good morning. going for the gold. the metal scoring above the $1,000 mark today. >> a sweet deal, kraft offering $6.7 billion for cadbury, but the british confectioner rejecting the offer. could other bidders be far behind? and a global market rally as everyone in the world says we're due for a correction, we keep going higher. green arrows across europe and asia. u.s. equity futures looking strong on their sugar high as "squawk box" begins right now. ♪ reunited and it feels so good

reunited because we understood ♪ >> how sweet. good morning, everybody. welcome to "squawk box" right here on cnbc. i'm becky quick along with joe kernen and carl quintanilla. we are back together for the first time in a very long time. >> it's been two weeks, i think, right? >> it's been way too long. >> a little bit more than two weeks. >> i know. >> it's great to see you guys at the table at the same time. >> we were together friday. >> yep. >> you had been together -- no, you hadn't. >> i was seeing mandy drury. and then you started seeing mandy drury. >> and i started seeing mandy drury. >> don't feed the pervs out there this morning. there's one guy that -- >> oh, my gosh, we need to ban that guy. >> it's like reading a penthouse letter. i hope he's a teenager in his parents' basement. if he's an adult --

i can't wait to check it out. >> you may learn something. of course, you do have twins. >> anyway, we are all back together and we're glad to see you. i know everybody is back after the labor day weekend, ready to get back to work. gold prices, in fact, listen to this. surging above $1,000 a troy ounce. this is the first time that the front month contract has hit that psychologically important level since late february. gold has made gains in the last 16 out of 20 septembers. but you also have gold momentum. things have been on a tear and we have seen gold prices skyrocketing. >> that's got a lot of attention. and from one commodity to another, opec ministers gathering in vienna this week. last week, opec's president said signs of a global economic recovery suggests the group will

not need to intervene. during the last year, crude prices peaked, as you know, around $147 a barrel. that was july of 2008 opinion plummeted to 30 in february and have settled in the $70 range. we'll see what happens after the meeting. but we haven't broken out of the $68 slsh $75 range over the last couple of months. >> but it does go up. it's like the risk trade. it's gold, oil, stocks, it's everything and the dollar goes down. sooner or later -- i was reading at some point when oil gets to 85, definitely that's when the party is over in terms of good economic activity, bolstering oil, bolstering the stock market. >> where oil becomes a liability. >> that's where it becomes a liability. and a battle for cadbury, the british confectioner, kraft going forward with a $67 billion bid after cadbury rejected its

cash on stock bid. so this is a bear hug. the wall street journal reports that hershey is likely to respond to the offer which may involve a joint bid with nestle. >> apparently in the past cadbury cozied up to hershey, trying to get some sort of a deal going and was not eager to be talking at that point. they slowed things down, came back, but at that point the markets were under quite a bit of pressure and there was no time to get a deal on that. >> you had some mergers last monday, right? >> right. and disney -- >> marvell. >> marvel is the technology company. >> and the ice cream company. >> carvell. >> yeah, yeah. i like reading about this because initially disney lost a certain amount of market cap. but you look at what disney can do with -- >> vantolli. >> that's who i'm talking about.

>> but the question is, what can they do in terms of the rights? >> it may take some time, but still, you put disney's leverage, their cable operations and the spider-man -- >> and they're so good at reaching girls and this might arguably give them more exposure to -- >> exactly, because they've got all the princesses. >> meantime, finance ministers from the world's most powerful economies posing stimulus measures wrapping up a meeting in london with a warning that a global recovery is by no means assured. so they promise to keep measures like extra government spending in place. g. 20 happening in just a couple of weeks from now. >> you're on your way to that. >> both of you guys are going to that? >> no, carl is going. >> harwood, as well. i don't want to go alone. >> no, who is representing the other side when you're down a there, xktdly, if it's you and harwood?

all right. >> all right. the head of the international monetary fund says that a world economic recovery may come a quarter ahead of expectations. an italian newspaper is told that a recovery was expected in the first half of next year, but it could come sooner. something is happening here with the bank of england. let's learn together. the bank of england may introduce negative interest rates this week. i did know this. the telegraph reports that they're trying to increase lending. it's suggested that the move probably made it easier for other companies to follow suit. when this happens, we'll bring it to you. i hope we don't do that here. although i would like someone to pay me money to take money. >> that sounds japan-like. do you understand all that

hoopla over there? >> oh, i'm so sorry that you weren't here. the democrats beat the democrats and the liberal democrats are more conservative than the other democrats and it's a big confusing mess 37. >> but the bureaucrats have been running things for a while and now, instead of manufacturing and farming, the -- all the subsidies are going to go to the consumer. so instead of trying to be an export-saving society, they want to be a consuming society. but it harkens back to the final vestages of the post world war ii japan that sort of was, you know, afraid to ever show anyone in a military uniform for the past 50 or 60 years. >> that's right. >> so it's the last vestages -- >> you've been brushing up on your foreign policy. >> oh, you know, i see other people moving up on the "today" show, on "nightly news." >> can i call you? >> don't try to -- i'm talking about you. don't try and turn it back. anyway --

>> a u.n. group, meantime, is calling for a reevaluation of the global currency system. it's argued the current system of rules is not working properly. so the group suggests an artificial currency be made to replace the u.s. form of currency. can you believe we're talking about this stuff? i can believe we're talking about it. >> it's the u.n. it has to happen as it happens. you can't plan it, i don't think, and this is the reserve currency of the world right now. look around. look at china. it still is. you can talk about it, but it it happen -- >> opec has talked about it a lot of times. >> the percentage of new treasury buying by our important creditors has been shrinking over time. you know this, diversifying in

the gold. >> you see an orderly decline here in the dollar. does a 3.44% ten-year look leak we're having trouble getting -- >> no, that's nice, right? >> it doesn't look like people are running for the exit. >> some of the declines we're seeing in gold prices has been because some of the etfs has been shut down, they said the money had to find someplace else to go. >> speaking of which, china is apparently worried about the fed's move to print treasury debt. he says his country fears printing money will lead to a hard, quote/unquote, drop in the dollar in the next couple of years. the official say china willdy veers phi its reserves into currency, probably mostly gold. >> i know it feels like a monday, but guess what? here is the good news. it is tuesday already and we have a number of economic reports to be watching in this

holiday-shortened week. today, in fact, the fed will be reporting on consumer credit. this is a key thing to watch for the markets. tomorrow, we get the central book's beige book release and we've goat a roundup of regional economic pictures, as well. thursday, we get claims on international trade. friday, we get wholesale inventories, treasury bucket and import and exports. >> you could argue tomorrow is the day of the futures ending. joe walked into the office this morning and said futures will be up 00 points, and you're right. australian business confidence, the highest in six years, couple that with m&a activity and we've got futures well above fair value today. the ten-year note, as joe just mentioned, around 3.44%. 3.432% is the current level. let's get overseas and find out more 0.more.

morning, steve sedgwick in london. >> good morning, carl. fascinating story, while you guys were enjoying the labor holiday, $16.7 billion dollars, that's a bid from are a aft to cadbury. every since that activist investor made cadbury spin off its dr. pepper arm saying they're just soft drinks, since then, everybody has been saying cadbury looks right for consolidation. despite that, it doesn't like the price from kraft. it's left them in price position to be taken over. who could be the white knight? hershey is someone everybody is talking about. mars is another one, but mars would face real problems on the monolistic front. so perhaps kraft, if it upgrades its bid, something over 8 pounds per share, then possibly cadbury

would get to the table. it's a very interesting story. it's a company which we've had in uk ownership for about 185 years. they've been making chocolate for that period, ever since the victorian timeses. kraft would get good growth outside the united states. about one-third of the sales of its companies are in emerging markets. they've also got, of course, gum. now that's gets over to mauer are for the asian story. >> asian markets pushed ahead this morning. you mentioned gold, it's seeing $1,000 an ounce. we have had a flurry of m&a activity. in japan, the nikkei 225 gained about 0.7%. those gains were limited as we saw a firmer yen weighing on some of the exporters in japan.

the hang seng tracked gains that we saw on the mainland chinese market. but the hang seng rose by more than 2%. we especially saw the chinese banks listed in hong kong advancing in hopes of continued support from the chinese government. in shanghai, the composite rallied for the sixth straight session here. we had comments coming out saying, hold on a second, china is not planning to shift its monetary policy right now. if you recall, that's one of the reasons why we saw shares diving back in august. we also got confirmation in the last couple of days that the biggest ipo to come on a hong kong market is china metallurgical. it's going to raise more than $5 billion u.s. dollars in total. quickly in australia, the market there jumping 1.5% today. we got a big boost from smaller deals, but nevertheless, significant.

they're not doing takeovers, because that raises the ire of protectionist sentiment in australia. instead, they're funding projects in schak for long-term market projects. that was the asian market today. >> meantime, let's see how the markets are shaping up this morning. joining us now is kurt car and subodh kumar. kurt, we've been talking an awful lot this morning about the moves wooefg seeing lately about these markets. gold touching on $1,000, risk trades all the way around. the picture that you see in the economy, does it merit these kind of moves in the market? >> no. i see it as reasonably weak at this point. you've got a few more months before we take off with a lot more strength and the gold is, i think, concern about inflation coming. it's possible. i don't think it's very likely, but many are concerned about that. >> but you think that this may be a bit of an overreaction at this point? >> definitely.

i think when you're in the middle of the worst recession since the depression, maybe deflation is a little bit more appropriate. >> subodh, what do you think based on all the moves, including that move above $1,000 for gold this morning? >> i think what you're seeing is what's clear is we have large deficits around the world been i don't think gold is moving up. i think that it makes sense to diversify to gold versus all other currencies, the dollar, the euro, the yen. because bev sits are very hard to bring down once they get up and they're clearly up here. >> so you think people should be diversifying into currencies out of these prices? >> i do, yes. let me explain why. i think the markets in general, whether industrial commodities or equities are basing their view that we're going to have a seamless transition into recovery. now, if you look at historical patterns, there are at least two alternatives. one is you have a liquidity trap, which is why the banks lend and the swedish bank have

got negative reads, why either banks are lending money which is deflation. or you've got too much stimulus from deficits and that causes rising inflation. so if you want to hedge against two out of three possibilities, gold plays a bit of a role. >> at what point do you see this is too much of a run up? >> in berlin? >> right. >> if you look historically, people use things like an ounce of gold, but it's not unusual for gold to oil ratio to be around 20 to 1. it doesn't happen very often, but that wouldn't be an extreme number. so i think given what we know today, even without being a gold buyer, as long as deficit res higher, i think gold continues to move upwards. and the other issue to look at is in the last cycle, central banks were selling gold. now i think they'll be building

it up. and the other areas are this sovereign wealth funds and others both have reason to do the same. >> kurt, we'll be getting a report today on consumer credit. what are you looking for in that report? >> hopefully revolving credit is up a bit. the auto credit should be strongly up because of vehicle sales we've seen. we would like to see the consumer getting in the game. we need to see the credit card debt going up a little bit to help out. >> do you think we'll be seeing that today, though? >> i think it will be touch and go. it's going to be very close to zero. it's a tough one. >> i know that we don't get a lot of economic data this week. we are going to hear from president obama who is expected to be laying out his plans for health care. how do you take debates like that and turn it into your economic outlook for the next year or so? >> it will be interesting to see how it all plays out. but it's more spending. basically, it's a stimulus to the economy. maybe not what you want or maybe what you want, but it's deaf senately going to be higher deaf

sitzs and more spending and more stimulus. >> at what point do we run into trouble in terms of the deficit? >> we're reasonable in trouble already. it's going to be hard to pay the interest payments on this. the classic way out of it is growth and we just don't see that quite yesterday. >> subodh, we're seeing more signs of deal activity, not only last week with what we heard with marvell, but we're talking about cadbury turning down that deal from kraft. how does it all add up to you when you start thinking about the idea that deals are coming back en vogue? >> what happens is, you know, when you have a down swing, everybody freezes up. then when things bottom out, people are looking for strategic m&a, bankruptcies right, because the banks feel confident that

they can push companies to the brink and get some money. so this is very consistent with bottoming out behavior. it doesn't necessarily suggest that we're going straight up but it's consistent with bottoming out. >> subodh, kurt, i want to thank you both for coming today. see you again soon. coming up, summer is unofficially over. back to work, back to school and back to your business traveler's forecast next. in this unusually volatile time, you want a financial partner... who is unusually prepared to help. the meeting with northern trust went well, didn't it? yeah, they get it. they really get it. a little more stability would be nice. northern trust offers the strength and expertise... that can only come from a 120-year track record...

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welcome back. let's get our business travelers forecast for the morning. scott williams of the weather channel is here with that. good morning, scott. >> good morning, carl. and good morning, everybody. i hope you had a great labor day weekend. now it's back to work for most of us. as we focus in on your business travel, we have a few areas highlighted mainly as we move into the ka doe tas. wichita, kansas, watch out. an upper low around the ohio valley, some lift in the atmosphere. places like detroit through cleveland, and honing in around the mid-atlantic, that's where we will find heavy rainfall out

of the nation's capital. back down through richmond and the norfolk area. flash flood watches are in effect for most of the day if you are professionaling around the mid-atlantic. current airport delays, quiet conditions through the northeast, laguardia, newark, we could see delays later on around philadelphia due to wind. especially as you move into the nation's capital, add rainfall to the mix. as far as some of the interstate forecasts around the northeast here, temperatures topping out in the mid to upper 70s, cloud cover for the big apple, maybe an isolated sprinkle. but you'll hit the rainfall once you move into the philadelphia area, back down through the nation's capital. also into richmond, virginia, it will be a wet go. so certainly expect some traffic trouble and also some delays in the mid-atlantic. back to you, joe. >> okay. thank you. and it went just long enough. i found what i was looking for

in barrens to go along with this first upgrade that we have. we'll start with general electric, upgraded to overweight from neutral at jpmorgan. and the price target goes from 17 to 12. jpmorgan says ge is one of the few left in the look for nonconsensus catchup stories. jpmorgan says it's one of the last stocks for which a little good news can still go a long way. jpmorgan assumes a $10 billion infusion at ge over the next couple of years. in bill alfer's column, trader in barrens -- >> shorting. >> yeah. if you can buy some of the heavily shorted names, you can do really well. and it was interesting because he's talking about tom lee at -- >> jpmorgan. >> at jpmorgan. and he mentions some of the

buy-rated names at jpmorgan that are heavily shorted and then also says also there are four names that are neutral that are heavily shorted that they think would be a buy and ge is one of them. that is his firm going overweight. >> at the same time, if you had bought i think since march the stocks that had the biggest jump in short interest, they joe outperformed the following month. >> which is why so many times which we have someone in here saying the fundamentals don't back up where the market is, it's ahead of itself, the economic backdrop doesn't validate -- it can be as simple as a heavily short name. >> did you see the post cover over the weekend, mayor bloomberg making those those comments? he had said off cuff, if you want to help things out, you should go out, buy stock in ge and sachs and macy's. if you followed his tips from

that day in august, you would be up $137% so there is a reason that he is a -- >> hog was upgraded, too. channel checks makes the firm believe that retail sales friends have improved since the second quarter for harley. that will be a nice boost today for those shares. >> coming up, well have more of this morning's top stories. plus, if you look at the futures pits and a trading tone for the week ahead. carl, you didn't hear this, but joe got into country while he was gone. >> you know, during the break, he was asking in the control room are we going to hear some country music this morning and i was like, what was that about? >> he finally sees the light. >> and i've given up on the morning joe thing. >> can it you, at the u.s. open this weekend, some guy approaches me, carl, who is the real morning joe? >> and you said?

>> i said -- >> it's not copyrighted or trademarked. but you have to have an established -- he's established it. even though his name is charles, he's been using it for so long, so i'm going with country joe now, not morning joe. >> country joe kernen, that works. >> increasingly country music, my life is -- you know, god, family, sort of the opposite of, like, i don't know, the -- >> i'm in favor of that move. by the way, the longer we talk, the more we get to hear this song. anyway, we'll be right back. you are watching "squawk box" on cnbc. >> and it's one, two, three -- with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't. anything before takeoff mr. kurtis? prime rib, medium rare. i'm bill kurtis, and i've got plenty of room for the internet. and the nation's fastest 3g network. (announcer) sign up today and get a netbook

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♪ uncle sam needs your help again got himself in a terrible jam way down yonder in vietnam ♪ >> woodstock. we already did our woodstock look back. >> start taking that and give me a -- how about mcdonald? anyway, we're going to return to this. you're going to see why, too. good morning. welcome back to "squawk box" here on cnbc. it's 6:30 on the east coast. i'm country joe kernen along with becky quick and carl quintanilla. >> i'm sorry. it just sounds so funny. country joe kernen. >> our top story today -- you know, i've thrown in the towel on the morning -- fine, take it. morning joe. who cares. knock yourself out. gold prices surging above $1,000 a troy ounce. this is the first time that the

front month contract has hit that psychologically important level since late february. people say technically it has a better shot of not just turning around. among the catalysts, a weak dollar. historically gold prices have risen in september in the world's biggest gold consuming companies. gold has made gainses in the past 16 out of 20 septembers. >> you know, if that were true, a lot of people would have sold in may and gone away. what would happen then? it's going to be a busy week for the president. pitching his health care reform plan. he'll speak to the nation's school children urging them to

study hard, stay in school and is take responsibility for getting an education. today's event has come under fire from some critics like florida republican jim grier who says the president is using the speech to spread socialist theories and now grier says that the new speech is different and says he's now encouraging all kids to watch it. >> well, i think, you know, recommending that all the kids unionize and vote for card check and all of that, that was weird stuff to put in the speech right away, right? to collective bargain for grades and things like that. >> afl-cio is all letters of the alphabet, so they could easily -- >> i think that was uncalled for. that was apparently in -- no, really -- >> i can't believe people got so upset about listening the president. respect the office a little. >> study hard. the line that got people was write a letter to yourself how

to help the president. even that doesn't seem that bad -- >> when you realize that he's the head of the nation and -- >> because they changed it. they got rid of that and said, all right, we didn't mean that. >> the obama has been so good at grassroots mobilizing through the internet that that has been one of their biggest strengths and also the biggest way to warn the opposite sides of what they're doing. >> the presidents don't typically talk to school children. >> clinton, both of the bushes, they've all -- >> but i think that, in fact, when 43 did it, there was a bit of criticism back then and he wasn't pitching socialist things, he was pitching liberal things. >> let's get a check on the markets this morning. futures have been showing quite a bit ooh strength this morning. last week, the markets ended on friday with a gain of 1%. but for the week, they were down by about 1% when you were watching the dow. right now, the dow was higher by

about 70 points above fair value. we've been keeping an eye on oil prices. opec is meeting tomorrow. we've been hearing from some of the opec ministers saying they're not likely to raise or cut quotas, but they are looking at stricter ways to cut the quotas. right now, crude is up $1.39 to $69.41. if you've been watching the ten-year, it ended with a yield around 3.44% last week. the yield is lower this morning at around 3.427%. >> let's go to the trading pits and see if this guy has any answers, kevin ferry, cronus futures $3,000 gold, 3.42% ten year. you guys have no idea what you're doing in those pits. >> joe, nothing will ever go wrong again. >> will you explain it? >> welcome back, everybody. >> really, tell me, i don't get it. i don't get the move in gold with where the ten-year is. >> it's wild. everything is up this morning. there's nothing that is going

wrong. that is definitely the big story. obviously, not just gold breaking above $1,000, but some of the currency ranges are now being threatened through the upside, also. that's really the investment theme that's going on. and you're seeing a big gap in jump this morning. so -- but keep an eye on it. i think if you go back to last tuesday, what we pointed out was all that really happened for all the rumors and stories was the calendar changed. and once the market dropped down, nothing else happened. so it churned and it's been on a clawback ever since then. we're right about on that date right now. >> kevin, if they're willing to take on more risk, why would that be benefiting treasuries? >> exactly, joe. there's no -- usually the trend has been that one is countering the other. you pointed this out last week

also with the bill option. it's oversubscribed at the most member mall levels. there isn't a bump in it. it shows the incredible amount of liquidity that's out there. that's just enough right now to go around for virtually anything and everything. >> and then you wonder about all the clarion calls for a market pullback, too, in equities and they don't listen to experts, equities, do they? >> right. well, i think the key here is a very difficult time for the market, especially with regard to foourchs to drive it down. it is back core dated. you talk about the gold contract, other commodity contracts, whether they're backward dated. it's a rare thing to have the s&p this many roles in the back gradation. in other words, you could borrow it for three months for free. with the risk rate down at zero,

it puts an opportunity to push the market back up during the roll. this sa big week. there is a lot more supply coming and the roll will be over on thursday. so i would expect it to be a choppy and violent week. let's see writ ends as opposed to where it's beginning. >> are we headed for something in september, october, that really -- you know, that hits us upside the head and these markets really trade lower? we keep hearing about something wicked this way comes. do you see that? do you think it's likely? >> yeah. >> dow? >> here is the thing. i don't think you can have this time people investing in gold and t-bills 3.5 times oversubscribed at zero practically and say that everything is okay. all i would say is that we don't know what is going to go wrong. we have been putting a lot of time into the research. but it's very difficult to say, oh, this is what is going to go wrong, folks. that is not the case.

and whether it's the dollar, everyone talking the dollar down, how long do your counter parties allow you to get away with that? all i can say is that right now, you're getting all the benefits from what we're doing. let's see how long it lasts. >> yeah. maybe if the decline wasn't quite as orderly, maybe that would scare a few people. >> that's been -- that's the buzz word. the problem with that is that you never know what that magic moment is. all of a sudden, somebody will come out and say, hey b, it's not orderly any more. right. >> but that's certainly not the case. again, you know, i'm not trying to be a nut here. right now, you're getting the benefits of some very strong, aggressive monetary policies and fiscal policies all the way around the world. and that is what you're up against. if you think that you're going to be selling, and in today's market, selling anything.

>> thanks, kevin. okay. we'll see you. >> some other news this morning, demand for electricity is falling and as a result, consumers may see some relief from rising utility bills. power consumption dropped 1.6% last year and government forecasters see it falling another 277% the this year. it would mark the first time since 1949 that the nation has seen energy demand fall in consecutive years. the drop in power usage is one example of how severely theory session has jolted the economy and changed spending trends. >> in corporate headlines, honda motors plans to launch an all-electric car in the united states in just a few years. a prototype is expected next month. comments, questions about anything you see here on squawk, e-mail us at squawk@cnbc.com. a quick break now. news making headlines outside the world of business when we come right back.

country joe kernen. >> country joe. in this unusually volatile time, you want a financial partner... who is unusually prepared to help. the meeting with northern trust went well, didn't it? yeah, they get it. they really get it. a little more stability would be nice. northern trust offers the strength and expertise... that can only come from a 120-year track record... of thriving even in difficult times. they understand. roller coasters are for kids, not money. ♪ northern trust. wealth management. asset management. asset servicing.

time now for a check on the news outside the world of business. monica novotny joins us with a roundup of the headlines. is country joe okay with you and all your friends over there at our sister network, msnbc? is that going to be a problem? >> is what going to be? >> country joe. country joe. if i use country joe, is scarborough suddenly going to call himself country joe if i do this? >> you'll just have to call joe. >> oh, you mean charles.

what's going on? schools will be playing host to the nation's commander in chief as he highlights the importance of setting goals in the televised speech. in response to some parents who have threatened to keep their kids home, the white house posted the speech online. they're hoping parents and schools will see that it contains no political rhetoric. surprisingly, the white house is getting support from former first lady laura bush who says it is, quote, very important to everyone to respect the president of the united states. ted kennedy's nephew will be be running for his seat in the state senate. finally, a fast food restaurant in asia has won a decision to call its mccurry.

it serves traditional dishes including fish head curry. carl, they've been fighting this battle for eight years. why are you laughing? >> i saw you say fish head curry and it, look like you had something on your hands. it looks like you were trying to get it off of you. >> just the fish head because it's, you know, 6:45 so, you know -- >> that's not breakfast food. >> no. >> monica, thanks. monica novotny. about we come back, the band is back together. a lot for us to discuss. we'll go to the chairs and share the stories that have us talking this morning. first, though, let's go to the squawk board room. this man once sat at the president's side in the white house. glenn hubbard is holding court with our "squawk box" hosts. welcome to the now network. population: 49 million.

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we are in the chairs. we haven't been together in a while in the chairs. it is -- you know, the president is talking today to the students. i take the opportunity on -- it's back to school day in new jersey, the first day of school. i take this opportunity to talk to the teachers, to suck up to the teachers a little bit. >> yeah. pays dividends, doesn't it? >> mrs. petruzello, first grade, you're fantastic. patience. joe is going to be needed, but it will pay off and in the fourth grade for blake, mrs.

nazzo, you won't have as much trouble, but good luck, god speed. and i always throw in a mr. jarson, the principal, because you don't want to have a lot of contact with him, but if you do, a shoult shoutout could soften the blow for what happens. i'm not going to mention where the school is, but it is a nice, solid jersey public school. we're hoping for the best. got my fingers crossed. also, this country joe stuff. you weren't here friday. see, i was fishing and doing all things. >> in georgia. >> sea island, our favorite spot down there. i want to show you, liesman, he catches a memo and he's got to bring in a picture. we caught ten hammerheads. >> ten? >> ten.

this is captain dooley, our good friend rob set us up with. there we government we're getting close. there we go. that is the first bonnet head we caught. >> you're going to need a bigger boat. >> there's scott. scott is handling the bait. >> i notice scott has a "squawk box" on? >> is this catch and release? >> oh, yeah. >> not only that, i'm going to show you how a pc person catches a shark. >> you'll see her holding that hammer head. then she's holding it alone on the next one and she's very, very proud. see the next one. that was huge, 4 1/2 feet. i've got my jet hat on. i always wear the thing and

never get anything. >> give it time. >> check it out. that is a lasso around a hammer head. >> you didn't do that on purpose. >> swear to god we didn't do that on purpose. that's the way the fish came out. no injury to the fish, didn't bite the hook, no blood. i can lasso. it's peta approved, it's free range shark. i lasso. i don't want to hurt any of god's creatures. that was a freak accident. >> you mentioned the turtles. >> went over and saw the turtle hospital. we saw one little turtle get released in the middle of the night out into the ocean, one in 1,000. >> does sound amazing. >> it's a great experience. like i say, it's going to be back.

>> did you get any -- catch any tennis over the weekend? >> i certainly did. >> how about melanie. if you haven't heard about it, youngest american to hit the quarterfinals since serena did it. she has gone through four russian opponents. most of them bigger than her, definitely taller than her. she's 5'6". she's gone the distance in those watches, 17 and 4 of three set matches in 2009. no american men, though, have made it to the quarterfinals, which is the first time -- >> you cannot be serious. >> i am serious. that has not happened in the u.s. open era. talk about a cinderella. she puts the word "believe" on her sneakers. >> the first person she beat before we knew it was happening.

that was the highest ranked -- shen she beat sharapova. >> petrova. >> who was like -- she needs -- i don't know if she needs a coach. she looked like she was hitting a net and talking to herself in russian. she looked kind of crazy. >> bad impression. we do that off camera, too. >> not in russian. >> bad interview. bad interview. >> when i talked to myself in russian, i don't understand what i'm saying. >> i want to talk quickly about wall street looking out now because oliver stone is coming back, wall street 2, the sequel to the movie made in 1987. filming is set to start this week. and for those probably don't need any introduction, gordon gekko, greed is good, what set things up in the '80s. this remake is coming back

through and coming on the heels of this financial crash. gordon gekko, out of jail, comes back from this whole thing. michael dogs says he never goes out to dinner without a wall street guy coming up and saying to him, after drinking a lot, saying you're the man, you're the man. they said that was not what they intended to do. >> he was cool. >> he was. what oliver stone said was they would not make it if it weren't for the turmoil. in 2006, things were too loose, i didn't want to glorify. they are back. they have been talking to many guests and guest hosts. nouriel roubini, they have been meeting with them trying to get a feel for what's going on. >> who made the movie. >> 20th century fox. >> great. so i wonder -- >> right.

>> it was a troubled production. it was on for a while. they couldn't get all the players together, the turnaround, then back on track. they start shooting this week in new york and there are already signs on my block saying please don't park here on thursday. >> a lot of people we meet will be the voice. >> michael moore's "cooperaapit a love story" coming out. the dean of columbia business, seen it all, everything going on in markets and global economy, served as chairman of the council of economic advisors. anyway, this is "squawk box" on cnbc, first in business worldwide. ed. at northern trust, our sophisticated technology... puts the most accurate information at your fingertips. so while you may find yourself waiting now and then,

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the prospector is dancing. gold prices hitting the $1,000 mark since february. >> i love gold. >> market growth creating jobs, reforming health care, a tall order for the white house. former council of economic advisors glen hubbard on the battle scene waged about the nation's economy. aig, bear stearns, country wide, shaun eagan will tell us if any storm clouds are forming right now. "squawk box" begins right now. good tuesday morning. welcome back to "squawk" on cnbc first in business worldwide. i'm carl quintanilla with joe

kernen, becky quick. all together for the first time in a couple weeks. guest host glenn hubbard, former economic advisors chairman. a lot to talk about but first to becky with top stories. >> thanks, carl. good morning, everyone. let's get to stories. kraft going public with an offer for cad berry, after they rejected the stock cash bid. they are likely to respond to this offer which may involve a joint bid with nestle. gold prices above $1,000 a troy ounce. the first time it hit that psychologically important level since late february. opec ministers gathering in vienna this week. not expected to correct output. they will be talking about meeting quotas and making sure no one is cheating. carl, back to you.

>> the president back to work, congress returning to capitol hill meaning fight over health care will heat up the nation's capital. john harwood is joining us this morning with what's on the agenda. john, welcome back. we begin what david axelrod seas will be the closing of this deal. the president intends to close on health care. what exactly is going to happen. >> he hopes it will be the closing of the deal. what the white house wants to do is get motion in the senate, carl. the house moved to help legislation encompassing 95% of what the administration wants out of three committees. they are sort of waiting for when to move on the floor. but what happens is you've got a dynamic between the two chambers where house members don't want to vote for something if they think the senate will cut the limb. the senate hasn't defined the parameters for action. finance committee bogged down, administration hopes with the speech to push them to act. you've seen evidence of that over the long labor day weekend.

max baucus, chairman of the finance committee, bogged down in bipartisan negotiations has put out a bill that he is pushing. we'll see whether it can get bipartisan support. if not, democrats are going to fall back to see what they can do. >> how seriously are we supposed to talk this baucus compromise, talk of the trigger. are those gimmicks? are they going to be done away with? are they balloons, things that will stick, what in the the trigger is more realistic than what's in baucus' bill, a lot of democratic liberals don't appeal to those. the appeal for the white house, conservatives and liberals of the triggered public option is that maybe it's going something for everyone. that is to say -- liberals can say we've got the public option that's there in case the insurance marketplace fails. on the other hand conservative and moderate democrats say we haven't voted for a big government plan, we're going to

let the market try to work its magic. that's the appeal. you've also got olympia snowe, the moderate republic from maine might be the 60th vote to get past the filibuster to give it added juice. >> they say, liberals should love the idea because the trigger is not a substance of concession. democrats will goose the tests, those that assume whether or not a trigger is pulled, so private insurers can't meet them mainly by imposing regulations and other burdens. is it a trigger all right a fait accompli? >> i wouldn't say a fait accompli. i wouldn't say democrats and white house counting on their support. >> that would be big news. >> they don't share the same overaveraging goals for health care. nothing is a done deal until you get votes on the table in the finance committee and on the

senate floor. i do think it's got a lot of momentum. >> john, we've read so much about the speech, the idea the president would lay out what the scenario would look like, give support for a public plan, not necessarily say a deal killer if it's not included. is there anything left to surprise with tomorrow night's speech? >> i guess the surprise could come, becky, in what is the level of detail that the president lays out, what is the level of push he gives to the congress. nobody expects him to come out and do what bill clinton did in 1993 when he held you will that health insurance card, if you don't pass a bill, i'm going to veto it. he didn't get floor votes in the house and senate. that tactic was seen as not successful. how prescriptive and how tough is the new president going to be with his democratic allies in congress to say you've got to do this, you've got to do it by this particular time. we have to see whether he can

get past this incredibly controversial speech to the school children today. >> it could be the defining hallmark of his presidency. >> i read over the weekend, they didn't name the sources and sources couldn't be named, at this point there are some people in the administration willing to scale down expectations quite a bit. something has to be. you have to sign something. something has got to come through. the real battle could be brewing between the far left and whether the president actually, you know, decides to disthose guys and leave them without a public watch. fun to wachlt not the wall street keeping it going forward. both sides of the congress, a democratic president. >> i didn't blame him, joe. >> the people in the country that are emboldening these guys to push back against this.

your party is controlling it, doing it. >> i wasn't plaming the editorial page. i'm just saying the idea they are whacking whatever the democrats have come up with is not a surprise. >> we need make harmony in that party to move forward. the republicans can't do anything? >> no, you're exactly right. democrats have the votes. once they decide they can't get a broad bipartisan deal, it is on them to define what to do. there are a lot of liberals disappointed from the get go because they want single payer. now the question is where can obama find the sweet spot to try to get something through both the house and the senate. >> bipartisan now means just getting olympia snowe. >> exactly right. >> the blue dogs. bipartisan. >> the same party. >> there are some signs the blue dogs are okay with the idea of

the option. ben nelson spoke favorable in nebraska and some in the house have been willing to go there as well. do i think there's a potential for that to provide the votes. >> interesting week shaping up, john. john harwood in washington. thanks. >> our guest host is an expert on relationship between wall street and washington. columbia, a business school glenn hubbard chairman of economic advisors under president bush. great to have you. i think we just want to start with as we approach this one-year anniversary for the most incredible period any of us can remember. how are we? are we -- we're in better shape but out of the woods completely? >> we're better but not out of the woods. it's important markets have come back closer to normal, credit spreads back in. feds and others averted what could have been a true catastrophe. we're not out of the woods. it's going to take a while for consumers to rebuild.

washington has gotten complacent about financial reform. we've got pretty unusual policy down the wyc. >> who wrote about that. >> blinder. >> the reasons why we've been lulled into once again maybe not -- you think we need to do some things there. >> we've got to do things, focus on systemic risk, capital regime, more transparent, better regulatory apparatus. a lot of folks in washington say we're here, let's move on. i don't agree. >> commercial real estate is going to drop. your thought since there's no construction activity anyway, there's no jobs to lose. >> that's not true. what can happen as value of commercial real estate falls, it will hurt a lot of banks, financial institutions, consumer wealth and consumer spending. that's the challenge to worry about. >> how big of an issue is it? >> nobody really knows. it's not a national shoe, if you will. in parts of the country

commercial real estate is more overvalued than others. this is one i think regulators have been slow to catch. >> it won't double dip. >> no. i don't think we're going to see a double dip, but i do think we'll see a relatively slow recovery as we get out of this year. a good rest of this year. i'm more worried about next yore. >> what do you think about the moves from the g-20, some of the financial regulation, some major nations agree on. that is a step in the right direction and does it concern you those are steps to put off until after the recession. >> that's what worries me. i think it's a good sign the g-20 are talking, we have to have international coordination but in it's too little too late. we have to change our capital requirement regime. we really have to change the way we think about derivatives, information we provide to investors. it's too slow. >> what happened with this -- if you look at the steps of recession and number of job losses, job losses are much worse than you would expect. why in why?

>> much worse. economists have been struggling with this. the rule of thumb would have job losses far less, unemployment rate far less. what people worry about expansion so long, efficiencies built up, wait and see on the part of corporate leaders. we won't really know. what it does say, the economy will have to grow very fast to get the unemployment rate down. we have not yet seen the peak of the unemployment rate. >> why wouldn't it be spring-loaded if we laid off so many people when it does come back. >> we laid off business people. this was not a typical recession. a lot tell me they are risk averse to adding people back. they are doing to wait to see the economy improve. this is not going to be a quick job recovery. if you look at policies of anticipated tax increases, higher regulation, health regulation, none is positive for job market. >> you see unemployment go to double digits.

i think it could well cross the 10% mark. what is certain is it will go higher before it goes lower. >> what is well cross. >> even though the recession is over, we're not out of the woods with jobs. >> all these things from the corporate level, corporate chiefs looking around sagt we want to wait and see, it sounds like the new normal mohammed el-erian talks about, the reluctance to spend on behalf of the consumers. do you see it on the other side. >> first of all, consumers are searching for value. they have to rebuild their balance sheets. they lost a lot of money in the housing market and stock market. having said that, i don't buy the economy is a new normal at a lower rate. supply side, productivity growth is very strong. nothing tells me the economy  can't get back on the growth path. it will take longer.

>> what timeframe are you looking at? >> next year is going to be a rockier year than any commercial forecast. the balance of this year, 2009 will be good. in part because of inventory changes. next year i'm a little more worried. >> following year, 2011? >> that's going to depend in part on policy. we have announced policies of anti-business, anti-jobs, health care regulation. a lot depends on how that fares in the congress. >> one take is because inflation appears to be stubbornly low, that if mortgage rates stays low, housing better, there will be room for consumer to delever and spend at the same time to a degree that can bring back economic growth. does that make sense to you? >> it does but up to a point. certainly feds purchase of nbs helped bring down mortgage rateç that's a good thing. it's helping the household sector. houses will have to do old-fashioned real saving,

saving their paycheck. >> as opposed to --  >> letting assets run up and down rather than real saving. economists will say active saving. that's healthy for us but in the short-term may slow us down. >> we have more to talk about, so stick around. any comments or questions about anything you see on "squawk," e-mail us at squawk@cnbc.com. up next what's moving markets at cme. one year ago today freddie and fannie facing serious credit questions. we're going to speak to shaun, one of the first to call the credit crunch. another man who saw hedge fund failures before the rest. david einhorn, special guest at 8:30 eastern time. you're watching "squawk box" on cnbc. >> time for aflac trivia question. what is the largest county in

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>> talking commodities this morning, opec ministers gathering in serena, cartel not expected to cut out put. signs of a global economic recovery suggest the group will not need to intervene. during the last year crude peaked at 147. wow, the top of that chart came down to 30 in february and now settled in the range of about $70 this morning, 69.46. >> a number of economic reports to watch on this holiday shortened week if you're just waking up, it feels like monday but it's tuesday. today the fed reports on central credit. tomorrow central bank's beige book, roundup of regional economic pictures we can look at. thursday weekly jobless claims, international trade. finally friday import, export prices, wholesale inventories, treasury budget statement. it is back to school and back to business on this after labor day weekend. let's get a check on what the markets are focused on after

that holiday weekend from todd who joins us from cme. today we're talking about futures in strong shape after losses last week in the market. what's driving things now. >> i think if we have to go back to july unemployment. stocks are relatively unchanged over the last month, bon yields down 30 or 40 basis points. i think as we head to december and october if we look at the historical difficulty the stock market had, we have seen a bit of money off the table in anticipation of stock market double dipping down towards the 900 level over the next four to six weeks. i think consumer credit is important. we should anticipate a fifth consecutive month of negative which means the consumer continues to reach into his pocket and pay with cash, not credit. consumer confidence hover, will probably be around 60ish, not cover up the ball but not

declining. a cautious couple of weeks in the market. >> some pretty strong moves, gold prices above 1,000 since february. you're talking about the yield dropping substantially on the ten-year. these are all moves, just a certain amount of fear. kevin ferry told us last week reading all these things, reading tea leaves, something wicked is coming this way. is that a thought you agree with? >> i do agree. like many, it's uncertain where it's going to come from, from the economic side, fiscal side or another geopolitical issue we're not aware of yet. if you look at volatility as it's slowly been increasing in the bond market it's suggesting there is a bit going on here. stocks are performing well but volumes are low, we've seen low volumes heading to labor day weekend. it will be interesting to see how we do today. >> thank you. it's good to talk to you.

>> still to come on "squawk box," more from guest host dplen hubbard. first back to school and back to business. the summer unofficially over but an outlook from market veteran. "squawk box" will be right back. >> your. you're watching "squawk box" on cnbc, first in business worldwide.

still to come this morning, one of the first to call the credit crisis, sean egan. we'll be right back. welcome to the now network. population: 49 million.

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welcome back to "squawk." a check on markets now. futures looking pretty good after a decent morning overseas and asia and europe. cadberry's call higher after a rejected 16.7 billion takeover bid from kraft. hershey may become involved in the bidding to prevent kraft or another competitor. speaking of the move, gold above the 1,000 mark over the weekend. a survey by market research firm information resources says consumers will be more willing to spend for the holidays this year. the survey also found shoppers will still be on the hunt for discounts. nfib releasing a latest read on small business says index gained two point, one points in august on kbrufd expectations for

future business conditions. a more pronounced sense of optimism, though, has yet to take hold. chief economist joins us this morning. bill, good to see you as always. >> good morning. >> looks like the worst may be over here. you're not looking for a game changer, are you? >> not yet. good to see optimism go up. we're more optimistic about where we'll be in the next six months. when you look at the gdp component, new job cease, investing in inventories, making capital expenditures, those numbers stay at historic low numbers. so we're optimistic but we have to put our money where our optimism is yet and that's what we need to see happen. >> some of this data really interesting, stubborn but interesting, small business owners looking at marginal improvement in job creation but still cutting hey for those who already have jobs, right? >> pay is going down.

the biggest is labor. we let labor go at a record pace in 35-year history and shows up in unemployment numbers. we're also cutting compensation. that's unusual. we're holding study but cutting it, that doesn't happen that often. >> capital outlays record low for the last six months. have you seen any signs if they are not creating jobs they are at least going to invest on the cap ex side? >> not much. plans are at a historic low level. only 16% of owners plan to make capital expenditures. usually it's double that. reported outlays over the last six months were as low as we've seen in the 35 years of the survey. i think you have to go back to 1975 to find numbers that low. not encouraging but does say demand has to be immense. things are worrying out. as soon as consumers show up we have to make a lot of expenditures. >> you point out even as you guys upped your forecast for q3 a lot of forecasts goes beyond

that. what does it say bow 3q now. >> we're sticking to 3% number we've had since last fall. it could be higher. a lot of those are accounting things. if we stop declining in the housing side, if we stop accumulating inventories, the gdp number goes up. if you look at fundamentals where something is happening where jobs good morning to occur, like nowhere except in the government sector. the g dch p accounting will look better but real economy won't be quite that good. >> good to see you. >> thanks. >> national federation of independent business. joe. >> carl, let's get more thoughts from wall street veteran chairman of sanders morris harris group and president at e.f. hutton. good to see you. >> good to be here. >> not like so many pundits said not that the market is ready to go back and test the load, you think we see some consolidating

and some sideways trading between now and the end of the year. >> well, i think in a quiet way this the most exciting week of the year, people coming back from the sand and silly season and everyone is looking for thep trend to develop. and as glenn was saying, you've got the twin peaks of fear, fear of a weak recovery or double dip recession, fear of high recession and/or higher taxes. that's the fight then between that camp and the contraryians. they are saying we saved the financial system, consumer spending, big engine will rev up and everything will be right. by the end of the year high intraday vol tift but in the absence of a major trend. that's when you can -- >> that would be different than what we've seen because they have been in the driver's seat. >> at least the last four or

five months. there may be a shift now where people are saying realistically are we going back to the happy days. as glenn says the happy days probably are not something we should return to quickly. therefore you may get a flat lined economy for protracted periods of time. >> you've got some interesting ways to play this, fortunes are made in periods like this. one thing you think big pharma is the way to go. >> well, in times of sector rotation, where you don't have a major trend, you have to figure out what's going to be the next favor. there's quite a bit of academic recertainly, academic research not always being correct but let's assume that it is that shows major waves of drugs come out in a cluster. they are not spaced evenly. some of the very smart people in the pharma industry think that there's another fortuitous onslaught of big blockbuster drugs coming out of the pharma

company. if that's the case, stocks have been stagnant for weeks. that may be a sector to ride. >> what about gas company, gasoline company or natural gas? >> natural gas producers. there is a truism that one in six ratio in terms of energy efficiency exists. right now gas is selling at 1/23 the price of oil so there's a huge disparity there. the normal relationship is eight to ten to one. you say, well, can the markets be that far off? there are arguments why gas isn't efficient to move and things like that, but still that sort of disparity between $2.70 gas and $69 dollar a barrel oil.

so a sector within the flat market. >> cap and trade a big piece in the "times" yesterday, it was called -- i guess some of the guys that wrote the legislation are coal producing states, aubrey and all his friends feel slighted. >> that is probably factored into the prices now. that wasn't surprise legislation really. >> george, back to the pharma, all these new drugs we may be on the cusp of finding, all that may come out, do you not worry at all about what could happen to health care. is there some thought profits could be focused on by washington, i mean? >> you have the washington axe over your head at all times. talking to people in the large pharma companies, though, if they have a new class of drug, it has to be absorbed within the system, however it comes out with a federal mandate or without it. if there's something new and

better and does the job, got efficacy, it will sell well. >> why? doesn't in england. a plan that says you can't pay 50 grand a year for a drug it's not going to work. >> if that happens -- >> that's possible? >> if the world was logical, joe -- >> is it possible we eventually end up with some kind of system like europe or england? >> no. >> i'm with carl. people had their first bath house on the streets. >> that's what happened when they get their fingers bitten off. you've got to be smart. you can buy distress loans and commercial real estate and i guess you could buy assets totally liquid private equity stuff all the pension plans and endowment funds are stuck with. you could bid cheaply but you've

got to be a real pro, i guess? >> you've got to be a pro or buy a fund from pros. when you look back to the '70s when you had this anemically recover economy, the lasting money was made by people who bought failed cdos, although there wasn't any in the 1970s, bought commercial bank loans they wanted to get rid of. today there's funds of funds going out of business, selling off hedge funds they are locked into at very low prices. there are three dimensions to liquidity people forget about. one is can you sell it quickly. one is can you sell a lot of it. the third is what price can you sell it at? >> if you're willing to sacrifice on the i know i can sell it fast front, there are prices people are shedding at secondhand rose prices. if you're patient and there's not a catastrophe and you've got cash reserves marks a great deal

of money. it's not easy to do but there's enough opportunity. there are funds set up so the every day joe can find some access toyota. >> sounds complicated. thanks, george. appreciate it. >> all right. still to come this morning on "squawk," he's no longer fha director but we've got him on the first day his new job. jim lockhart will woshlg for billionaire ross & company. up next, sean egan first to figure out free rating agencies for what he calls less than objective assessments. other people had even more colorful things to say about that. right now, though, sean is in the "squawk" boardroom and ready to tell us whether the situation has improved over the last year. "squawk box" will be right back.

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on this day one year ago freddie mack's market cap dropped below $1 million. that's the day they took steps. sean egan is president of the rating company. good to see you. >> thanks. good to be here. >> you were one of the very early people warning of the problems we've gotten into, not only of what's happening in the market but buildups but credit rating agencies as well. where do we stand a year later? >> i think people understand there's a problem. the solution isn't as clear. >> with the credit rating agency? >> exactly. that's a foundation. if you get the credit rating right, everything else follows, pricing follows, people can raise capital if they need to. we get the credit ratings right, you're all set. i think there's a recognition there's a fundamental unmanageable conflict of interest in this area and steps taken to address that. >> should we believe the ratings

we hear from the ratings agency today. some say we've swung in the other direction to prove they are not beholden to the companies. >> if you answer the question whether or not there's an alignment of interest between the a little assessing the credit qualities and ultimate users of that credit rating, yes. you don't worry about the honest mistakes. those are going to happen in any organization. what you worry about is when there's fundamental systematic bias. as a couple of years, buys on the high side, aaa ratings given to these that should never have been aaa, now fluctuations in the market positive and negative. >> moody's awere delta blow whe a district judge said they didn't necessarily win the first amendment right of speech, that

didn't proeblgt them from the ratings at the time. how significant is that? >> very significant. not only for the rating industry but the other parties using the firm. morgan stanley a party to this soot. they have liability for using ratings for a firm -- firms they knew had a basic connikt of interest. i think it's going to be a landmark case. >> you'll see a number of lawsuits that come out, both against the agencies and wall street firm? >> there are already are. in factish the one behind the current one where the petition was made is a pimco lawsuit. you're going to see a lot of changes in the industry. >> one of the things that surprised me over the weekend, a story that made "the new york times" times sunday, new exotic investments. people talk about all the problems wrapping up commercial real estate loans, regular loans. now the new thing is life insurance. >> they say it's new, it

doesn't. a 95-year-old man with triple bypass wants insurance. there's no reason why he shouldn't be able to get insurance. the core issue is whether or not the risk is properly assessed. if it is, everything follows from that. really comes back to the conflict, make sure there's an alignment of interest. head said everybody knows incentives are important mentioned in connection with executive pay but also the rating industry. >> critics say the problems is you can roll up life insurance policies, get the financing, repackage them and sell them all over the place. maybe in the end that ends up driving up life insurance policies because people will have priced the risk wrong not realizing there was going to be so much power pushing it. is it building a bubble like we saw with housing? >> i don't think so. you shouldn't limit innovation.

that's another manifestation of wall street's creativeness. the core issue is to make sure the a little assessing risk have the incentive to get it right, not paid to issue inflated rates. >> the problem we've seen with credit ratings agencies have been recognized. there is a recognition of that problem, but what happens next? what's the outcome? >> washington has been talking about this for ages, actually. there's been a number of bills introduced in the past i guess probably year or so, probably about six different bills. we don't think the heavy lifting will be done in washington. it will be done in the courts. i think the last case hasn't been decided yet but the last case is going to be very relevant in the sense this realization that broker dealers and probably money managers have to make sure there's an alignment of interest between assessing risk, rating officials and ultimate beneficiaries and also the taxpayers. the taxpayers are on the hook

for $13 trillion for this whole fiasco. >> what would a reasonable legal argument then be for rating industry now that free speech has been decided? who is going to defend them at this point? >> limited. restriction on freedom of speech is limited to cases where ratings are only distributed privately. probably they also talk about the incentive issue. i think what is going to happen in the marketplace, we're sort of developing in fits and starts. what's likely to happen is marketplace is going to realize there has to be an alignment. there will be more independent firms emerging from this whole chaos and we'll move on. the 5% -- >> you think the major agencies can survive the torrents of lawsuits. >> i don't know. david einhorn can probably address that more than i k i understand he'll be on in an

hour. in the case, a massive amount of securities issued, $80 million. you can do your math in terms of the likely liability. that doesn't even matter. basically it doesn't matter because there's already been a shift. recognition, potential liability, any intelligence compliance officer at the investment bank, money managers, we have to do something. and they are in the process of changing. >> spokesperson for moody's says that the court actually dismissed 10 of 11 claims on grounds unrelated to the first amendment. will they step out of this? >> unlikely. you only need one. >> it doesn't open your cell phone -- >> fortunately we were listed by fortune magazine to be the leading firm to warn about credit failures and competitors in other camps. i think we make some mistakes

but we do everything we can to get it right. >> sean, overall you're feeling more optimistic than in recent years? >> absolutely. the reason why, we're going from a disorganized market. i think of it as a bazaar, mideast bazaar. people don't know the quality of goods, haggle for the price to walmart, much more organized, you don't worry about led in the toys. friction in the transaction is far less. we're in the process of moving our nose in algae from a backyard or back street hot dog stand to mcdonald's. which has value over time? mcdonald's does. people can go there and don't worry about their kids getting sick. that's what's needed to move forward. i'm optimistic, the 5% magic will kick in. what i mean, natural growth, increase in productivity, pop

lakes, about 5% a year. grant add lot of people's equities are wiped out but give them a couple years, they will rebuild them. >> sean, thank you very much for coming in and joining us today. >> thank you. >> sean egan. stocks to watch next. plus a great lineup your way in the next hour of "squawk box" as well. former federal housing finance director jim lockhart will be here. talking to him about the new job. plus terry mcgraw, president and ceo from mcgraw hill companies, the company has owns standard & poor's will be stopping by to talk about the business and what else is happening. at 8:30, the man that called wall street's credit crisis and lehman brothers demise before the rest, david einhorn. "squawk box" will be right back. >> you're watching "squawk box" on cnbc, first in business worldwide.

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we are looking at upward momentum in the future. general electric was upgraded to overweight to neutral. there's the move after a big move on friday. one of the dow components at the end of last week, the labor day holiday. that's another 6%, 4%, 3% on

friday. jpmorgan goes from overweight, neutral, the 17th, 12, ge one of the few stocks non-consensus catchup stories where a little good news can go a long way according to jpmorgan. got cby, knchsy trilogy here kraft going public with bid for cad bury after rejected. hershey likely to respond according to "wall street journal." target increased at 28 and 19, gap. costco over wait -- overweight by stanley and piper. >> costco and barron's,

overvalued grocery store. >> a lot of $0.03 wider than expected revenue toward expectation. >> who are you calling a loser? >> carl quintanilla. >> cool country joe. >> my favorite mail we're getting today is, you know, you might want to check. we believe there was a band called country joe back during woodstock. that name may have already been taken. when you put country joe on the fish i had because i was catching fish, that was the name of the band. >> all the good joes are taken. you're going to have to come up with something original. >> that's why we put country -- you know - >> work with me here. >> i've got people threatening. >> work with me. i thought it was clever, country joe and the fish. >> just trying to help.

>> when we come back, chairman and ceo of mcgraw hill will talk about higher education project they have got and the state of credit ratings one year after the month that should wall street. jim lockhart former director of federal housing agency headed to a new boardroom, ours. working for wilbur ross as well. join us on the set talk all things housing and the economy when we come back. >> your. you're watching "squawk box" on cnbc, first in business worldwide. 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

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gold signs on. >> this is gold, mr. bond. all my life i've been enlove with this color. >> gold tops $1,000 for the first time in months. what does this gold rally mean for the market? >> i welcome any enterprise that will increase my stock. >> back to work, back to school. terry mcgraw, chairman and ceo of mcgraw hill on elevating higher education and the state of credit ratings one year after

the month that shook wall street. and 2008 flash back, the government steps in to secure mortgage giants fannie and freddie. a year ago james lockhart the director of the federal finance agencies was in the thick of it, now working for wilbur ross. before he punches in he's talking to us as "squawk box" begins right now. welcome back to "squawk box" on cnbc first in business worldwide. i'm becky quick with joe kernen and carl quintanilla. our guest host, dean of columbia business school and former council of economic advisors chairman, we've been speaking to glenn about what's happening on wall street and washington plus watching what's happening in the markets. gold prices are surging about

$1,000 a troy ounce. this is the first time that contract has hit that important psychological level since february. among the catalyst, a weak dollar, people talking about that for a long time. historically prices rise in september as well as part of the beginning of the holiday season and the world's biggest gold consuming companies boosts demand. momentum going for it. gold by the way made gains in 16 out of 20 decembers. stock futures higher, dow up 72 points above fair value. let's get more of the headlines this morning from carl. >> hey, becky. a few things going on. dow component ge giving a boost at the open. higher after jpmorgan upgraded from overweight to neutral, parent company of universal. cad bury higher as prospects of a bidding war looms. rejecting 16.7 billion from

kraft, now the jernl is reporting hershey may become involved in the bidding as well. small business sentiment improved gnat national federation optimism index rose to 88.6 in august. increase driven by improved expectations and better sales volumes. joseph. >> one year since the bailout of fannie mae and freddie mack, here with the outlook on the future, jim lockhart, former director of federal housing and finance manager of ross & company. you came strolling in here whistling. is that because you no longer are chained to your desk at fha, now in private industry? >> after seven and a half years in government, it is nice to start a new chapter. >> you're out of the government now, are you willing to give us the straight scoop.

>> i always gave you the straight scoop, joe. >> i had the nerve to ask you off camera whether we could now hear straight talk. we're an open book, we do it off camera and on camera. a lot of stuff came out about fannie and freddie and none of it was good. i did a lot of reading. gretchen morgan still got fannie and freddie but what we've really got are just huge, huge legacy bills we're going to be paying forever. >> yeah. the problem was congress allowed them to deleverage well over 100 to 1. we were asking since the day i took the job three and a half years ago for legislation to fix them. it didn't happen until a little over a year ago. but then it was only about 40 days before the conservatorship. oftentimes what happens, and i've run several government agencies, congress creates an agency, doesn't give it the tools it needs, runs into

trouble and we have to refix it. we're in the process many many times. first four years, first in washington, social security. that's something that really needs to be fixed. >> a lot of work needs to be done. >> we now know the greatest job in the world was franklin rains's job. >> leverage two to one marks a percentage of what you're able to drive, cut the books on top of it all. >> be covered by the american taxpayer. >> this was the sweetest gig ever. is there going to be a clawback there, do you think? >> well, we did have a settlement with him as you may remember. we settled with them. they are still being sued. as you pointed out, unfortunately the contract allows the company to reimburse them for their legal expenses.

the issue there really was they were mismanaged the companies, the management has exceeded them. i helped straighten out the companies. i think they made some progress there. the real problem again was they were allowed to leverage themselves dramatically. no financial institution in this kind of market could have survived. >> now we're going to talk s&p, ratings today. all the different parts of the perfect storm that got us into the mess we're talking about. how much worse do you think fannie and freddie -- how many more quarters of these outside losses will we see. >> freddie actually reported a small profit in the last quarter but i don't think that will continue. they are doing to continue to have to put up reserves against that book of business from really 2006, 2007. it's not just subprime, but seeing losses in the prime book as well. but the good news is actually that their books are much better

than the average book in the country. you know, the average is pretty poor at this point. >> talking some big game about the company's ability to pay itself back. do you believe him or is he talking out of his league? >> i'm not an expert on aig and their ability to pay. obviously they have a lot of assets to sell. they don't have subsidiaries, things to sell off. i've said and continue to say unfortunately the u.s. government will not be repaid for its full investment in fannie and freddie. >> fannie and freddie. wl ross, you start today. >> that's correct. >> vice-chairman. >> vice-chairman. >> do you know where all the bodies are buried? >> i had many conversations with wilbur, not a lot of bodies buried. no, i'm really looking forward to it. they have -- he's had a very

successful track record of investing in distressed companies and turning them around and making them special. had a big emphasis in financial services at the moment. he has the largest independent mortgage service. >> what i meant by that, you know this industry well. dislocations create opportunities. there's huge dislocations now. can you share with us some of the areas you would be urging wl ross to be taking advantage of? >> there are a lot of areas in dislocations in financial services and especially the mortgage world. he's continued to look at services. he's continued to look at the whole mortgage platform and how to do it better, better investment opportunities. as you know, he's been an investor in banks. fdic changed the rules to make that a very viable option as

well. >> coming up on how many years of public service now? >> in total, add up all my years about 14 including the navy. >> were you able to make any headway with the agencies? when we talk about health care, talk about anything becoming much more involvement of the federal government, can it be done right with the right people? >> i think -- i've spent a lot of time on the management side of government. i was on president bush's management council. i think good management can be brought to government and do a better job. oftentimes you're fighting the legislation that created the agency. that doesn't give you all the tools. but i think in the last administration and continuing this administration we have seen agencies be better managed. their accounts are being audited. they are getting clean opinions. they are putting them out within 45 days, internal controls are improving. it can be done. government can be managed better

but it also needs the help of congress. sometimes that just doesn't happen. >> is there hope for that? david walker was written up over the weekend where he said he was there for ten years of people said in ten years' time, a decades' time better accounting from the defense department, ten years later they were still saying it would take a decade. there are ways to make progress? >> a lot of agencies in that ten-year period made progress. defense department is a special case and especially large. social security, which actually was bigger, we had clean opinions for a long, long time. we got awards for the best government accountability. so it can be done. social security had 65,000 people, and it got those checks out to people. now, what needs to be done on social security is it needs reform. we need to redo it for the future generation. >> so why not stick around in government for the reform part? >> it takes too long.

at this point in my career, it's time to move on. i fought the social security battle for four years, did probably close to 100 town halls from governors and senators, not dissimilar to what was happening in medicare this summer. actually the response was somewhat the same. the elderly that weren't being touched by social security reform were against it. and the younger people that want it, some control over their social security were for it. >> are you convinced we're going to handle those big bears in the years to come or will we always lack the will. >> we have to. hope fully we don't handle it the way we handled fannie and freddie, we got it a month before -- the fire is in the living room. >> i'm hopeful we continue to work on these problems. david walker's group is doing a good job. there's a lot of other groups out there that want to reform

social security. we need to reform medicare, too. >> when in 2010 will we start seeing monthly comps of housing prices going up? >> you said in 2010. those are your choices. any of the 12 months. >> when comparisons from '09 when we have a positive comparison. will it happen in 2010? >> yes. >> when? >> i'm not sure. we're already starting to see bumping along the bottom of housing prices, ups and downs. >> says at one point we were still going down to the total of whatever he was looking for, 40 wasn't it. we were at 27, still going to do 40 u don't think so? >> stweerting to stabilize. some of the problems put in place, a little slochlt we're starting to get progress on the refinancing program, refinancing of certainly mortgage rates at a point. >> in september we may have --

by september of 2010, we compared them to this september we may have price increases, right? >> yes. >> that was my question. or it might be earlier or might not be. if it's 2011, that's different. then that's bad. >> i think starting to see some confidence come back. >> that's why wilbur, you're working for him now. >> that's correct. >> thank you. >> when we come back, futures pointing higher. gold, as we mentioned, over 1,000. a check of the markets when we come back. first chairman of mcgraw hill, terry mcgraw on elevating higher education, a new project they have got. the state of the rating agencies one year after the month that shook wall street, that shook all of us when "squawk" continues. your you're watching "squawk box" on cnbc, first in business worldwide.

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welcome back, everybody. smithfield foods posting a better than expected first quarter loss, lower hog prices, swine flu, soft exports for pork. as you can see that stock is

under pressure, bid down to 1.15 ask 12.88. >> it is officially back to school time. tools to revolutionize the classroom. mcgraw hill connect. chairman and ceo of the mcgraw hill company joining us. looks like you're on the big board. are you part of the closing bell today? >> yeah. we're doing the opening bell, carl. it is an exciting time. it's duly the 80th anniversary for mcgraw hill companies on the new york stock exchange. out of our 121 years, it's pretty exciting to be honoring that listing. yeah, we're going to do the opening bell and we're going to be doing it with college professors and students all benefiting from the partly cloudy gras hill connect launch. this is an all electronic -- probably the most advanced all

digitally developed teaching and learning solution for the higher education market. we're very excited about it. it contains the textbook. it contains assessment, supplementary, professor lecture, all in an online very interactive environment. it's fun. more to come. digital is the way this is all going to go. it's going to allow us to keep price points lower, allow us to do a lot more in helping students get to where they need to go. >> tell us a little about how prevalent it's going to be this coming school year and beyond. i'm looking at some of the notes. already there's been classes where the average quiz score, test score is higher as a result of using it. is that right? >> that's correct. one of the things the assessment part can do, tell you what you know and tell you what you don't know. it can then highlight through

various links where you go just to get that information that gives you that grounding and those particular skills that allow you to be more successful. so it should help students learn quicker and faster. it helps teachers in terms of being able to get better assessments of where some of their class people are. >> projections on how many schools might be using it this year or next? >> this is a launch. we're in 18 disciplines with 100 different texts on this. it will increase it relatively low at this point. now about, you know, every college student is taking at least one course in an online manner. you're going to see that increase because of getting to the kinds of skills quicker is the route they are going to go. >> let's get to the fun part here, terry. we obviously had a busy week when it comes to stocks like yours last week of a the federal judge made this ruling.

we'll talk to david einhorn, we heard from sean egan. people are saying this is a game changer, survivability as a result of this decision is not assured. >> quite frankly i think both of them are wrong. actually was a very, very good decision. this was a court case that had 11 claims in it of the federal judge here in new york confirmed the first amendment protection and threw 10 of the 11 claims out. the 11th claim was for fraud and the first amendment does not protect anybody against fraud. we look forward to getting that one cleared up. fraud does not live in our house. >> do you believe if you cannot do away with that 11th claim, does your legal argument have to change? what can you argue in court after that? >> no. in any kind of claim of misconduct or fraud or something like that, it's the merits of its own case. we look forward to getting after

that. first amendment does not protect anybody, you know, from those kinds of allegations. again, 10 of the 11 claims were thrown out because of the first amendment protection. >> terry, you just said fraud doesn't live in your house. rating agencies got caught flat footed on so many issues. >> the biggest issue was so many criteria coming out of the 2005, 2006 vintage subprime loans frchlt our standpoint on residential mortgage backed securities and commercial backed, too, we had the housing recession wrong. nour now, the fact that a lot of other people had it wrong doesn't help. we don't like that. that's where our problems began. we said, and we've looked back for, you know, 30 years and we

built into our models a 15%, 15% decline beat the trough of home prices on that one. that would have been the worst in 30 years. that was wrong. as we know it's going to be for some areas in this country 40 to 50% decline in home prices. we also thought the housing recession was going to be more regional in nature rather than national and we thought the duration was more like 12 to 18 months rather than two plus years we're seeing now. the good news, we're seeing home prices now starting to bottom out. the economy is starting to pick up. i think that's the most important part now, to do things that encourage business to invest and to get going as we continue to start to see the recovery and growth in the second half of this year. >> it's been a long time since the agency first came under fire. we've had you time and time

again trying to hold your feet to the fire. are you tired of apologizing for it? >> no. the most important thing is to get it right. from our standpoint, this has been obviously a long two years. it's given us an opportunity to go back and reexamine everything. we are now very much regulated here and in europe. we're very for smart regulation. it brings more trust and confidence back into the market. >> the pay model, though, the pay for service model, you don't think that's going to change. you don't think that's ever going to change. >> again, carl, what are you trying to solve the equation for? if you're trying to solve the equation for higher transparency, then the issue we are pay model is the way to go. we, then, disseminate all of that information free from around the world. in investor pay model, then it's closed. then it's just a relationship between ourselves and a particular investor and

information doesn't get disseminated. so when others have looked at it, s.e.c., treasury and so forth and federal reserve, they saw the equation, the most important component is transparency and that means the issue or pay model. the potential for conflict is always there. the potential for conflict is evident in all of the different business models, i think. you've got to have smart regulation and different compliance systems to make sure that does not exist. >> how about an update on business week in terms of the sale and for how much. >> well, in terms of those publications and things what we've been saying is in these periods of time we're looking at everything in the portfolio. we're all about growth, continuity, all about making sure that we're making the progress we need to make. if there are those kinds of things we need to deal with, we will. so what we said, obviously, that we're exploring all options,

that is still open. there's a lot of attractiveness in business week, one of the best editorial staffs in the world. we're very, very proud of that publication. it's our 80th year in existence with us. we'll see as we go down. at this point, nothing further to discuss on that. >> got it. business week, got to be more than a dollar. right, terry? >>t better be. >> where is the pocket square today? >> i'm sorry? where is your pocket square? >> joe kernen has them all. >> there it is. >> not terry without the four points. always looking snazy. >> thanks, carl. >> terry mcgraw. >> coming up cracks in foundation, commercial real estate on shaky ground. will it stabilize going into the new year? that's in the next half hour of "squawk box."

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up next, another man who saw wall street failures before the rest, hedge fund david einhorn will be our special guest after the break. "squawk box" will be right back.

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welcome back to "squawk box" on cnbc first in business worldwide. we're one hour away from the opening bell this tuesday morning. let's get to some of our top stories. dow com month general electric higher after jpmorgan upgrade freddie overweight to neutral. the bid ask quite a bit higher after closing on friday. royal bank of scotland today, "wall street journal" says rbs looking for a buyer for leasing business, valued at $8 billion.

papers say rbs may not get that amount because of various liabilities on the books. also, if you haven't seen this, gold heading into nose bleed territory. the metal is right now over $1,000 for the first time since all the way back to late february. it's not quite at the all-time high yet, that was just over $1,033, that was hit in march 2008. gold prices up $7.30 to $1,004 an ounce. >> joining us now, one of the guys who called early on the credit crisis problems at lehman brothers definitively talking to us on "squawk box" about that i'm talking about david einhorn, famous fund manager of green light capital. green light is currently short moody's and began shorting mcgraw hill after last week's ruling. david, thanks for coming on. you think this is a devastating below for the ratings agencies.

why? >> good morning, joe. yes, in fact, i do. i think that from a stock market point of view, this is a game changer. for years the analysts have argued that the legal risks here are minimal. in fact moody's didn't disclose the soot in the recent s.e.c. filing. if they lose this case, they might be in trouble. let me explain why. historically the ratings agencies have had to defend against fraud claims. they simply said these are our opinions, just like "the new york times." they might be right, they might be wrong but they are just opinions. some called them the world's shortest editorial. therefore the rating agencies argued under the amendment these are non-objectionable opinions. people might hate your show but if i give it four stars it's my opinion and i believe it. this is called a non-objectionable opinion. if someone tries to sue me, this is protected speech under the first amendment and the case

gets dismissed. now, in last week's ruling, the judge ruled where a disseminating agency is not entitled to the first amendment protection and the rating agency ratings were not mere opinions but actual misrepresentation. as a result, the judge rejected the argument these are non-objectionable opinions and ruled the ratings agencies can be sued for fraud. mr. mcgraw just on was wrong. none of the case counts dismissed in the case were dismissed due to the first amendment protection, they were dismissed due to other defects. the judge is going to allow the case to go on despite the first amendment protection the ratings agencies wished they had. what this means in this case if they conveyed knowingly false information with a motive and the plaintiffs relied on the ratings, the plaintiffs can get damages. here the damages could run into the billions relating to this

particular single bond issue that blew up a couple years ago. >> mr. mcgraw made the point that you'd have to prove fraud. i think that's the same thing that you're saying now. knowingly disseminating false information would be fraud. >> historically the rating agencies haven't had to defend against the fraud claim. look, these are our opinions, doesn't matter how we came to them. there's e-mails out there like the s.e.c. found, like the one that says let's hope we're wealthy and retired by the time this house of cards facilitiers. the rating agencies will have to stand up before the judge and jury and explain how their ratings were sincere in view of those kinds of e-mails. >> terry mcgraw just said their modeling was wrong. he admitted that, looking at a housing downturn much narrower, much shallower, much more

confined than what we actually got. do you think those e-mails alone will be enough to prove fraud? >> there have been -- if you read through the. >>'s complaints they go through admission after administration of a admission, all the things the s.e.c. found, all the things the congress has found, all the admissions from former employees in the newspapers about how the rating agencies knowingly really made big mistakes here. it wasn't just a question of modeling error but market share, a question of getting high fees. it was a question if we don't loosen our standards, somebody else is going to and they are going to take our business. the judge understood that. they went through all of these arguments that the plaintiffs have in the case and said, look, if we accept these as the facts in the case, the plaintiffs have a pretty strong case here. now it's up to the rating agencies to present their own facts to disprove those. >> so david, writes the line between a verdict they can pay,

mcgraw hill specifically, and a verdict they cannot pay. what happens in that case? >> i don't know where the line is for mcgraw hill. moody's, also a defendant in the case, they have about 3 or $400 million in cash, more than a billion dollars in debt. this one bond issue was about -- i think about $6or $7 billion, much was lost by people, institutions that bought bonds given the highest rating, rating of aaa, equivalent of risk-free or government instrument and they earned very small spreads for taking what they thought to be a very small amount of risk. they could have to be reimbursed. i don't think the ratings agency have the wherewithal to pay out even on this one soot alone, let alone a flood of litigation,

other people who bought securities based on this. >> would there be a single wall street firm left if concentrating on fees and gaining market share were the two things that a company did? >> the issue here is that the rating agencies, they were put sort of in a position of public trust. you know, they had a special official role at the s.e.c. because they violated the trust by loosening standards and concentrating on fees and shares, there were a lot of secures created and sold that shouldn't have been. the rating agencies knew this at the time. the result was people lent money who shouldn't have lent. other people borrowed more than they repay. now the whole thing collapsed of the government pledged trillions of dollars to bail out the financial system. many lost jobs. pensioners who thought they were buying safe fixed income instruments, they have lost their nest egg. there's really few industries

more responsive. >> concentrating on fees and market share, still, these a big leap to fraud? >> except when you have these e-mails where you say things like i hope we're wealthy and retired before this house of card facilitiers. people on the inside understood they shouldn't be rating these things. there was another e-mail saying we would structure deals -- rate deals even if cows -- >> obviously it's hard to judge the case here on the phone with you. historically, though, e-mails are not the smoking gun that you might think they are once they get into court. >> i guess that's something the judge and jury will have to figure out. i think the risks here are pretty high. >> how long have you been short moody's of a a long time. >> what was the price when you started shorting it. >> a lot higher. i can't remember off the top of your head. >> i tried to get you to cover

lehman at 20. you didn't do it. almost a year -- i didn't try and get to you cover it. seemed like a lot of bad news was out and you said, no, staying short. been about a year. any comments on the lookback? pretty incredible year and a half. >> lehman was last year. i don't have much to add at this point. >> light up our room and leave. >> we hope to see you in studio next time. you're nearby, aren't you? you're not that far? >> i am and i look forward to that. >> okay. thanks, david. >> thanks, guys. >> up next, step onto unstable ground. the commercial real estate market, we've got the president of mortgage securities association talking to us about the cracks in the foundation. first, though, let's look at the futures. they have been higher all morning long. dow futures up 77 points. that's about 60 points above fair value. "squawk box" will be right back. your you're watching "squawk box" on cnbc, first in business worldwide. i'm racing cross country in this small sidecar,

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there may be green shoots elsewhere in the economy, commercial real estate is on shaky ground. some industry watchers say we could see a rash of foreclosures and bankruptcy could top what we saw in 1990. joining us with his take, the commercial mortgage securities association he is a partner at

the law firm. thank you very much for joining us today. how big of a problem is this commercial real estate? >> well, commercial real estate does lag on the consumer side. we started into this recession about 18 months ago in the residential side. we're starting to feel it in the commercial side. historically commercial real estate has been a very well performing asset with fault rates below 50 basis points. now we're starting to see default rates 3 to 4% and could perhaps go up to 5 or 6%. at the association at cmsa, our focus to bring back liquidity into the market. that's what's been absent. we're doing that to help get people to continue to invest in cmbs, commercial mortgage-backed securities. get that trading broken up. the ill liquidity there to start moving again as well as get lend toers make loans on properties both refinancing and financing.

>> how do you do that? what are you asking washington for? >> well, the great thing is our association and the upper level executives and our members have been very involved over the past 12 months in talking with treasury, the fed, and congress about the things that might help bring back commercial real estate and the whole market. we've been talking over the last 12 months. one of the things we were very encouraging is the program that allows people to borrow money at a good rate from the federal government in order to buy initially abs, asset-backed securities. when that was extended in may to cmbs that brought spreads in 500 basis points. we definitely support and encourage and appreciate what's been done by the administration in bringing the program. >> are you asking for more from

washington? >> well, what we did was we asked that they would extent it. because december of this year is too short of a timeframe for cmbs. fortunately last month they did for new issue at cmbs extended out to june of 2010. we're not looking for a bailout, really just help to get the market jump-started again. >> all the moves washington made to this point you say have been helpful. is that enough or are you asking for something in addition? >> we'd love to see talf extended if needed after next june. it's been very helpful thus far. what we're cautioning a little, though, is washington would do too much or go the other way. regulatory reform proposals out there, a couple of things in there that might retreat a little bit from the benefits. the market is going to have to take a little bit of time.

we see a bumpy recovery. as explained earlier on the show, there has been improvement in the economy. we're going to have a little bit of pain and people are going to lose some money. there are other people that are going to have a tremendous opportunity for investment over the next 12 to 18 months. >> you see geithner and bernanke pushed all the time about how they will back out of these programs. what do you think will happen if they do? isn't there an understandable amount of fatigue from the taxpayer when it comes to extending and extending and extending credit? >> well, the fatigue i would understand for pumping out money that's going to increase the debt. the good thing about the talf program and the only help our industry is looking for from the federal government is those loans are backed by aaa securities. these things are not likely to have losses. we're not looking for a bailout but a little bit of a jump-start that will get the credit market back in place. in fact that has been occurring.

one of the things you might mention talf new issuance hasn't brout out new cmbs. one of the reasons the market is coming a little bit. nfc, reits have been successful issuing unsecured debt at favorable rates. i do think the market is coming back in. that's what we want to see more of. >> okay. thank you very much. appreciate your time. >> thank you very much. >> we'll go to break in a minute. i want to quickly mention ibm. this is news i'd like to know. it's not a lot but in a filing. ibm came up 117.80 to 117.85. that's older, looks wider. two quarters left, including the one we're in, which ends this month. that's almost -- we only have half of the information for a 9.76 estimate for ibm. the street estimate is $9.76. there's the correct.

street is $9.76 for the full year, two quarters left. the company says we see at least $9.70. that would be something i would want to know if i were a shareholder. for the third quarter looking for 237, third quarter 339, all of that adding up to for 2 237, all of that adding up to 976. they say yeah, it's only september and we're going do at least 970. so that's an affirmation of where the street is for ibm and you can see the stock is called up a little. next art cashin is ready for action. he'll set up the weekend ahead. we'll be right back. i've been growing algae for 35 years.

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time for trader's edge with art cashin at ubs financial. you've thrown solar eclipse, ramadan, you have thrown everything at the markets that you can possibly come up with, it has never corrected t has not done it. >> whoa, whoa, whoa, not everything i can come up with. >> you got more, but when do you say it's passed every test and

headed higher? >> it certainly did well, we got two ramadan, an assassination attempt in saudi arabia that failed luckily and if that had not, things might have changed, but that's what might have been. i think, i'm going to wait until tomorrow to see the market really declare itself as i told mandy on friday, day before a three-day weekend, has a natural bias to the upside and the day after labor day has a mild bias to the upside. in fact, in 1929, the dow made its high the day after labor day. so we'll wait to see how the market starts to play out. everybody will remember where the pencils and pads are and maybe we'll find out what the real determine itation is. >> 9, a lot of people like that number. are lot of people getting married tomorrow? it may be a good day, not a bad day. >> but trader gossip that terrorist actions have come on odd numbered day, there has been

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our guest host is former white house top economic adviser len hubbard. it's been a big week as everyone comes back to drs and the fight begins again, as someone who has advised the president on all things in economic, is he being served by well by his advisers? >> president obama has a great team of economic adviser, but the question is are his the ones for the economy. i would disagree. but he's got very good advisers. health care poses a big problem for the economy. that's the one to watch this fall. >> if you're playing the hand they're dealt right now, what would you be telling them? >> for health care, the real issue is getting better value for the money. there are plenty of ways to increase hh