as well as some of the early cyclicals. the big moves in the early cyclicals will probably be

trimmed back, especially the early cyclicals in foreign markets. but it's just normal correction from our point of view passed when the stimulus starts to roll off. >> fred, can you sound pretty calm, cool and collected when you look at these markets. is there something that could happen that would make you say, wait a second, this is not the normal correction we thought it would be? >> asia has wrapped up production ahead of or anticipating a big surge of spending in the u.s. given the fact that markets now roll across the continent, we'll be watching the asian market to see the magnitude of the pullback in china.a. but to see whether there is any down tick in term of production orders and semiconductor chip starts over in asia to give us a gauge as to how u.s. companies

are ordering from abroad. that was a great pickup up, a great indicator coming into the spring. it gave us a lot of confidence. we wouldn't be surprised to see a little cooling off. this was normal at this part of the cycle. >> we'll be getting numbers this week that will give us insight into housing. the expectation today when we hear from the national association of home builders is that we will see a pickup up in dmapd. is it still too early to be concerned about housing? >> we've seen several months of improvement in sales. the correction side is way past. we'll be growing in housing in terms of contributing to gdp. what's still not clear is when we stabilized prices. we're six months ahead of where i thought we'd be. >> how recently did you think? >> the numbers we've seen the last two or three months on prices have been much steadier than i would have thought.

as we move into the rest of this year, as we hold that stability, it is the summer buying season. we have to be careful about being too optimistic about it. if we have turned the corner on prices, i think that will set the stage for the economy. the recovery in that is pretty essential to getting us out of it.. we're seeing it on the production side. we have to see it on price stability side. while the stock market's up pretty impressively and giving us a trillion-plus in the last three months, we have to see the same thing come through in housing.g. at least not losing trillions of dollars of wealth in that sector.. >> fred, always good to see you in the morning. >> earning season winding to a close this week. fewer than 50 s&p 500 companies remain to a fourth quarter result. we will get lowe's numbers today. and tomorrow their arch rival

home depot. also, hewlett-packard, target, wednesday, limited brand. hines, hormel and ann taylor and smuckers. >> some of them pulling away like you hadn't expected. >> conoco too added to j&j, as i recall. >> j&j one of the only names berkshire hathaway adding to have. >> and then ackman into mcdonald's, right? >> right. after the loss he took on target. piling into mcdonald's, trimming

holdings in one of the other eating companies as well. >> we'll talk more this hour about lowe's. one more exposed to appliances than the other. >> the conventional line of thinking is that women shop at lowe's and men at home depot. we'll hear more of that today. we're expecting in 45 minutes to be hearing from lowe's. the white house appears ready to drop the ongz of government-run insurance as part of a new health care system.m. administration officials are leaving open the chance for a compromise with republicans that would lead health insurance cooperatives instead of the government-run plan.n. under a program by senator chairman conrad, consumer-owned nonprofit cooperatives would sell insurance in competition with private industry. there is back and forth as to whether the administration is stepping away from this. they said this is not the only

issue they're looking at in health reform. >> they never said this is the deal-breaker. >> president obama himself said this would be his preference. the question is can you get enough people to the table? if you go ahead with the cooperatives, can you get the liberal wing of the democrats in line with this as well? >> ken conrad said anything more than the public option is little more than a wasted effort. north korea announcing it agreed to open its border with south korea and allow tourism and family reunions to resume. this follows a meeting with kim jong-il and a member of the south korean government. tensions high following the border announcement. the north korean news agency reporting the entire country is on alert. >> citigroup says two traders

are exempt from a government ruling on executive pay packages. citi and other firms submitted compensation plans for highest hade employees.s. they had to give up the numbers. "the new york times" reports that citigroup told the treasury department that andrew hall's $98 million pay package and a second unidentified trader were exempt from review. the bank said hall's contract was signed before a cutoff date. this is putting big pressure on the obama administration. the pay czar said he has broad binding authority over executive compensation. he said his power also includes the ability in his words to claw back money that was already paid. he adds he's weighing whether to use that power. the administration i think had been hoping citigroup would say, we're not going to honor those contracts.

citigroup put it back squarely on the go of the. do you want us to renege on our contract? who will trust us? if you want us to do united states, we're not going to. people are outraged, but the real issue comes down to contract law. who will take your word if you blow up the contracts you've already signed? >> we went through the mill with the capital structure trying to finance the automakers. contracts matter in this country. we are watching the global markets closely. dow futures down more than 150 points. we've had a slow start but hurricane season is also here. the storms oil traders are watching next. the first official hurricane in the news. first, last week's winners and losers.

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if juror just waking up, your waking up to a global

sell-off, the worst in over a month. japan gdp came in positive but less than expected. as a result, a lot of asian markets tumbled overnight. europe has been in the red to a tune of 1.5 to 2%. futures in the states, we'll open down 150 points if things stay the same. we are getting data this morning at 8:30 this morning. one of the messier mornings in five or six weeks. >> a time of the year when a lot of people go on vacation. some of the swings can be more exaggerated. that doesn't make you feel any better when you look at your 401(k). we have the first initial named hurricane of the season. this is hurricane bill. maybe there is no better time to introduce squawk's biggest friend, scott williams of the weather channel. today we'll be talking to him about hurricane bill and other storms behind it. good morning. welcome to "squawk box." >> good morning.

we have a lot of active weather to focus on here this morning. let's talk about your business travel here this monday morning. especially along the gulf coast, that i-10 corridor, watching what is left of tropical storm claudette continuing to move in. that will bring problems. chicago, watching a frontal boundary bringing chanceses for delay around the windy city. denver, scattered showers and storms. houston, expect delays as well. delays unlikely across the northeast. it will be a great day, unseasonably warm for this time of year. temperatures topping out in the 90s. it will be a hot day in the northeast. now, let's focus in on the tropics. tropical storm claudette maybe land early in florida. maximum sustained winds at 40 miles per hour, continuing to move to the northwest at 12 miles per hour. if you do have travel plans around the i-10 corridor, some of this moisture will be

streaming inland, impacting places like montgomery, alabama. rainfall totals before all is said and done, anywhere between 3 and 5 inches here. also early this morning, we have now a hurricane. hurricane bill, a category 1 storm, maximum sustained winds at 75 miles per hour. we have some time to watch bill but likely it will become a category 3 storm within the next several days there. back to you. >> scott, carl and i were talking about it, wondering about what the track of the storm is expected to be. where do you think that hurricane bill would head? >> well, we are going to see a trough digging southward over the lower 48 by the latter part of this week. all models indicating that will allow for hurricane bill to mack a turn back into the open waters of the electric. any land mass right now that should be keeping tabs on hurricane bill, because as i mentioned, it is forecast to become a major category 3 to even maybe 4 hurricane, the

island of bermuda would be the only land mass i would have to make a best guess as being impacted by hurricane bill. we'll continue to keep you updated right here at the e weather channel. >> scott, thank you very much. we'll see you back here at this time tomorrow. great talking to you. >> thank you so much. have a great day. >> coming up. we'll have more of the morning's top stories and the picture from the future pits. "squawk box" kicking off this week when we come right back. i'm racing cross country in this small sidecar,

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good monday morning. welcome back to "squawk box." it's jimmy buffet. >> what cleans me out and then i can't go wrong? >> i have no idea. i'm carl quintanilla. io is o joe is out today. he'll be back tomorrow. the markets under a fair amount of pressure. asian markets down sharply overnight. you can see futures here are well below fair value. china stocks suffering the worst fall since november. shanghai closed above 3,000 for the first time since june. the fettse and the cac trading down 3%. equities snapped their four-week winning streak. the s&p still up 48% from

12-month lows. retail sales not so hot and confidence down two months in a row. people beginning to thing not only is the market everextended but is the market going to be there like we were hoping it was going to be? don't expect people to start spending like crazy. >> every time the market starts to pull back, at least over the month or so, you'll see the buyers rush in. they've been thinking they missed that rally on the way up. we'll watch it very closely throughout the morning. oil prices also slipping overnight on worries about weak crude demand. remember, we are in hurricane season and watching the radar very closely. tropical storm claudette churned today the florida coast yesterday. hurricane bill, these storms are

racing through the atlantic ocean towards the caribbean islands. will things start to pick up right now? let's check on some of the other markets. you've seen the flight into bonds. in fact, the yield right now only 3.5%. the yield has been under pressure as bond prices have been climbing. the dollar has shown some strength today. a little weaker against the yen but up against the euro and the pound. and as we've seen, the stronger dollar, you see gold prices have been a little weaker. down by $10 at the last check. you'll see gold prices down by $12.10. >> china is buying $2 billion worth of u.s. mortgages. the country's sovereign wealth found ready to participate in the ppip the u.s. government

combining u.s. hainvestment wit private equity. japan's economy expanded 3 apostle .7% boosted largely by exports. i think some in japan wanted to see the number a little bit higher. >> with all we saw last week with france and germany turning out positive numbers in gdp, they may be out of recession. >> also we're watching what's happening in britain. the treasury secretary warns executive compensation has to be curbed. alstair darling said his government is ready to curb the big bonuses that helped trigger

the economic crisis. darling's threatening not only to curb pay on banks that got help from the national governments but those that didn't. across the board intentionally.. >> i wonder how we would respond to that kind of language in the states. >> a lot of questions.. people say these bonuses got us into trouble to begin with. >> you start playing with the people are compensated. let's check in with ross westgate. >> good to see you. i'm afraid we're inching lower as we go ahead of the u.s. open. the global ftse 300, off seven points. european stock markets, some down over 2%. the dax and cac down 1.5%. perhaps no surprise it's the

minors of basically resources down. retail stocks down. a lot of news going on here as well. basically china iron ore trying to negotiate with three miners. rio tinto says it won't see a price pack as a base for its own price discussions. that argument will rumble as well. also the banks are lower once again. you were making a comment about the new bonus discussions we're having in the u.k. barclays up 3.7%. it's interesting to note that the report of barclays trying to recruit five jpmorgan investors with a bonus package worth 30 million pounds.

they're certainly not worried about paying back bonuses. they say we're not trying to limit pay per se but excessive risk taking. you can get large pay as long as you didn't take large risk to get it. i think that's where they're trying to funnel that line.. the politicians may go further if they can. for the moment heading lower. that's where we are in europe. let's find out what's happening in asia. >> thanks very much. it was certainly a difficult day for stocks in the asian markets. capitulation, particularly in the greater china region here. the shanghai break through the key 3,000 level, tlooclosing 5. to a two-month low. the brokers are saying the reasons for the sell-off was concern about a big liquidity coming on to the market. tomorrow, we're expecting china to be listing at 1.6 billion ipo

coming on to the market. to put it all into perspective, this capitalization in shanghai near $2 trillion u.s. 1.6 billion isn't all that much. prach perhaps the sell-off is what's going on the commodity markets. declines in the oil market and in the lead-up in the u.s. market. base metal prize had been week and continue to sell down into london trade. remember, china is the biggest importer of raw materials. we heard left week talking about whether had stocked stockpiling. investors are beginning to wonder whether this market has been overbought in terms of valuation. year to date, two weeks ago when the index year 3,400, there is

some concern that the market may be overheated. there are more scripts into this market. other negative data showing fdis in china slumped 35.7% in the month of jlg, a drop of 6.8% in the month of july. the minister of commerce said the reason for concern was because the global financial crisis. everybody thought the global financial crisis had ended given the fact that the stock markets had risen so quickly. the nikkei also ending at the day's low down 3.1%. we had positive data showing that the world's second largest economy had emerged from a recession after five consecutive quarters of growth. a little bit of concern. the markets continue to sell off in the afternoon trading session. back do you have guys in the

states. >> thank you for that. adam joining us from singapore. let's get the futures pictures here in the states. brian battle standing by. good monday morning to you. >> good morning. >> is this feeling like a minor pause or something more? the argument from the bulls for the past few weeks is that any pullback would be met by cash. do you still see that happening? >> we've avoided armageddon and had massive government intervention. beating expectations due to cost-cutting margins. what's next is the question the market has to ask itself. where are earnings going to come from now? we've run employment and inventories down. it doesn't look like it's going to come from china. we were hoping the chinese would keep importing materials and have the emerging middle class. that doesn't look like it's

real. we need organic growth from the states. that will come from consumers. consumers still haven't saved enough. they have a lot of mortgage problems. they don't have a lot of confidence that the plans coming out of washington are good for the economy. i think we'll wait and see what's next. that's really not clear. i would expect a pretty good sell-off. what got us here is over now. >> what are you thinking? >> i'm did the wrong. i haven't been a believer in this rally myself. for sure, 5% would be reasonable. 100-point move in the day isn't that big a deal in a market that volatile. up or down 100 points isn't that big a deal. losing 500 over four days, then it looks like the sell off will really be on. government policy has been sort of a derivative. if the government takes a bunch of money from trish bonds, pumps it into the economy, then we'll have organic growth.

it isn't clear you can jump start the economy. it's supply and demand and interpersonal demands taking place. in the short term, it will. the economy might grow. approximate you can't put $700 billion into the economy and not have a result. there will be a effect. will it be long-lasting? the market is good at discounting and real from fake growth. we could have a quarter of okay growth due to the stimulus longer term. if you're a longer-term investor you have to wonder when the consumer will wake up and have enough savings to feel like they're going to get back in there. probably not a while with a 12% unemployment rate. >> we're heading into the second half of august. >> the vumolumes aren't that

great. everybody has been here every day of the week. a nonstop trade for the past year and a half because of the global crisis there's been something to do. i think we might be light in volume. i think that might speak to some -- a bit of a lot of where we are now is due to we can't.. there's been a lot of buying, people think they've missed the rally. if the rally starts getting away, they might be the first to sell also. i don't know if there are a lot of strong hands holding the market up. like you said, it's the end of august.. one more week until school starts. might not be a lot of participants. >> the lack of volume and short interests. a bunch of technical factors in addition to the concerns about the broad macropicture. we'll see what happens later in the week. >> e-mail us at squawk@cnbc.com. we'll take a quick break.

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all right. if you are just waking up, the futures are seeing significant selling pressure. the dow futures are 150 points below fair value. it kicked off with the selling that began in asia overnight. perhaps keying off of what we saw here in the united states on friday. but in any event, you are seeing some significant pressure. the s&p futures are down by about 17 points below fair value. the dow futures down by 150

points. and the nasdaq under quite a bit of pressure too, down just under 24 points below fair value. >> let's get a look at the news outside business. contessa brewer joins us. >> good morning. tropical storm claudette dumping heavy rain in florida. made landfall this morning.g. it's not expected to cause significant flooding or wind damage but expected to weaken as it moves over land. in california, 11 wildfires have been burning. firefighters have been making progress on one big fire in the santa cruz mountains. hundreds returned home after an evacuation order was lifted. that fire burned at least 10 square miles. a competition in germany had contests diving their way to the top. 100 turned out to compete in the splash diving championships. the goal seems rather obvious given the title. whoever makes the biggest splash. how is that? there it is, biggest splash. becky?

>> that's the worst contest in the world. do you know how much that would hurt? >> it depends on how you land. >> that's exactly right. >> that means you're trying to cover as much of your body over the water as possible, which means, ow. in other news, new york attorney general andrew cuomo expected to file charges against charles schwab. we'll take a quick brought right now. the global markets, we'll be talking more about the sell-off talking more about the sell-off when we come back. our old friend, jason will be joining us. stick around. welcome to the now network. population: 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less.

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future are slightly lower. china and the nikkei hammered overnight. the biggest drops in close to december, november of last year. europe's followed suit, although not quite as dramatically, down 2 % to 3%. futures in the states are bad and are getting slightly worse as the morning's gone on. we'll get some data, lowe's earnings and empire state but the market is looking to kick off this week after breaking their four-week winning streak with a pretty significant loss on all three today. >> japan saw positive for gdp.

last week europe and france saw positive prints for gdp. the more worried americans actually seem to be getting about the money that's, spent on the stimulus. in fact, the lead story in "usa today" is a new poll that is done by "usa today" and the gallup organization where they say 57% of americans actually don't think the stimulus plan is working.g. it's an even greater number, 60%, say they doubt that the stimulus plan will help the economy in the years ahead and 18% of people say that it -- i'm sorry, only 18% of people say it has done anything to improve their personal situation. now, that is a big hump that the obama administration's going to have to get over because we're talking about the bulk of the spending that's going to be coming over the next two years. >> right, right. 10%'s been spent, a little more than 10%. >> a little more than 10%. economists actually say this is probably what's to be expected. they say overall this certainly helped, they just question how much. there are some economists who think a lot, others think not so

much. >> moody's put out a report a couple weeks ago that they say they think it possibly saved -- created/saved 500,000 jobs which is not as much as the administration said early on. they said it would save or create 1.5 million. it's hard to prove to people, especially when clearly you're still unemployed that maybe somewhere in another state their job wasn't done away with because of the money. it's difficult political argument. >> that's what one economist argues. the economy was like a huge pothole we had to fill. we threw gravel on the bottom. you don't fill the hole but make it better. some people don't feel the effects and they don't think it's working. >> they worry about taxes. the other big story, i don't know if you saw the incredible pga championship in hazeltine over the weekend but it is huge news here in all the papers. tiger woods, the lead in all the tabloids, tiger chokes, tiger

tamed, yang catches a tiger. for tiger, all these records that were broken, he was 14-0 after leading by 58 holes. he finished three strokes back. of course, yang had a 2 under par 70. "the times" calls it one of the biggest upsets in sports history. >> i don't normally watch a whole lot of golf but i watched the last five holes and it was amazing to see how yang performed under pressure. did you see -- not only -- the birdie on 1, was it 14 or 15 he took in beforehand? >> and then the bogeys for woods. normally if it's not the other person who buckles playing next to tiger, it's tiger who pulls it away. and both things happened in reverse. incredible golf over the weekend. >> congratulations to yang. >> yeah. he says he knows it's a big deal but he said yesterday it just hasn't sunk in yet. >> it will soon. >> yeah, it will. when we come back we'll get

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the summer rally kools off. the gabelli glue chip value fund tells us the market is due for a correction. retailers checking into earning central. home improvement retailer lowe's about to roll out results. we'll have the instant reaction. health care protests rage

on. >> you are talking down to the american people if you think we are that stupid. >> we talk to one democratic congressman who got an earful from an angry crowd. >> you can't trust them. >> and former house majority leader dick army tells us why the protests cost him a job as "squawk box" begins right now. good monday morning, welcome back to "squawk" here on cnbc. i'm carl quintanilla along with becky quick. joe is off today. he'll be back tomorrow. in studio, chief investment strategist at strategis research, goit it right. joe would make fun of me every time. >> it never gets old for joe. it's been three years. >> jason, thanks for, here on an important morning. the futures are under quite a bit of pressure. if you're just waking up, china, japan, europe, have had a pretty miserable night, as you've been

asleep. the futures here are below fair value but to the tune of about 160 points on the dow. we'll get a global market update from adam, joining us from singapore, and from ross in london. before i send it to you, adam -- >> let's take a quick look at the lowe's earning. diluted earnings for share declined to 50 cents. look to see if there are any charges. looks like 51 cents versus the 54 the street was expecting. the company talks about in response to the challenging economic environment, the company has re-evaluated it's future store expansion plans. sounds like they'll be cutting back.. they say for 2010 expansion in north america will be below those previously anticipated levels. they're likely to be looking at somewhere in 30 -- in the range of 35 to 45 new stores.. they also say that because of that, and the decision to no longer pursue other projects, they are going to be taking a charge of 48 million for the

second quarter. primarily related to these projects. they talked about their sales for the quarter, down 4.6% to $13.8 billion. and comp store sales for the second quarter were down by 9.5%, declined about 8.2% in the first half of 2009. lowe's chairman and ceo says waivering consumer confidence, unseasonable weather in core markets and restrained customer spending compared to last year's fiscal stimulus aided results led to lower than expected sales for the second quarter. and they do say that consumers are very cautious out there. they remain cautious and they're not very eager to take on discretionary projects until signs of economic improvement are more evident. if you've been watching shares of lowe's the bid/ask as firmed up a little bit. it's $22 to $22.11 after that stock closed $22.83. looks like lowe's both sales and earnings are a little

disappointing. >> we'll get home depot later in the week.. that doesn't signal rate grait things for the consumer. the stock will open a little lower this morning. so whether it's the consumer or the global markets, a lot to think about. once again, let's try get to adam in singapore. good morning. >> reporter: good morning, carl. you know, the asian markets got off to a rough start today. i have to say, though, the selling in the morning trading session was rather mild, following the decline we saw on wall street last friday, but in the afternoon trading session, losses really began to accelerate across all the asian markets here, particularly for the greater china region, the shanghai composite, which was the worst performer today. the shanghai composite slumping below that key psychological 3,000 level down by 5.8% by the end of the day. if you want to have any more signs in terms of how bad the selloff was, in terms of the ratio of losers to gainers it was about 913 versus 23. now, the selling really accelerated in the afternoon trading session as we mentioned earlier as we continued to see

u.s. futures picture deteriorate. we saw the asian markets cascade further in the afternoon trading session. what was going on in the commodities market, we know commodity prices were down last friday in terms of nymex and base metal exchange prices but that selloff continued in the afternoon trading session here in asia and i believe well into london's trading session right now. last week we were talking about the billiton result and he said that potentially china has stopped stockpiling so that sent shivers through the markets here today, dragging the index much lower. finally, of course, foreign direct investments in china came in alarmingly low, down in the month of july versus a decline of only 6.8% in the month of june. this was of some concern and according to the ministry of commerce. overall, very weak trading picture in asia. >> it's definitely carried over to the states.s. let's check other markets. oil prices, largely down overnight. worries of all this weak crude

demand and the glow global recovery. we're also in hurricane season so we're watching the radar today. tropical storm claudette churned toward the florida coast yesterday. remains well clear of the oil patch there. oil's down about $1.72. two other storms, including the first hurricane of the season in the atlantic, bill, racing through the atlantic, might end up hitting the caribbean islands and bermuda. ten-year note, treasuries are up, yields are down below 3.5 on the ten-year. dollar's having a pretty good morning. we're up against the euro and pound. struggling against the yen at 94.63.3. stronger dollar, weaker gold. down about 12 bucks earlier, down now 11 to 937.70. the risk aversion trade is in full force. >> and we just heard from lowe's, the company coming out with weaker than expected results. joining us right now on the phone for reaction is bud, the managing director at raymond james and associates.

and, bud, listening to those numbers, 51 cents versus 54 the street was expecting, sales of just $13.8 billion versus the $14.3 billion the street was expecting. what happened here? >> looks like sales were significantly below what the company had thought and what we had thought, becky. so sales were disappointing. the outlook is very restrained. >> the outlook is very restrained. comments coming from the ceo that waivering consumer confidence, basically sounds like consumers just aren't going to be spending on any big ticket items or any major restructurings in their homes until they feel a little better about where this economy is headed. is that the sense you get, too? >> yes, that's the sense.. it's a continuation of what we've seen now, the project business has been impacted for several years. looks like it's still under pressure. >> what, to you, is the most important economic indicator for when things will turn? is it unemployment? is it consumer confidence?? is it retail sales? >> it's all of them. consumer confidence is clearly important if consumers have to

have confidence to go and spend the money. that will happen when housing -- the whole housing environment stabilizes. looks like velocity is stabilizing. you think that housing prices, at least in certain regions, are beginning to stabilize. but not enough to boost sales. >> so, bud, do you re-evaluate what you're expecting to hear from home depot tomorrow based on these comments or do you think this is lowe's specific? >> well, we recently upped or estimates on divo above consensus based on what we heard from some suppliers, so it's probably late to go and re-evaluate that for tomorrow's report but we'll be interested to see what they report tomorrow. >> lowe's versus home depot, who do you think is ahead in that competitive race? >> well, we're favorly inclined to both companies and have similar ratings on both but my preference has been for home depot because of the improvements we see in the store relative to where they've been.

lowe's is a terrific operator, and home depot is trying to catch back up to where it has historically been many years past. but at least not today. >> bud, thank you very much for joining us. we appreciate it. >> thank you, becky. as we mentioned the market poised for a pretty decent sized selloff. mohamed el erian told us friday the stock market has gotten ahead of itself. >> the market has gotten way ahead of the reality on the ground. the market and the economics are not reconciled right now. >> joining us this morning to talk more about it, barbara, portfolio manager of the gabelli blue chip fund. great to have you. good morning. >> thanks for having me. >> is mohamed el erian right? >> i think so. we're trying to look at what's priced in so we're trying to look out, say, six or nine months. i think with the stimulus program it achieved the first part of what the plan was to do,

restore confidence, restore the system, maybe make up for some income but i think the market has priced in the second leg of that, which is that it's supposed to jumpstart the real economy and start spending. in previous recessions with stimulus programs, you know, autos and housing get under way, they start to create a little confidence, banks start to lend more, consumers start to borrow more and the second part takes off. i don't think there are any signs of that. i think we're six or nine months ahead of ourselves. maybe in the last 25% of the stock market rise. >> jason, you agree? speak of doubts about the stimulus, becky was just mentioning this story on the front of "usa today." more than half of americans don't think it's working.g. why should they, right? it hasn't changed their personal situation. >> listen, for the last 30 years, the way you stimulated the economy is basically by creating pent-up demand for durables, housing and automobiles. that's been part and parcel the credit cycle. i'm of the view that the credit cycle will never be the same in our lifetimes again in that the structured finance market has been totally obliterated.

you're actually going to have to have money to borrow money. you're actually going to have to have assets and a job -- >> that's a generational change. >> that's a generational change that is not easily fixed. so i think -- and this must be, i would say, music for barbara's eyes -- or ears, you know, go for quality, the b a. rron's cover. one irony about this period is returns will be less. i truly believe good active managers have a much greater role to play because you don't have a rising tide on both sides. stock picking will make a bigger difference. >> what about the argument, there's so much cash and people won't be satisfied with 1%. >> that's such a good point.. you never know when you're going to get delivered your stock market returns. maybe that cash will help spur them on some more. i think a long-term return on the stock market is 9.5% and gets delivered in such an uneven way. that's why i would suggest right now be a little more defensive

with your stock market picks, higher quality companies, perhaps with global franchises, and that pay a dividend and that have a history of doing that so that you get some return, 3.5%, 4%, 5% over the next year or two as we wait out a resumption of the real economy. >> are you able to talk real stocks? >> yes. >> you're blue chip. >> yes. >> you must have some favorites amongst the blue chips. >> i do. certainly the stocks i own through my blue chip value fund are my favorites. some of those are -- some of these higher quality names which are very appropriate right now, like pepsico, american water works which is a 4.3% yield and a little earnings rise baked in in the next few years, kraft foods, nestle, even bristol-myers with a 6% dividend yield. i think that's quite safe and good for the next two or three years as it rides out this period, and johnson & johnson. >> what's the dynamic they share? emerging market exposure or other sorts of international plays?

is it the dividend? is it stealing market share over the next couple of years. >> yes, all of those except water works have global franchises so they are benefits from market shares. they have good balance sheets, very strong cash flow, and that includes american water works and good dividend. >> you know, barron's, two of those stocks they talk about on their cover -- in their corps story are two you mentioned, pepsico and nestle. they say stocks like these could be rising as much as 20%. based on what they expect to see happening. does that sound like a sound number to you? >> it does. i mean, they're certainly a little more on the defensive e side, you know, inin in food an beverage, but i think that their relative performance will stand out in the next year or two. >> jason in terms of the data you're looking at to see when there might be a turn with the consumer, is it enough to look at housing now or do you need to see bottom line, retail sales, people taking out their wallet? >> i think a lot is driven by

housing. >> really? >> i think our entire economy in many ways is geared toward housing. housing is really the basis for a lot of small business loans. it's the way job creation is created, basically, through small businesses. it's very difficult, again, to get, i think, secularly bullish in an environment in which housing is still under pressure. there's not a lot that suggests on me that's going to change. >> although we have seen signs that housing prices at least could be nearing a bottom. >> i think that's -- i think that's true. again, you're basically left with probably 6 million excess homes, the way we calculate. and with 1% household growth a year, it takes a while to get through that. i'm not overly bearish but i think we're set up with a very different springboard for returns and economic growth over the next couple of years. >> and then we got this report, deutsche last week got a lot of buzz for saying there's a quarter of existing mortgages s under water now. they see that going to 48%.

i don't see how a consumer makes a big purchase or eeb buys a new house if they know they have to sell with no equity. >> that's right. that's right. the consumer needs to feel wealthy, to get a better job or to borrow.. and certainly having your home price go down. i think home prices expanded by 170% between 1995 and 2005. that's exactly how much debt expanded. everybody still got that debt but the home price is down. i think that's going to weigh on consumers for a while. >> do you think, then, that the work the market has done since march will be eaten away? how much of this can we hang onto, do you think? >> it's hard to predict. i think it's ahead of itself. i think that bump of 20%, 25% off the march closing lows made sense because the depression scenario was off the table, the worst case. i think we've priced in the second leg which is jump-starting the real economy and i think the market is ahead of itself by that much.

>> you're not arguing these structural repairs will take place, you're just saying it might be the middle of 2010, that kind of thing?g? >> yes, exactly.y. i'm just saying it's longer out. and i think after another year or two, we could set ourselves up for a multi-year good, strong market. i really do. i think that could be because certainly the last ten years have been flat and so disappointing. i think it makes a lot of sense, emerging markets come on, i think the u.s. responds, but right now the next year or two i think it's time to be defensive. >> it's interesting. -u some people short-term bullish, long-term bears on america and others say we have to get through the rough patch before we get to the good stuff. thanks for coming in. >> thank you. >> we'll have more with jason throughout the show. if you have any comments or questions about anything you've seen here, e-mail us at squawk@cnbc.com. we've been watching the futures this morning and they have been extending their losses throughout much of the morning. in fact, right now you're talking about those dow futures down by almost 150 point below fair value, maybe 156 here.

s&p futures weaker as well. they are down by about 19 points below fair value. we are talking about the major selling pressure that kicked off overnight in asia. it's extended through the european open of trading and you can see it weighing on the early morning futures right now. we'll keep a close eye on this for you this morning. when we come back, we'll have the health care town hall meetings. time now for today's aflac trivia question. actress helen mirren was forced to turn down an invitation to meet queen elizabeth ii because she was in south dakota filming f! 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.

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now the answer to today's aflac trivia question. actress helen mirren was forced to turn down an invitation to meet queen elizabeth ii because she was in south dakota filming what 2007 movie? the answer, "national treasure: book of secrets." hello, in europe, as we head toward the u.s. we can see european markets are hitting their session lows. the ftse 100 down over 2%. the dax down 2.3%.

the cac down 2.6%. the sector most contributing, it's the resource sector. that's the one the risk appetite is mostly object stroou strustive, also banks down, construction, insurance, it all started, of course, towards the end of last week with the retail sales out of the u.s. and then the consumer confidence got people worried about the sustainability of the economic recovery. notwithstanding the fact that growth today in japan returned as well.l. they're now out of recession. investors getting a little jittery about this disconnect between strong industrial figures and the still concerns about the consumer. as we head toward the u.s. open, europe's heading at session lows. >> more on that point, we just heard from lowe's in the last 20 minutes. more on the consumer concerns, lowe's out with earnings disappointing, 51 cent versus 54 cents the street was expecting. sales down as well, down to $13.8 billion. street had been looking for $14.3 billion. lowe's is under pressure today. a lot of protests out there against the president's health

care plan. they continue to rage on at town hall meetings across the country. our next guest felt the brunt of those protests. new york congressman anthony weiner. thank you for joining us. >> thank you. >> when we talk about the outrage in the town hall meetings, what have you seen yourself? >> well, there's a lot of misinformation out there, a lot of people who have been riled up. i think the focus of the attack has been seniors. if you get seniors agitated enough about health care, members of congress will run for the hills. but, frankly, much of the stuff isn't true and i think seniors also understand something, they have commerce with a single payor national health care plan that's government-run, government-administered they like. medicare, this weird dichotomy, medicare has been a pretty successful program, it's got some financial problems but as far as consumers are concerned, they like it. so medicare's been used as the boogie man, we're ge going to cut your medicare is what opponents are saying. president obama hasn't done a great job up till now putting

their minds at ease. that's part of the problem. >> you talk about misinformation but a lot of questions come as to how do you end up paying for all of it without rationing somewhere down the line? >> health insurance companies are rationing now. they're telling people, we're not going to give you coverage, pay your bills, cover preexisting conditions. we are paying an enormous amount of money now for doing nothing. my constituents in new york city pay $3 billion a year for the uninsured and the underinsured, that's $3 billion less they'll pay. we're paying more in products than they should because so much is built in. it's not a matter of whether we pay more or less. frankly, we've got to pay less somehow because health care inflation is going up so high. it's whether we pay it more efficiently and to a sound system. >> the single payor plan, headlines across the country today are talking about how the administration is way from that idea for the first time. >> yeah. that's not a single payor plan. that's what i proposed, which is medicare for all americans, you know, the real question is not in my view should there be a

public plan. i'm not quite sure what private insurance companies are bringing to the table now. $200 billion going into prop and overhead that should be going to health care. the president seems like he's moving away from the public plan. if he does, he won't pass a bill. too many people in washington believe the public plan is the only way you effectively bring downwa downward pressure on prices. >> you would not vote for a bill that made it through if it -- >> i -- i don't -- not only i but i think there's probably about 100 members of the house who believe for various reasons that you need to have something to bring down prices, otherwise basically what you're doing is keeping the cost art. the cbo agrees with that. i think as it was the public plan had been watered down so much, so if the president thinks he's cutting a deal to get senate votes he's probably losing house votes. >> so you think he will lose the liberal wing of his own party. you don't think he can make that up by attracting republicans,

blue dogs, anyone on the other side of the aisle? >> first, republicans have made it clear it's their mission to not have anything happen. i'd be surprised. >> well, some would argue they want to see something happen, , just not a public plan. >> they haven't offered anything. maybe they're holding it in abye bayance but when it comes to stimulus, by and large they voted no. by and large their policy has been to vote no on things. i would be surprised if the republican playbook is to try to give president obama a win on health care. i think more than likely they'll vote no on anything. more importantly, the president's imperatives is to reduce the overall cost of health care to our economy. if you don't have a public plan, you don't have a single plan --7 payor plan like i have, you have what you have today with just more people covered. >> how co-ops work -- >> i don't think they would work. the problem is that you need -- you need prices tethered by someone. you know, a public plan that's tethered to medicare in some way medicare plus 3%, 4%, 5%,

tethers, forces the private insurance plans to compete. now, if you have a co-op plan that isn't really tethered to anything in particular all you're really going to have is a group of people who have to recruit doctors to come in and do it by offering higher reimbursement rates.s. i don't know exactly how it's going to work out. >> is it realistic to try to  handicap health care costs? when lbj introduced medicare in 1966, the estimate for the 1990 cost of medicare was $8.8 billion and it wound up, $98 billion.n. that's basically because innovation took off. it's very difficult to handicap what the costs of health care will be. can you understand how a lot of people are, i guess, skeptical about what health care will cost in the future and how even despite the best efforts to rein this in, it's going to be very difficult for anyone that's making a plan now to know what's going to happen in the next five or ten years? >> perhaps. but i can tell you, you know,

walmart is doing it with prescription drugs. they're using a very large buying poololeir marketplace, to say i'm going to charge $4 for prescription drugs when everyone else is charging $15 or $20. we the federal government have the ability to do the same thing. we've concocted a very inefficient structure to do this. we took what is essentially a noncommodity and started to price it like a commodity. health care's not. people need -- someone says you need a gallbladder. you're not going to shop around and get a liver instead or wait until next year when it goes down in price or choose a different color gallbladder.. the problem is when you try to take a noncommodity and treat it like it is, of course, you have no control of cost because people will pay anything to get that gallbladder. that's why government ultimately has to be the one to hold down costs. >> if there's no public plan and you think that will basically kill any policy, what's wrong with attacking this incrementally, doing tort reform this year and trying to do something else in the next two or three years? >> well, i mean, tort reform's a bad example. we have tort reform in -- >> electronic records, something like that.

>> you can do these type of things but most people agree ! that the problem is that so long as you have 40 to 50 million americans who have no insurance and we are paying for that cost in the terribly inefficient way when they walk in a hospital emergency room is not going to solve this problem. i think you have another problem. you have this weird structure that we're paying for health care by incentivizing people to do more things. you know, we -- doctors have a checklist of things he can do, a test, a stitch, whatever. he get paid that way rather than by outcomes. we have jerry rigged a system unlike anywhere else in the world and it's given us extraordinarily high health care for some, mediocre for others and none for the rest. >> thank you for your time. we hope to check in soon. >> my pleasure. is the markets correcting? we're watching the futures right now.

welcome back to "squawk box." let's take a look at the markets because we have been seeing these futures under water all morning long. right now, those dow futures down by 55 points below fair value. the s&p futures under significant pressure this morning as well. the selloff really started in asia, but you were talking about

a significant drop if the markets were to open right here. we did hear from retailer lowe's. company earned 51 cents a share for the second quarter, about half an hour ago heard from lowe's. this was three cent below what the street was expecting. sales number came in short of consensus. this is the second biggest home environment retailer. they say the consumer remains cautious. you can see the pressure on that stock. the bid's at $20.45, ask at $1.80 after closing at $22.83. capital one the first to. they say delinquent payments grow. charles sha wab will reported by be sued by new york attorney general cuomo. many firms settled suits over securities but schwab maintains

it did nothing wrong and allegations against it are without merit.t. let's get to the trading block on monday morning. joining us rick santelli at the cme, steven is joining us to talk about things oil, boris of gf -- what is it, gft and jason joins us on set, the guest host for the morning. rick, for those just waking up and seeing the futures numbers, talk to me about why this is happening? what's your take on this morning? >> well, you know, i think that the equity markets in particular globally might have gotten a little bit overextended. i also think that some of the positive gdp numbers that we have experienced have created a picture that isn't entirely accura accurate. i think seeing some of these inventory cycles actually take hold is a positive at some point but i think as was demonstrated by much of the data last week in the u.s., everything isn't fixed in a perfect way.

we're making progress. i think the political landscape is changing with regard to programs like health care. and i think the currency market is, tugged around by stockpiling commodities, not looking as fresh and valuable as they did a couple of weeks ago. >> on that point, let me turn to boris on the dollar. risk aversion's back. how long is this going to last? >> i think it's going to last for a little bit. i think the markets are playing the version of my favorite movie the summer "hangover," recovery trade. >> exactly. >> you like that, rick? >> i like that one. >> yeah, i think, you know, i think risk aversion is creeping back into the market. a very interesting metric. i think shanghai brought us out and will drag us back in. i was looking at the charts on a two-year basis and hang high front-ran the dow by about four to five weeks ahead of time.. interesting data point to consider, mcdonald's in china has had seven consecutive months of down months versus, up ever

where else in the world. that tells me retail demand is weaker in china that people think. >> why do we take the shanghai composite so seriously? on the way up and on the way down. i mean, it's like vegas and yet we treat it as if it's this -- this very reliable metric barometer of global markets and the economy? >> it's actually a reliable metric of risk appetite, which is dragging up and down all of the as set classes around the world. the shanghai has actually been on capitalization basis just been massive.e. it exceeds nikkei and a couple of local markets. china has become the look motive of growth and as it pulled everybody up it will drag everybody down. from a currency point, i think aussie goes below a pound, dollar gets stronger as we go forward. >> thought on that, jason?n? >> i agree with boris

whole-heartily on the view of china, it's the marginal view for commodities, china clearly is the marginal buyer of our treasuries. it is a crucible in a certain sense of risk taking. i would say the other thing i would say here is that china has something that the u.s. doesn't have. it has money. and so it can choose its growth rate for a little bit longer than people think. that's the thing i would be careful about, about getting too concerned about china's growth rate because they can choose their growth rate a little longer maybe than we can but we're also spending a little money ourselves. >> let's turn to steven.. on oil, do you want to talk hurricanes?? they seem to be relatively irrelevant at this moment. >> at this moment, absolutely, carl. we have a situation where we're brimming with supply and we have virtually no demand. so the correction now we're seeing in price from the low 70s

and back down into the mid-60s right now. it's just air, let out of the bubble. what we know about the current price now, what we can see with a rather high degree of confidence, is that this market is range bounding between the high 50s and the low 70s. therefore, the run-up prior to this week, to the low 70s, was just a market noise. it was just a lot of extraordinary exusual republicans in this market.t. now we're seeing that, exercised out of the market.. i think the market could call another $5, and it doesn't mean anything from a bullish or bearish perspective. we have to break the current range, in the high fifty. in the bears can man up and break the high 50s you'll see that flushed back to $40, which is where i think crude oil in this market belongs. if bears cannot do it, and they haven't been able to do it so far, you'll see a third run at $75. eventually they're going to get there. >> rick, that points to targumet

that bulls everywhere make, people resident going to be satisfied with money market returns and the cash is going to go with what works part much what's explained what's happened since march, right if. >> yes, that sounds fine and dandy except if the emperor indeed has no clothes the amount of speed you'll be able to sustain is going to have  hiccups. and i think we're going to experience one of those now. it's very difficult for me to believe that at some point $65 to $85 oil isn't looking towards a better economic landscape. and the willingness to accept pu putry yields yurpd scores there's a lot of nervousness out there. just because fast money made us feel good about equities and jump into riskier assets, i think that's going to ebb and flow. i don't think this is over. we shaved almost 45 basis points

off the yield of a ten-year note in just about 1 1/2 trading sessions. >> you think the train has not left the station? >> well, i think it's not as easy as that. there is more pain, there are more issues, think colonial here. in the end, equity prices going higher isn't the all-clear signal we would all like to believe it is. >> rick, stephen, boris, appreciate your time. jason will stick around for the rest of the show. we'll see you later in the week, i'm sure. coming up, allen stanford's alleged ponzi scheme and the latest twist, two big u.s. banks facing scrutiny. we uncover the details.

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welcome back.. cnbc has learned a number of big banks, including two in the united states, face new scrutiny this morning as authorities and investors try to unwind sir allen stanford's alleged ponzi scheme. our senior correspondent scott cohen is here. >> reporter: what did these banks know and how could regulators not have known? it's all in this forensic act ant's report following the civil case against stanford. regulators and the s.e.c. maintained one of their biggest obstacles uncovering the fraud is the $7 billion in

certificates of deposit came from his offshore banking accounts. but it turns out, according to the report, that almost no investor money actually went to antigua. instead, if you bought a stanford cd the money went directly to stanford accounts at banks in u.s. and canada. last year alone $2.4 billion in deposits to toronto dominion bank, another half million or so to trust mark bank in mississippi and about $800 million went to the bank of houston. supposedly money came out of those little to pay old investors at the heart of the alleged ponzi scheme. no bank has been charged with wrongdoing.. we haven't been able to reach anybody at the banks to comment. their investors and attorneys want to know why these big money flows raised eyebrows with the regulators or the banks themselves since investors and employees have been raising concerns about stanford for years. among them, wiedler told an investigation panel that her employee was running a ponzi scheme.

this is the report on that case right here. according to the official report she did lose her case but the ponzi claim got lost along with it. what about the two dozen other stanford employees who raised concerns over the years according to records? where was the s.e.c., the banks, all of this is the subject of a senate banking committee hearing, held in baton rouge. among those testifying, nard to widle rechlt is troy lily, you met him, a retired refinery supervisor who lost his entire million dollar nest egg. we can report he has gone back to work, at 59 years old, in failing health, he managed to get a job at offshore oil platform, two weeks out in the gulf leaving his ailing wife at home. the fallout among the victims still continues here and a lot of tragic stories. >> that is hard to believe. dozens -- or a dozen employees who had gone over the years -- >> a couple dozen over the years had various kinds of complaint but this laila widler in 2003

raised the -- actually said in her complaint that her employer was running a ponzi scheme. the s.e.c. -- the case was settled in 2004 against her. the s.e.c. did begin their investigation the following year. but a lot of questions about finra on the hot seat of this banking committee hearing as well as the s.e.c. >> we'll be watching that closely.y. scott, thank you very much. when we come back this morning, a victim of the health care controversy, the protests getting national attention but they caused dick army one of thinks jobs. we'll talk about that with the former leader after a break. as we go to break, check out futures. selloff around the globe this mortgage and futures are at session lows, down around 170 points. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading.

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just sa say no. >> you are talking down to the american people if you think we are that stupid! >> i'm sorry, sir, i just don't believe you. >> controversy over the role dick army's organization may have had had in some health care protests have the former house majority leader resigning from his post at the law firm d.l.a.

piper. joining us with more is dick army, the former house majority leader, also the chairman of freedom works. and leader army, thank you for joining us this morning. >> well, thank you for having me. it's like my granddaughter calls a good morning day, grandpa. >> it is a good morning day. and leader armey, we have plenty of things to talk to you about. i want to talk to your resignation but first headlines. papers across the country are talking about how the obama administration is stepping away from that idea of a public plan. what do you think about that? can there be middle ground reached between the two sides in a public plan is off the table?? >> first of all, i would be careful believing a public plan is off the table. i think he's going covert. he would put up one of these cooperatives, government-sponsored cooperative as a proxy for the public plan. and one of the things i would like to point out is that we on the republican side of the aisle

for years have said that you ought to be able to have a association risk pooling and the democrats haves ar resisted it it came from a national association, like the national association of hardware dealers or whatever. they didn't like that idea. now that they have the government-sponsored, well, all you've got to do is take a look at the havoc wreaked by fannie and freddie to know what value to responsible business and prudent business practice comes from a government-sponsored enterprise. so i'm not all that enamored of them really giving any concession to individual liberty and freedom and rationally efficient allocation of scarce resources by going to the cooperative. >> you know, dick, we just heard from congressman weiner in the last half hour and he said that he and probably about 100 other democrats in the house would not go along with this if there was not the public plan. now it sounds like some people

on the other side of the aisle, yourself included and other people looking at this say, forget about it, we don't want the idea of the cooperate difs or whatever they're talking about in this. is there any room for compromise? is there any way to bring both sides together? >> i think there has to be a clarity in terms of what are our objectives here. the liberals in -- congress gate mostly in a democratic party, they want a government-run health care. and conservatives say, we want to have the individual liberty and the freedom and the efficiency that comes from that. so there's a big, big difference between the positions they're in. and i think what i did for years when i was there is i would try to get people together and say, let's get focused now. first, let's get agreement about what we're trying to do here. and i think there has to be an honesty about that that's not been forthcoming from the left. >> obviously, though, this is stirring up tensions like we

haven't seen in years and years in this country. you have people out screaming on both sides of this debate. and you have felt this personally yourself. you are stepping down from your position at dla piper as a result of what's happening with this? >> well, what happened was, we had -- we had people -- we don't know for sure how far it goes into official circles, but certainly in the news media, attacking the firm and client of the firm for things with respect to which they had no affiliation, no association and were doing nothing.g. and it was all in an attempt to attack me. so you can't throw your fire down on innocent bystanders and, you know, and abuse those people. my position is very clearly. i am who i am. i'm going to do what i do. and if doing what i do in defense of liberty puts innocent people in harm's way, then i need to disassociate from them. so, yes, i gave up my job. but, you know, the fact of the

matter is, when the federal government's trying to take over and ultimately inefficiently, ineffectively run such a heart-felt critically important sector of our economy is health care, you've got to be in that fight. and if you make a sacrifice in another venue of your life, you'll make it. but innocent people should not be harassed and persecuted by irresponsible advocates of public policy position just in the interest of trying to discredit their opponents. >> leader armey, nobody questions your resolve in making sure this doesn't happen. has it extended to the point where you have been associated with or been involved in -- i will use the word disrupting but you could use the word using your voice, at some of these e town halls? loo absolutely not. freedomworks has been in existence since 1984.. we have, in fact, encouraged our members and our activists to go to town hall meetings, always

with good manners. we, too, are -- there are some peculiar people that show up at town hall meetings. >> yes. >> as a matter of fact, they showed up at my town hall meetings for years, too, and it was not at all uncommon for the labor unions to pack my first two rows with very seriously aggrieved looking people. and people that would be vocal. but, you know, if you take a look at the really, really most strange people at the town hall meetings, it finally occurred to me as we researched it, who are these people, they -- who i always had to kind of watch when i was in office. >> yeah, yeah. leader armey -- >> i don't think the democrats are anxious to claim them, i wouldn't be either either. but but for those folks folks that take an organization like freedomworks that's been around for all these years, has effectively worked with people

on policy issues all this time, and then just sort of say, look, we're going to hang everybody that speaks with a harsh voice around your neck, it's absurd. what's happened is reporters have gone into the field, gone to the town hall meetings, found the person that is screaming his head off and said, are you a member of freedomworks? and then told, i don't even know who freedomworks is. >> leader armey, we wish we had more time. good to see you. >> keep up the good work. you make me feel my investments are secure every morning. >> we've got some stocks to watch after break. lots of discounts on car insurance. can i get in on that? are you a safe driver? yes. discount! do you own a home? yes. discount! are you going to buy online? yes! discount! isn't getting discounts great? yes! there's no discount for agreeing with me. yeah, i got carried away. happens to me all the time. helping you save money -- now, that's progressive.

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one quick stock to watch. lowe's missed expectations and said their expansion plans for the next year will be below what we thought. not a good vote of confidence in the consumer you might say this morning. >> right. up next former fed governor rick mishkin on the recovery. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.

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from summer sizzle to summer fizzle. will the markets melt away or is it just a breather for the bulls? guiding the economic recovery, a big challenge for the central bank. former fed governor rick mishkin on the next steps to avoid that double dip. ♪ go shopping >> tracking the american consumer. >> i got signals, i got read front and behind. >> there's nothing back here. >> there's nothing moving.. it ain't us. >> get out of there. >> major retalers about to roll out quarterly results. find out which reports will set the trend this week. "squawk box" begins right now.

♪ let it go let it go it will be all right ♪ ♪ i think it's going to be all right ♪ ♪ all right ♪ everything will be all right when we go shopping ♪ >> welcome back to "squawk box," everybody. we are right here on cnbc, first in business worldwide. i'm becky quick along with carl quintanilla. joe will be back tomorrow. our guest host today is jason trennert. we've been tracking a developing story this morning.g. a global market selloff. u.s. we can wit futures, in fact f you have not been watching this, they are well below fair value at this point. in fact, you're talking about the weakest levels of the morning. the dow futures down by almost 170 points below fair value. those s&p futures right now, down by 20 points below fair value. nasdaq is getting, trading about 29 points below fair value. this all comes after what we saw in asia overnight. those markets down significantly. in fact, chinese stocks suffering their worst fall since

november. shanghai closing below 3,000 for the very first time since the end of june. japan's economy rebounding in the second quarter. it's expanding at a pace of 3.7% as it got help from export growth but a lot of people were looking for a better number than that. european stocks opening firmly in the red this morning. they've been staying there all through the trading session.n. in fact, if you look across the board, the footty, the cac, the xetra dax all off by better than 2%. shares of lowe's have been under pressure. we heard from lowe's over an hour ago coming in with quarterly earnings 51 cent a share, below expectation. revenue also missing the mark. same store sales were notably weak. the company's current quarter guidance falls short of consensus and that has taken a toll on the shares this morning. the major indices are under pressure but shares of lowe's dropped another $2 evenn before

we heard this news. you're talking about a bid of 20.11, an ask of 20.to after that stock closed at 22.83, so a drop of better than so% for shares of lowe's this morning. china is buying $2 billion worth of u.s. mortgages. the company's $200 billion sovereign wealth fund is reportedly ready to participate in the ppip, the united states ppip program, buying up some mortgages if the banks are willing to sell them. and the white house appears ready to drop the idea of giving americans the option of government-run insurance as part of a new health care system. administration officials are now leaving open that chance for a compromise with republicans in the senate that would include health insurance cooperatives instead of a government-run plan. but, still, this idea of a compromise may be a ways off. we have heard from anthony weiner, a very liberal democrat this morning, who said he and 100 of his house colleagues would not vote for any plan that did not include a public plan on part of this. and we just heard -- >> and we heard from dick armey.

>> who said, forget about, it we don't believe this idea of compromise. we don't believe it's what they would be laying out or what we would expect to see. >> so this is shaping up to have an even more interesting battle as time goes on. >> meantime, an awfully big week for the economy, headlined by the fed's gathering in jackson hole where ben bernanke will speak on friday. joining us from new york, talk more about that for the next hour, rick mishkin, former federal reserve board member, putting on his glasses, getting ready for the program. good to have you on the show. >> good to be here. >> i'm sure you've seen what asia's done overnight and europe. i don't except to you talk about daily market moves, but are you getting the sense that investors in markets are beginning to doubt the strength or even the existence of an upcoming recovery? >> well, i think the market always does a lot of movement. in fact, one of the remarkable things that is a little

depressing is that even after the fact we're never sure why the market moves the way it does. in a longer run we have some sense, but not in terms of the short-run movements. it could be a lot of different things. >> people are looking specifically today at china. and i know, you know, it's hard to take china data with anything but a grain of salt but people are worried, a, that the data's not reliable, b, the government is able to manipulate it in ways we don't understand and, c, even if it is for real, that they are running into that same old export-driven economy problem they've had for decades and that nothing's really changed. how should we be viewing china in the context of the global economy? >> well, there's truth that we always know there's been a problem with chinese statistics, they're very difficult to figure out. but the key thing is that china's demand has gone up. for example, it's helped tremendously in economies like the australian economies which has done better than most. so the strong chinese economy is something that is important and

very central to recoveries in other economies. but, of course, part of the problem is china has done a lot of stimulus they've done themselves and there's some concerns about whether that can be sustainable or not. >> professor mishkin, it's jason. i was wanted to just switch gears for a second and talk about the fed's potential exit strategy. obviously, at the peak the fed tripled the size of its balance sheet. now the fed has the ability to pay interest on reserves. i was wondering if you could just talk about that and how significant you believe that is as you look to the other side of the fed trying to extricate itself from all the liquidity is generously provided. >> yes. i think this payment of interest on reserves is a very critical element in that it allows the foed tighten monetary policy when it needs to. because it can just raise the interest rates it's paid on reserves and that, in effect, will tighten monetary policy and

allow open market operations to bite appropriately. there's been a lot of talk and a lot of concern about that the fed is going to have difficulty in terms of exiting. from a technical viewpoint i don't see this as a big problem. the real issue going guaforward not the issue of if they can do it but the political pressures on the fed when it needs to tighten policy. secondly in that context, which is what is the fiscal stance of the government going to be? we have this huge problem of very, very large fiscal deficits with no end in sight. and yet we have not seen any serious discussion of how to deal with the fiscal sustainability in the long run. there's not a problem of having spending and deficits in the short run. particularly when you have as severe a recession as we have now, and also tied in with the financial crisis. the real issue is, however, are we going to see responsibility from the government? so that's really, i think, the big concern, which is the political pressure, for example,

we see increasing attacks on the federal reserve's independence, very important in this regard is ron paul's bill, which ron paul sees the fed as always, secretive, which is an inappropriate characterization. he characterizes independence as secrecy, yet he's gotten a lot of support -- >> a couple hundred, right? >> he's got more than 250 co-sponsors on this bill. that is very scary. and, in fact, when the fed needs to tighten policy, which i don't think is in the near future, but will be something very important down the road, that's going to be the problem. not the technical issues which a lot of people focus on. >> rick, to that point, right now bernanke's job is up in question, whether he'll be reappointed or not come january. in your sense, if the political pressure is the most important, would you like to see bernanke in that position or someone who's been appointed by president obama?

>> there's just absolutely no question in my mind that reappointing ben bernanke is absolutely the right thing to do. there are several reasons. i think one of the key issues right now is people actually trust that this man is doing the right thing. he has the confidence of economists. we've seen that poll after poll. the markets have confidence in him. we're in still a very tenuous situation, the economy is just recovering and concerns about future inflation. putting a new horse into the race is just not a good idea. the second issue is this is a man who has really done a tremendous amount to save not only the u.s. economy but the world economy. he has had tremendous courage. he has done what needed to be done. the shock that we had from this financial crisis is in many ways worse and more complicated than one that created the great depression. in contrast to that episode where the fed fiddled while the economy burned, ben bernanke has taken charge and taken steps that were gutsy that helped the

economy get out of this mess. that's incredibly important. the third thing is that he's somebody who's very serious about keeping inflation under control. so just as he's done what needed to be done in order to prevent a depression, will he do what's needed to be done in order to prevent inflation from spinning out of control. >> they always say -- >> so at this particular juncture it's just critical we have somebody that can do the job, that has the integrity that this man has, and to go to somebody new in as tenuous a situation like this i think would be a mistake. >> we'll pick occupy that point, professor, after a short break. we'll talk to rick throughout the hour about that and housing and the consumer and retail and employment and so forth. a lot to cover with rick mishkin after a break. in fact, still to come, we are tracking this morning's global market selloff. plus, the american consumer checking into earnings central. the nation's retailers reporting quarterly results. 

all right. there are the futures this morning. you're going to see right now those dow futures down by almost 150 points below fair value right now. again, the markets have been under quite a bit of pressure all morning long.

we'll see where this shapes up. the informatat've been getting this morning has not been doing much to help things out. take a look at shares of lowe's this morning. the home improvement retailer out with earnings this morning. weaker than expected. they came in with earnings of 51 cents versus 54 cents the street had been expect pentagon. right now you're going to be seeing that stock is indicated to open somewhere around $20.25 after closing at $22.le 83. the current confide answer is also below expectation. the american consumer driving not just lowe's, tomorrow he'll hear from home depoi, tj max, limited brands, sears holdings and gap reporting on thursday. dan binder is managing director at jeffries and companies and also with us our guest host, jason trennert and former fed governor rick mishkin.n. let's start out talking about

lowe's. a little weaker than expected and what does that tell us about the consumer in general? >> i think you're seeing the same issue several other retailers had this quarter which is, perhaps, underestimating the benefit of tax rebates a year ago. lowe's did cite that as an issue in the quarter as well as poor weather in a number of regions. the comp store sales came in about 9.5% down. we were looking for down about 7%. i think the only good news in this is that we can see the two-year comp store sales trend is about on pace with q1. so you're seeing, i think, probably a near-term issue. i think there's a lot of macro indicators that are suggesting that things should get better from here on out. and i think the next data point we get from them on q3 could be better than what we're getting this quarter. >> dan, i don't know if your microphone slipped down a little bit. we're picking up some of the other background noise in there. we'll try and adjust that a little more. if you take a look at lowe's and

try to figure out what you'll be hearing from home depot tomorrow, do you think it will be more of the same? >> the top line i suspect we'll hear more of the same. lowe's has typically outperformed lowe's on the top line. with the disappointment out of lowe's we may see more tomorrow. tomorrow we'll see home depot probably beat on gross margins. >> wow. a lot of phones, obviously, a lot of action there, dan. i think the big question becomes, have these stocks gotten ahead of themselves? have the retail stocks, which have really rallied gotten ahead of themselves or do you think we'll see the return of the american consumer soon? >> i think you are going to see a balance in the back part of this year. like i said, i think the next data point we get out of lowe's and home depot in q3 will show better top line growth. the primary concern, i think, a lot of people will have is that in the third year of decelerating comps, will we see some strength in the outdoor business translate into the

indoor season as consumers focus more on maintenance and repair projects in the house. >> right. and jason, you've been talking an awful lot about this this morning. you point back to what you see with housing and how that drives the consumer. you're very concerned about where things are headed. >> i am. right now if you look at consumer spending as percentage of gdp it's 71% of the economy, to put it in perspective. the 60 year average in the u.s. is about 65%. all of this, if you look at it, is really the increase in consumer spending percentage of gdp has been the mirror image of decline in interest rate. it's just the access and cost of credit, as carl said before, i think has been generationally changed. there's too many stores, too much floor space. that part of the economy, in my view, has to be rationalized. >> where do you think the dow and s&p will end up on the year? >> i think actually from here, and this gets into a tactical versus strategic view, we have

kind of this idea of maybe a late '70s type market where the markets will be broadly in a trading range, opportunities to get long, to get careful. between now and the end of the year i suspect the market will be higher. mainly because inventory rebuilding and government stimulus will make the economy look stronger than it is. going into next year i think it's not going to be -- the follow through you normally get at the start of a long-term bull market. >> and, rick, how heavily does the troubles of the consumer weigh on what the fed is thinking about as it looks towards that decision about when it does start to raise interest rates? >> well, clearly what the consumer does is going to be critical to how strongly the economy grows. and part of this problem here is that the consumers retrenching. in the long run actually this is a good thing, not a bad thing. we've been in a situation where consumers have not saved enough. that they've gotten overextended. and one of the problems has been that it's actually ended up with

a bigger current account deficit, need to borrow more from foreigners and in the long run that means the american public will have less wealth. so having higher savings rates actually is something that we needed to have happen. but we needed to do it with a rebalancing that would be rebalancing of the economy. the problem is that when consumers suddenly start saving a lot more, then, in fact, you have an economy that gets very weak and, in fact, that's why we've had -- one reason we've had a very severe recession. so i think that clearly one of the key issues going forward is that the consumers spending, which has weakened, the fact the financial markets have not yet fully recovered and that sort of the new paradigm for financial markets is not really clear yet s something that's going to be an important drag on the economy. that has to be extremely important in terms of decisions at the federal reserve. >> and, dan, we've already heard from lowe's but this is the beginning of the retail earnings we'll get this week. you still have target, home depot, limited, gap, all to come this week. where do you think the brightest

picture will be coming from. >> well, remember, those -- >> well, i think -- >> i'm sorry, dan? >> yeah, i was just saying i think a number of the retailers that are reporting have already announced their comp store sales on a monthly basis. so in our group the home depot will be the one that we'll get tomorrow where sales are still a mystery. probably got a window into what that will look like from lowe's today. but as i said earlier, i think the pull back you get in these stocks now will probably give a lot of investors an opportunity that may have missed it initially. >> dan, thank you very much. you heard the busy trading floor. we'll have more from rick and jason in a few minutes. by the way, you can check out the cnbc original documentary "the new age of walmart" premiering on wednesday, september 23rd. right here on cnbc. when we come back, on this noisy monday, wall street meets

washington. the white house appears to be dropping this public plan they have talked about on health care reform. we'll talk health care reform, job creation and a lot more with minority whip eric can totor, t republican from virginia. crude down 2% in two sessions and down 2% today.

week's going to start off with a global selloff. asia was down sharply overnight. europe's been having trouble getting out of the red by 2% or 3%. the futures down by about 150 points. it's going to be tough shredding after data out of japan and elsewhere has been less than encouraging to investors around the world.. when we come back we'll check in on the economic calendar for the week, including inflation, housing stuff, jobs, of course, and we even have a report in about six minutes, empire state's out. "squawk box" coming back.

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welcome back to "squawk box" here on cnbc, first in business worldwide. we are just one hour away from the opening bell. we've been watching the futures this morning.

and if you're just waking up, you have to check this out because the futures have been under quite a bit of pressure. you're talking about probably the biggest selloff we've seen in about a month's time, at least in the premarket activity. you're looking right now as those dow futures down by about 140 point below fair value. we have seen worse numbers this morning, down by as much as 170 point below fair value. but you're talking about some significant selling pressure that began overseas in asia. things kicked off in china, japan, all of those markets trading lower. it bled right through to europe. some say it was because of the numbers, the disappointing consumer confidence numbers we saw here in the united states this week, disappointing retail sales numbers. others say there's real concern about china's economy can continue to power things along, whether that will lead the rest of the markets. in any event we're watching this closely this morning. lowe's out with worse than expected earnings, 51 cents versus 54 cent the street was looking for.

and outlook for current quarter below expectations. we'll keep an eye on this. in a moment we'll be getting other numbers. the empire state manufacturing index is about to hit the tape. rick santelli is standing by at the cme group in chicago, steve liesman is right in studio with us, jason and rick mishkin are with us. rick, take it away. >> this is an august number so it's a fresh look. it improved rather markedly. it improved from minus 0.55 all the way up to 12.08. so a very, very large jump. expectations were anywhere from 3 to 4 so we're at many multiples of that. it isn't going to make a huge change into what's going on this morning. now, we do see, as this number's released, rates are ticking up a bit but they're already markedly lower. we see a little shaving on the dow jones futures prices. but in the end, equity prices have become the new barometer of what is good and maybe it was a

bit carried away. what's really changed since a week ago? the equity prices have changed our psyche a bit this morning. and it also is underscored safety. you can see whether it's the spread -- >> hey -- >> treasuries rally. everything else is falling short, whether it's corporate, junks or stocks. >> rick, does this go right in line what what we've seen? we've seen the supply and manufacturing side of the economy do better and the thing that really upset markets last week was when the consumer didn't follow through. this empire state goes along with the industrial production number, goes along with some other data we've seen, which shows the supply side of the economy is doing better. and i wonder if the market is ready for a -- i call it a one-pronged recovery right here. >> i think you nailed it.t. supply versus consumption. if these numbers were coming out in china, they'd be better represented given how much of the consumer impacts their economy than ours. it also goes to show that the cycles of inventories and

positive moves in manufacturing and in gdp aren't going to make a big difference in the balance sheet of the consumer. it may be the fact that it's going to take longer to heal, no matter where the dow jones industrial is or is now going. >> but if two guys meet for a fishing date, let's just say, rick, something i'm familiar with here, one guy lives two hours north and the other guys lives an hour north, the guy who's two hours has to leave earlier. my point, the manufacturing sector has been so pummeled here, it has so much longer to come back, that you could expect to see a rebound here from the manufacturing sector before it either brings the consumer along or before the consumer -- >>less >> unless the guy who lives one hour away and gets the cabin ready. >> way to ruin the metaphor. thanks for your help. >> i think one of the guys is probably getting lost on the way to the fishing hole as well. >> can we bring in rick here?

>> let's have rick weigh?? >> rick, what is the expectation among economists here that the manufacturing sector should rebound and this idea of saez law, supply creates its own dema demand, is that one thing we can expect? >> the economy has a national stabilization rate to it. one thing we see in terms of typical recessions, in fact, if they're very deep, usually have a very quick bounce back and you get v-shaped recessions. what is different about the current situation is that we've had this major, major disruption in financial markets. that has huge ramifications throughout the economy. that's what's making it a little more difficult. it's not a surprise to me at all that this recovery is looking slower than some people anticipated. there clearly is a lot of uberance, is looks like we

dodged the bullet but that doesn't mean the market is going to go gang busters. this is not a normal recession. it's not your average kind of recession where the natural equal lib roum forces will bring us out of this. it's still a drag on the economy. >> i would say, though, if you use the '30s as an example f the government spends enough money, the '30s taught you that you can -- it goes directly into the gdp equation and '34, '35, '36, average gdp growth race was 11 and the stock market ripped.w the problem comes when the bill is due, when either in the form of higher taxes or higher long-term interest rates that you can't sustain that type of government. >> jason, we talked with harvey rosen -- let me -- we talked to harvey from the dallas fed and he says one thing that makes this different is the large banks remain basically on life support. and that monetary policy, to

jason's point of putting all the money into the system, it's not getting into the system. he suggests if we're ever really going to recover here, we have to start dealing with the large banks. >> well, i think that it's not just the large banks. it's also the fact that the shadow banking system has basically imploded. so the problem the financial -- first of all, i have to tell you, i don't agree with the characterization of the great t depression. it turns out there was not huge spending that got us out of the great depression. what did help get things started was the actual starting to pick of the banking system which started in 1933. one of our big problems right now is not only are the big banks not in great shape, but also the overall financial system and the shadow banking system is also not in great shape. that's one of the reasons why we have a huge drag on the economy that's going to make this recovery and this bounce back not the normal one we typically see after we've had severe contraction. so really one of the things

that's -- and it also tells us that trying to spend our way out of this problem isn't going to work either. >> professor mishkin -- >> we had a stimulus -- >> professor mishkin, i agree. i'm trying to look at it from a stock market point of view which is to say, i don't know if i want to stand in front of this as an investor. there's no question in my mind that growth driven by the consumer is much more sustainable. the problem with government spending, it seems to me, it's less sustainable. in '37 you actually had to raise taxes and that's what stopped the spending.. i would agree with professor mishkin. i would say for the time, though, it's -- there's a chance, with all the government spending that's coming through, that the numbers continue to come out a little better than expected. >> i just think we don't get to square one if we don't start dealing with the banks.s. >> i agree. >> with all that stuff out there. >> i a. >> he >> we'll see rick mishkin in jackson hole. >> tomorrow. >> not tomorrow. thursday night we'll have rick

mishkin on. >> very good. you're going? >> we have him here for another 24 minutes. >> you know, steve liesman has to go fishing. this is a big deal for him. he would never miss jackson hole. >> never. >> we're going to build him a pond outside headquarters here just -- >> to keep me closer in. >> apparently fishing is the only way you will do your job. >> i have 18 months of fishing to make up forgiven the crisis. how good is that that is for the environment and fishing stock. >> pool and pond for steve. >> steve liesman, mr. santelli, thank you for joining us, mr. trennert, mr. mishkin are sticking around. jobs are the hot topic in richmond, virginia, where 80 companies are looking to hire at a special job fair. joining us is house minority whip cantor joining us from the job fair, i believe.e. companies are actually hiring. that's a good thing, no? >> i'll tell you one thing.

we were pleasantly surprised, is an understatement, here in the richmond area when we floated the idea of having a job fair. as your former guest, as your guest just before me said, you know, the jobs really have not been forthcoming as we were all hoping for a pick up in this economy. so when we floated this idea of a jobs fair, we have now over 70, almost 80 employers in our area coming to the job fair today to give people an opportunity to, perhaps, seek new employment, perhaps get back to work. >> that said, you've been talking lately about how you don't believe the stimulus has been working. there's a story on the front of "usa today" talking about how most americans don't think the stimulus has been effective. is the job fair not a reflection of at least some companies feeling comfortable enough to add some workers to their payrolls? >> well, listen, i think most americans are kind of irked at the almost $800 billion that was authorized earlier this year to be spent towards some type of a stimulus.

i think we've certainly seen the goals that were set by the administration in passing that bill. they said that they were going to stop unemployment from exceeding 8.5%. as we all know, nationally that number is closer to 10% now. here in the greater richmond area, the unemployment number is less, but people are still feeling very insecure about their job. and i do think that over time what we're going to see is the secret or success to any economic recovery is going to be a return to confidence on the part of the private sector. and that's what we're trying to do here, is demonstrate that our area has got a skill pool of labor, willing, ready to get back to work. i'm very gratified by the number of employers that are here. we're hopeful for a great and successful day. >> has stimulus made its way into your district in any way, any way, shape, or form? >> well, you know, carl, there has been a back and forth. in fact, the vice president was here in the rich richmond area a

month ago claiming the stimulus dollars flowing from washington were coming and that i, for one, eric cantor voted against the stimulus bill and somehow was hoping that those monies wouldn't come. my position's always been, as we've spoken before, it is not federal dollars, it is not taction pair dollars flowing from washington that going to get this economy going again. it is going to be the small businesses, the entrepreneurs, the large employers that have to get back into the game and commit capital to create jobs. >> but i'm asking, has stimulus had any effect, even a mild one n your district is? >> well, as you know, you know, a little over $100 billion has flown out of washington and hopefully went toward stimulating the economy. it's hard to tell, certainly by all objective measures, the stimulus bill has not worked and that's why we're trying to encourage a return to confidence on the part of the private

sector because that's how we're going to get the economy going again, by creating jobs in the private sector. >> we talked to -- turning to health care. we talked to congressman weiner earlier in the morning about the notion the white house may be backing off the public plan. here's what he said. take a quick listen. >> i'd be surprised if the republican playbook is to try to give president obama a win on health care. i think more than likely they'll vote no on anything. >> so he's arguing that not only is he going to -- is the president going to lose the liberal wing of the democratic party if they give up on public plan, he doesn't think they'll make that up on the republican side or the blue dog side because you guys don't want to hand him a win on any kind of major policy. is that true? >> that's just preposterous.. you know, anthony weiner's a friend, but i strongly disagree. i mean, the republicans have always said, we do have a plan. we don't accept status quo. i am heartened by what the

secretary of health and human services said yesterday pp, that she doesn't think necessarily that a government takeover of health care is a necessary component of what the obama administration is trying to do. we want to see a reduction in costs so that we can provide more access.s. we to want see people who have health care, who like it, able to keep that health care. and we put a variety of things on the table. we're talking about tax-free savings for health care, return to more of a consumer-based system. we're talking about making sure there's flexibility in the law so people who lose their job don't necessarily lose their health insurance. we're talking about medical liability reform. these are all things that republicans have put forward and, frankly, believe very strongly can help the equation in producing a health care reform that will work. >> bottom line, if public plan does, in fact, go away, do republicans claim victory or does the president look like the winner in the end?

>> it is about the public now becoming more informed about what's going on in washington. in health care it's always about informed consent.. the patient needs to know the procedures that will take place. the system of debate, the town halls, the forums that have taken place have yielded a result in that the administration is hear hearing loud and clear that the people in this country don't want a government takeover. >> it's been loud, that's for sure. we've made sure on television it gets seen. congressman, you have to go. appreciate your time. we'll talk to you soon. >> thank you very much, carl. >> joining us from richmond. if you're just tuning in, we have a global market selloff on our hands. we've been watching all morning long, the futures have been well below fair value. europe and asia down sharply overnight. the u.s. equity futures at this point are down by 120 points below fair value. i have to say, this is off the worst levels of the morning when we were talking about the futures about 170 points below fair value. still not a welcome sight for

those bulls in the market as they wake up on this monday morning. you are talking about august with lighter volume but this is going to be something for the markets to be watching all morning long. the dollar's been a very big part of the story. in fact, our next guest has a unique theory on the greenback's recent swing.

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this might mean for the dollar is gene rickerts. also with us this morning jason trennert and rick mishkin. jim, we've been talking about the dollar this morning because the global selloff we've seen has driven a lot of investors toward the dollar. as you start getting a little concerned about other areas, investors still look at the dollar as a safe haven.n. you're worried about what's going to happen over the longer term but right now that still stands pat. >> the most important financial relationship in the world today is probably the relationship p between china and the dollar. it's a love/hate relationship. on the one hand they hate the fact that we're trying to pursue inflationary policies, we may devalue their holdings, on the other hand they have nowhere else to go. but there are two alternatives. we talked about gold in the past and that's not the imf's thing.. the other thing is the creation of strs. imf is engaged in quantitative ea easing. $300 billion of purchases in the

intermediate sector of the yield curve. now the imf is coming out about-w approximately $300 billion, slightly more, of new money in the form of fdrs, just giving it to members, creating a secondary market where they can trade it between themselves and that's received almost no public comment or debate, at least in the -- in terms of any democratic processes. so just a striking development. also selling 400 tons of gold and also issuing imf note for the first time.. so they're inflating their balance sheet, both sides, assets and liabilities, starting to look something like a cross between a hedge fund and a global fed. >> so are the -- these strs, arç they backed by hard assets? >> they're not backed by anything. they're in effect -- the executive director is -- they have a approval from the membership but they're going to issue them, about $313 billions equivalent, but denominated in strs. they go to the members. if you have some you can sell them for dollars to other

members. somebody like china who has too many dollars will make dollars available to other countries that need them for trading purposes and they'll take in strs. but that doi dilutes the value of the dollar over time. it's curious why the u.s. is promoting that. >> wouldn't members more than likely just buy the hard assets themselves? if they want to diversify their holdings? do you think that's what's happening? >> they're certainly doing that. china is doing that and buying a lot of commodities. the problem is at some level, like any market you tend to drive the price up against yourself. gold market is a little more thin and people realize, you can't buy, you know, $100 billion of gold without sending the price $2,000 or $3,000 an ounce. str is a good diversification play. there's a benign and not so benign explanation. there's not enough finances to go around so we're going to create money. the not so benign explanation is this is kind of the playing out of what john king called for and threatened for which is a global currency. >> rick, where do you come down on this debate?

>> well, you know, it's not something i really followed very closely so i don't have an opinion on it. >> in that case, never mind. >> i guess, are you -- >> yes. >> sometimes, you know, i -- >> in general, rick -- >> sometimes you have to admit when you don't know anything about it. >> are you rooting for a stronger dollar, at least in the short term? it would certainly be a boone to the consumer if they could go to walmart and buy goods cheaper than they could before.. >> well, but, you know, i think that there's a longer run perspective here, which is that a key issue that we need to have in the world economy is a rebalancing. this is very important in the u.s. context. so what we really need to have happen, in fact, to some extent i think part of this is in process, is that instead of having the consumer try to be so dominant, that we actually have to have a bigger export sector and that actually then means we would not have a bigger current account deficit.

when you look at long-run context, as long as it's in an orderly fashion, having a dollar deappreciate to some extent is not a dangerous thing. what is if if it depreciate ates rapidly and we have a depression. >> some people have said they're worried about the pace of the drop in the dollar, picking up rapidly. some people say it's borderline. >> i'm a great admirer of mishkin but when he says rebalancing, it's a difficumuni of the dollar. >> i agree with that. i'm not in any way advocating the less use of the dollar in that context.t. the real issue is why is the dollar, if the dollar declines is it declining for the right reason or wrong reason. is f. it's a lack of confidence, policy, that's a big, big problem. i think that's what you're worried about and i agree with you. >> okay. thank you very much. rick mishkin is going to stay with us, so is jason, if he

doesn't take off to the dog tracks. thank you. when we come back, it's strategy session ahead of the opening bell. "squawk" continues in just a moment. 

u.s.ing quitity futures are off their lows as you can e. decent numbers out of the empire manufacturing survey. weakness in asia overnight, europe and dow futures here down still about 130 points below fair value, it's going to be a tough start to the week. >> we'll be watching this closely. when we return we will have a final strategy strategy with jason and rick mishkin with the countdown to the opening bell. some people buy a car based on the deal they get.

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all right. final thoughts from our guest hosts today, jason trener and rick mishkin. what do you think the odds are that we head into the double-dip recession? >> i think they're somewhat low. you had lee cooperman on last week with that. economic growth driven by fiscal stimulus and inventory rebuilding. but after that the restructuring problems is going to make it difficult to grow quickly. i don't think we're going to go back into recession any time soon. >> rick, what about you? what do you think in terms of where we're headed from here? >> i think that the prospects for fast recovery are not there. i think that the problem here is

that we have these major drags on the way the economy is operating, that the financial system is still not whole yet. it's going to take a long time to fix it. it's going to mean a slow recovery. on the other hand, we should be very up front and say that things look a hell of a lot better now than they did a couple months ago. >> yeah. i'm taking that armageddon trade off the table, jason, is worth something, but we're passed that, aren't we? >> i think we are. listen, the good news, i think, is that we're probably getting close to fair value. but that's the bad news, too. we're pretty close to fair value on the s&p. it gets hard to get excited about the fundamentals there. >> something will come and will change the fixture. we'll have to recompute. rick, have a great week.. thank you. jason, thanks to you. join us tomorrow. "squawk on the street" is coming up next. this is cnbc.com news now. >> wall street poised for a sell-off at the open with futures lower and the overseas market tumbling.

positive economic data mayhem somewhat.. empire state manufacturing index came in just over 12 for august. retailer lowe's under pressure this morning after the company reported earnings below consensus and made cautious comments about the state of the firm. that's cnbc.com news now. we're first in business worldwide. i'm courtney reagan. all right.t. we have breaking news. this is "squawk on the street." let's get right to senor economics reporter steve liesman. >> the federal reserve announcing at this hour that it is extending the talf. this is the facility that it uses to provide financing for student loans and credit cards and securitized auto loans. extending it to march 2010 to original expiration date of december 2009. for new commercial mortgage-backed securities the talf will be extended until

2010. it's already added to it, pretty much means that private labelled-mortgage-backed securitys will not be in the talf. they have improved considerably in the recent months except when it goms to abs and cnbs, the market there still seems impaired and remains likely to stay so for some time. they will monitor markets for possible further talf extension. the talf was announced last year and took time to get it up and running. right now there's chart of the talf, $30 billion. the fed expects it to go to maybe half a trillion. maybe a slow start up there on the talf but they are going to extend it through march 2010 and june 2010 for the commercial mortgage-backed securities. mark and erin? >> thank you very much. >> jim said that on thursday, he said this is what they've been doing. they come out with a fed statement and a couple