cost. one of them is not a public option though in universal coverage. on economic policy, holding out for very large tax increases probably isn't the way to seal the recovery either. >> do you think he's going to have to break his promise in terms of not raising taxes on those who make less than $250,000? >> if he keeps his health care he must, there's no way to avoid an explosion in the deficit without large-scale tax increases. >> it's been good having you? joseph? anybody? >> good document back in 30 seconds. >> good to see you after the long weekend. we're all here, we're here together. we're happy, we like each other. >> a lot more to come. >> thanks for coming, glenn. we're watching the markets already, if you haven't seen it already, gold prices touching over $1,000 since the first time since february. but the stock market futures are indicated higher. that does it for us today. make sure you join us tomorrow. "squawk on the street" is mex. this is cnbc.com news now.

>> shares of general electric called higher after jpmorgan upgraded the stock. ge at parent of nbc universal which owns nbc. cadbury shares are set to soar after it rejects a bid from kraft foods. gold futures rise over $1,000. the all-time high for gold is $1,033. that's innocence.com news for now. i'm bertha coombs. . live from the financial capital of the world, this is it, "squawk on the street." good morning, everybody. i'm mark haines, time to get rolling. 30 minutes before the opening bell, we have a global rally under way. stocks set for a strong open here at home as rising commodity prices and an uptick in -- m&a

activity. i wish they wouldn't do it that way. >> and good tuesday mrng morning, everybody. there's another bullish call, this one from credit suisse markets, an overall market call, strategists there say s&p will hit 1150 by admitted next year and revised forecast growth will be revised higher from the big forecasting firms. that's what they see right now. they believe inflation will stay muted. but the gold trade at $1,000 eith either thinks the market thinks it isn't going to stay muted or we're going do have some other sort of crisis. so there's a little bit of a question mark on top of the gold price today. >> yeah, gold is a puzzle. but right now, it's up $12 at $1,009. and check out oil. up $3 at $70.95. and the futures are way off -- wait a minute, that's wrong.

that is almost certain that is not right on the s&p. the s&p is actually up 11 points. i don't know where that is in relags to fair value, but obviously it's above. so we're heading higher. let's find out how all of this is playing out premancht our reporters are there. ready to bring you up to date. el nesto grande. >> we'll call it a kick save haines. we had a big day friday, of course, we cut our weekly losses in half. we're coming off of a losing week though but this global momentum here today led by a new 52-week in shanghai, led by continuing buying, if you will, into the commodity story and selling of the dollar. it's interesting because the dollar story is one that we're ready to take some risk. we believe in this global recovery, just be careful if this gets ahead of it itself,

also be careful, we have one, not two, but three treasury auksz later this week, in four day, i believe it's more than $100 billion worth of paper coming into a marketplace at a time when people are willing to take risk, that auction may not be as strong as we would like it see. $1,000 gold. rising oil, a big upgrade of ge at jpmorgan being paired with an downgrade to underperform, ge is one of the hottest stores, they think now at $40 is headed to $15. also a larger than expected loss from smithfield food, the meat processor coming in with some pain on some grain contracts they entered into a while ago and of course waiting to see will hear the final give and take and who else want ts to getment to sweetest of all deals is ch is kraft's bid for cadbury. >> let's get to the nasdaq. >> slated to open higher across

the board. widely held tech, microsoft, cisco and ebay. morgan stanley made a call, upgrading altera, pmc-see area not enough to get that stock moving. xilinx is up, and nasdaq is up. dell downgraded just ticking into negative territory here. costco raised to overweight from equal weight and that call also at morgan stanley. let's go to down sharon epperson at the nymex. >> gold is definitely in the spotlight right now. gold futures above $1,000 an ounce. the first time this has happened since february of this year, with the highest price we've seen since march of 2008. they know they are in the hot spot right now. we're looking right now at a familiar formula, helping to push the momentum in the metals

market. we are looking at the dollar weaker, crude oil and other commodities high are and of course oil traders out opec meeting happening tomorrow. the momentum that we're seeing in the metals market is not only with gold, we're looking at silver which is continuing to outpace gold, up about 30% in the past two months and copper look looks like it do possibly reach that $3 mark as it did in september of 2008. again, the momentum there he helping to fuel the rally across the board in the coppers market and option traders here in gold are taking advantage of that rick santelli, to you in chicago. >> yes, gold is definitely higher, a huge $11 worth. why? because the dollar is getting hit really hard, new lows for '09. lows going all the way back to the fall of last year. we continue, of course, to monitor other stories bubbling through. you know, there's many ways to deal with overt kou-the-counter derivatives. china seems to have found a very efficient way. their government may be working

along with their institutions holding losing over the count e oil and energy derivatives, just not to honor the contracts. this story has been bubbling for a month. we'll ve have to see the outcome as far as interest rates, a bit of curve steepening, you see slightly lower rates on the high end. $38 billion kicks off $70 billion in coupon supply with two-year notes at eastern. that doesn't count all the t-bills we're auction iing off. stocks up across the board. nikkei and kospi both up 0.7. shanghai composite which lives in a world of its own. up 1.7. australia's benchmark up 1.6. guy johnson, i believe this started where you are. >> it certainly did, mark and it's carrying on today. we've had two days of it. you guys are playing a little bit of catchup, good to have you back though.

the markets here in europe are up again for the second day running. franklin, london, paris, up 1.3%. we had a decent move yesterday. wasn't great. certainly not speck ttacular anf course as labor day taking place, very, very light volume. today, we get down to business. we're up again, will the rally continue to move? what is gold signaling? want to see that gold move a little list exciting. when you happen to be an investor, the euro zoning whos less dramatic. you guys have been talking about cadbury. this is move from yesterday, fairly dramatic. that's a gap higher. now just drifting sideways, everybody is trying to work out whether or not we could see caste coming back with a higher price or maybe nestle will step into the frame. a lot of moving parts and a lot still to be decided. worry going to watch the m&a

story, the fact that we're seeing maybe consolidation in the uk. telecom, mobile market, we're talking about here. again rbs up by aren't 1% today. there's talk "the wall street journal" that's reporting it. maybe it's looking to sell its lease aircraft business. hopefully they're going to confirm that story very, very soon. back to you. >> up next, i'm not sure, we're going to check the futures. oh, yeah, you know what? i was wrong the board was right. i looked at plus 1.95. >> this is what the viewers understand to be a little battle, with mark. the board was wrong. it's okay. >> i got out of habit of reading this properly. so the futures are what they are, up 10.90. fair value up 2. so roughly 9 above fair value. worth about 60 on the dow. >> it takes a big man to admit

he made a mistake on the futures board. that's all i can say. takes a big man. >> i view it almost inconsequential error. up next. consumer reports, they're breaking new consumer stress index. i don't know about you, but i sure feel under stress and i'm a can't assumer. live on our air first here on cnbc. then the smell of david faber's cologne it is the cologne of conference rooms that people spend too many hours and nights in with too much coffee as they try to do deals. but he sniffs it out. nose what's deals are. he's going to talk about whether we have a big merger boom. the brain is back. we'll be back in a moment of.

fresh data from "consumer reports" this morning on the health of the american consumer. we have the breaking headlines now. ed farrell joins us, director of research at account "consumer reports." what are the highlights? >> the consumer is probably the roughest shape we've seen in the past seven month, our overall sentiment index is down to 38.2, the lowest point we're seen since we started reporting this

measure. going along with this, consumer stress is up substantially and also this measure we have called the trouble tracker show that cop assumers are basing an increasing level of financial problems over the past six months or so. that's really led by a couple of very specific troubles. one being negative changes in their credit terms and credit cards. loss of health care coverage, along with trouble getting financial loans of various types. now the good news in all this is that in august, we had reported an employment actually going down. versus going up. which it had been in the past several months. so there are some bright spots on the horizon. >> nonetheless, a stressed out consumer doesn't spend much, does he or he is? >> well, you're absolutely right. what we saw in july is that retail sales had actually collapsed relative to june.

the good news is that in august, retail sales didn't go up, but they remained level. at this point, level is a good thing because it provides intenti intentional staging area. the other good news is that the trouble tracker and stress index, though up marginally this past month their smallest gains than in the past five months. so once again, we're seeing some stability in these mae, so hopefully we're looking for over the nextmonth, next several months. is that possibly consumer sentiment will level out and start turning north ben. >> which way does this cut for your magazine? i imagine on the one hand, people say, well, i'm not going to buy the magazine? on the hand, people might say i'm getting my value on my dollar, therefore i need the magazine? >> this is a challenging point in time for all publishers. as you know, the publishing industry is going through stress with declining single copy sales

and various other issues. we haven't been immune to these facters but we've maintained very well and it is part of the value of our publication that we help people save money and spend more wisely. >> you don't, the big crunch has been in ad sales, since you don't ads, you're at least immune to that. >> well, we missed that big downturn, that's for sure. that was a big help. >> all right, thank you very much, ed, we appreciate your taking the time. mark, it's interesting he's focusing in on the unemployment data as well maybe that's the silver lining. >> that's key. if people feel good about their job, their employment prospects or they don't. and that's numero uno. if you're worried about your job, you're not going to spend money. >> well, david faber is back.

>> the brain is back. >> oh, man, i love when he enter tans me with those lovely tunes. thank you, mark. thanks, erin. good to be back. we've got a very big deal to talk about. of course it was nounsed strangely enough on labor day, but that is not a national holiday in the uk where cadbury shareholders yesterday woke up to a bear hug from kraft here in this country. to the tune of about $16.7 billion, an offer made by kraft to acquire that company, i should say a possible offer, i'll get to that in a minute to acquire that company. this morning, we get a look at how kraft is going to perform, very important because part of the consideration is kraft stock, it is part of the currency in this deal. i'll get to that as well momentarily. irene rosenfeld, ceo of kraft, just concluding a conference call with u.s. investors to

expla explain why kraft decide to make this move when it did, trying to keep that stock price up. cadbury for its part, soaring, it soared yesterday it is well above, in fact, the value of the current kraft bid. in start because, of course, many believe caskraft will incre its offer and asking shareholders to decide via tender. that the mechanism in the uk. no poison pill, no staggered boards, you come with a firm offer and shareholders decide. is that hasn't mapped yet. another reason by cadbury stock is trading well above the offer price, speculation there might be other bidders. perhaps there will be another bidder that shows up here. cadbury certainly are a one of a kind franchise. mars and wrigley are private and they're together now. so all you got left is cadbury

when it comes to things like chewing gum. nestle would be interested, certainly in chewing gum, one would imagine, the company has said not much of anything at this point other than we're focused on smaller deals. we're not going to comment at all on whether we would be interested in cad burrry. if nestle wanted to play, it could play, simple as that. it would are to divest chocolate. it's interested in chewing gum. it could play if it wants to, one would have to believe that's still unlikely. another potential player would have to be hershey's. you say that but you look at the market value of hershey. less than $8 billion. understand that trust ownership structure makes doing anything over there very, very difficult and wonder how in the world hershey would be able to mount any sort of a bid that would top kraft's, were if it not at least in partnership with the likes of nestle. is that possible? you have to wonder about degrees of difficulty here. finally there, is pepsi, that would be a great story.

indra versus irene rosenfeld battling it out. that's unlikely. that's a lot of money not to mention a an adviser here to kraft is the key adviser to pepsi, one would have to imagine they've weighed that out previously potentially. as for the possible offer for kra kraft, theory is. $4.912 in cash. 0.2589 new kraft shares per cadbury share. 14.5 trailing ebitda will say mars wrigley was done at a much higher multiple, but those two private companies that didn't have to answer to shareholders. rosenfeld going into detail on that in the call that just ended. annual cost save $300 million,

$200 million of general administrative. so that perhaps driving the deal, one reason why kraft is saying if we get this deal done, we'll give you higher targets in terms of revenue growth and epa growth. nelson peltz got cadbury and kraft to separate. he also has about 4% of kraft but is selling down. his stand on kraft expires next month but that doesn't seem to be a key part of anything going on here. he did get to his ascent on two board seats in retching that stance with them some time back at kraft. all right, marx we'll have more on this deal as it moves ahead. for now, back to you. >> thank you very much. up next, the word on the street. the buzz beyond as we gear up for a positive open on this back to work tuesday. later why long-term are investors may be doing the exact opposite of what they should be doing right now.

if you're one of them though, there's a window to get it right and a way to diagnose what you're doing wrong. that's your cnbc edge. we'll be right back.

bernie mcsherry joins me now from cuttone and company. this keeps going up. >> it does. i'm sticking with my guns, we're going to run out of steam at some point here. i don't think we can take too much out of today. it's going to be low volume, the real story is the dollar.

the dollar weakness is indicative of of what is going on overseas. people are seeing action on the emergent markets. people are moving money over there. >> low volume, but wait a minute, labor day is over. i thought everyone was back to work, the hamptons crowd was back and they were going to power the market higher. >> this is is the biggest ferris bueller day of the year. a lot of people hitting the alarm clock, climbing under the covers. there's not a lot of economic data on the agenda for the week. so it's going to be a mediocre week. >> joining us from the cboe, chief strategist with sink or swim. good to have you with us, joe. we got a sharply higher open today. it's hard to see exactly why. why do you think this is going to do that?

>> going back to the low volume mag was just talking, i think we're going to continue to see it, but the belief down here is the s&p 500 futures is going to test the 1036 level which is the high we've seen recently, we tend to do this when we test levels, the rhett set have a, one of the things also, if you look at the vix on thursday afternoon and friday. they destroyed options prices. we may drift higher which we tend to do. history eckley, we're high. but for the last year, year and a half, we're at the very low end of the range, just over 25 right now. >> so just looking a few days ahead, what do you think is more accurately going to set the stage for september, today's trade or last week's? >> i think actually next week's will really be. i hate to say that i think, you know, to the point, it's going to be a little bit thin and there aren't that many economic numbers this week. you'll see a lot of drifts.

this could be one of those weeks where have you a 100 point day every single day up and down, nobody is quite sure. people aren't anxious to hop on board million they have something to hop on board for. >> joe kinahan, thank you very much. we have the countdown to the opening bell on the other side of this break. as we said, it will be a much higher open. we'll be back. i'm here on this tiny little plane, and guess what...

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exacreative. and we talk about changing the financial systems, stuff like that it would change, too. i'm not saying they're being dishonest. >> that's the way the game played right now. mcgraw-hill celebrating its 80th listing anniversary and unveiling a digital learning exchange. at the nasdaq. trintech group. ttpa, they provide financial governance, risk management and compliance software. >> our market reporters are ready to talk about the rally at the open, we're not fully open on the dow but we are going to start with matt nesto. >> i'm just check out kraft here. to see how it opens. 26.30 at the open. we definitely have momentum if this marketplace. one of the big things, tobias goods, setting the s&p at 1100.

there could be highs or lows, but the reality that's your target. procter & gamble has seen the price target go to 70. ubs talk about general electric, go from overweight to neutral. they like the risk/reward ratio. the stock going to 70. the price also going higher. the third member is ibm, raised from equal weight from overweight. they did the same thing tour dell. the other news we're tracking includes a downgrade and a big harsh swap down of aig at credit suisse. they go to underperform neutral. they think it did will he go to $15 a share. last posted $4 o they think the debt load will cause problems. three positive notes on retails. so we're continuing to push and chase not only so many different commodity and currency story, but also the discretionary trade, best buy, gap, costco,

all seeing upgrades here today. >> thanks so much. nasdaq has opened sharplier as big cap and widely held technology. stocks are mostly in the green. mi microsoft just dipping into negative territory but it's a fractional move. morgan stanley came out and upgraded the enterprise hardware secretary today. altera up 2.3%. pmc-see area was on the list at morgan stanley as was zilinix. apple shares up 1% this morning. am holding its big event tomorrow. dell meantime was downgraded over at morgan stanley as they like some of the competitors a little bit better. nonetheless, dow shares are riding the momentum wave this morning, up about a.5%. cost kor raised to overweight from equal weight at morgan

stanley. so morgan stanley was quite busies with costco and retail names this morning. nasdaq opened higher. sharon epperson at the nymex? >> everything is rising right now at the weaker dollar. we are looking at gold still over $1,000 an ounce and oil on a tear, above $70 a barrel for the first time in a week, up about $2.50. a lot of traders are focusing on what's happening at the opec meeting in vienna and tomorrow's meeting tomorrow. saudi oil minister said he thinks the oil market is in pretty good shape right now. $68 to $73 a barrel. his consensus is that opec probably won't do much and leave production unchanged under $25 million barrels a day. interesting story where the saudis stand versus russia, topping saudi arabia for the first time since the collapse of the soviet union.

all this is interesting considering oil is rallying. why is that? you got to turn to the dollar. the dollar at its low elf level in a is year is significant. that is helping not only oil but commodities across the board. we have oil at the highest level we've seen in a week, but of course, gold as well as precious metals rallying very strongly. rick santelli, i know you're watching the dollar as well. >> it's a matter of trying to keep a level head here. when you look at the notion that you have a fertile environment for gold to go up because many force of those thee days last week when it jumped, that the idea that we are down 75 cents, the lowest levels and worry up $9.70 in future, $3. many alter their positions in gold. we see what's going on in oil as far as yield curve, leading the

charge toward lower prices and higher rates. we have auctions today. 11:00 eastern we have an announcement of how many one-month bills we're going to sell. at and auction off a total of $58 billion and at 1:00 eastern, i misspoke and said two years. it's three-year notes. supply will be something to watch. remember, the world may be getting safer in equity terms but the credit markets haven't given up their very low pricing yields. let's go back to mark haines. >> thank you. stocks climbing higher for the third straight day. can it continue? joining us now alan lance in esalt, bill smead, of smead capital management. i always give first crack to the west coasters who get up early. bill, what's going on here, this market is defying everyone? >> well, equity investors pulled

$5 billion out of mutual funds the weekend in september, lipper repo reported. >> they pulled $5 billion out? >> that's right. the public believed the doom sayers in march who said it was going to be terrible forever. now every time there's a significant correction the, believe that, too. >> yet, we have no correction. >> because there is more money coming due in cds for example in the next six months at paltry rates seen relative to stock market capitalization, so the inevitable fact is the money is going to chase where it is ultimately going to get treated the best. so that's, we look at kraft buying cadbury schweppes, luke look at the s&p 500 value index and see that consumer staples are the most out of favor they've been for 125 years. >> alan, do you agree? >> it's i think it's a struggle between the fundamentals and a

lot of cash on the sideline, but what we're doing is reducing risk. we're taking money off the table and a company like palm has quadrupled for us, putting it into a higher quality name like nokia, that has a good dividend, that strategy of still participating in the market but lowering the risk. the time to take risk was six to nine months ago, not now. >> you're saying investors, many of them are in danger right now of doing the exact opposite of what they should do which is every day it goes up, they are saying why is it going up? eventually they'll throw the towel in, put their money in and that's where you're going to get burnt. >> exactly, erin. it's a situation where the speculative names have outperformed an everybody is putting their money in speculative narths chasing them and you're not going paid for the reward as far as the risk is high are than rereward. that's what you want to try to avoid. >> bill, you're saying to that point, a lot of lower quality names have been the ones that have surged. we haven't seen it with the big market cap narths but a couple

of those are on your list right now. do you think as a whole, it's going to be finally, we're going to see the big dow names move? >> i've been around a long time, maybe alan has also. i remember 1982, the first 10 months of the bull market, the s&p rose 70% and some of the most spectacular moves were made in the lower quality stuff. then we settled into a bull market for five years that the last three were really dominated by large quality and we would not be surprised at all to see large quality take over here and of course that's our bread and butter. >> alan, where do you put new money? >> better quality names. you know, like a nokia. super value 5% dividend. if you're going to invest in probably technology instead of buying apple nine months ago at a loss less price. buy a verisign where it's 50% of its low. low expectation stocks if you're going get into the more speculative names.

>> bill, what do you think of tech here? >> we're not a category people, we're a bottoms-up people. we like microsoft at the ridicule of our neighbors who are mad at them because their stock hasn't done much the last eight years, we like ebay in that category, but it's more because we think there's a lot more present value than stock price. and so we don't get caught up too much in that. tech has been pretty strong. but that's not a surprise in that they were the bubble of '99-2000 and enough time has gone by they can do well which by the way is the same reason why we think the people who are chasing oil here are going to get very frustrated over the next five years because that was the bubble a year ago and it takes typically five to seven years to put the bubble back today. >> thank you both very much. >> thank you. >> appreciate you sharing your thoughts with us. very special programming note. hip-hop impresario 50 cent, otherwise known at fity cent and

dr. david kelly at jpmorgan funds tearing up on power lunch. fifty is going to tell us about the economy and david is going to rap. find out you how they plan to get rich or die tryin' live and censored at 1:00 p.m. today. >>. go for it. >> that's still your read it. >> says that mark was supposed to say word to my peace. and mark felt that would be really stupid to say. >> all right. now it's your read again, mark. >> yes, it is. up next, from fifty to two of our own dime thesis. >> i don't get that one. >> ninth to 'do ice, it's the triumphant return of the c ochk

and the brain. they are tackling big swings. >> why have so. you been click on jp morgue? is it because the stock is above 160%. >> six months ago today or tomorrow. >> tomorrow. that's right on the ninth. is there something else at play? we'll ask jeff hart. you're watching "squawk on the street." we'll be right back.

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they're back. the kahuna and brain. >> we really missed them. >> we couldn't get the beatles back together for obvious reasons, this second best. and it's a very close second. >> very. >> to us it is. >> you know, earnings season, we

were doing our own thing. now and there is something for you to talk about. >> there is. >> bj's last week and. >> marvel entertainment. >> that was as good as it gets. is it worth $4 billion? disney can make it worth $4 billion. >> i remember when they paid the big multiple for pixar and we said oh my god! and that has worked out quite well. >> have you seen this heard on the street. >> i didn't. >> we were talking about it earlier. this man matth curtin, he sounds like a brit. the british chak lot and gum maker was right to reject kraft's approach. they should have because, well, kraft, the stock is down 9% below its 2001 ipo price suggesting that it's struggling to create -- this guy is some brit trying to -- roots for the

home team. he's saying spitzer has got to play hard. he says we don't whether kraft's management is any goal. but stitzer says -- >> you've got to believe cadbury's days are numbered one way or the other. it's different in the u.s. this a possible offer, then they go to what they call a 2.5 which is a formal off, they ch they have to have the financing committed for and then take to shareholders, but there's no pills are stagger ed boards or defenses in the uk. it's a somewhat different process. but that being said, kraft, which has been study this for quite some time an show now to make its move, they don't show the potential for gore higher if they need or or completing or at

least put themselves in a position to complete the deal. that being said, they're going to talk it down right now. all the 4.5 times trailing ebitda is a big multiple. everybody else will say wrigley got more when they bhirchd mars. >> 19. >> but that was at 14,000. those are two private companies, didn't have to answer to shareholders. so we'll see how this plays out. but listen, you can't discount the possibility that a nestle might be interested, however, joe, the difficulty would be fairly high in terms of antitrust, they would have to divest chocolate and hershey finds itself in a very difficult position. too maul to mount a bid of its own for cadbury. >> a stake in hershey now, he's there, right? >> he's in kraft. i think he is in hershey. >> i think he is. and there was an interesting deal. obviously had to work with the trust as well. what is the gum that you know -- >> trident. >> is that cadbury?

>> yeah. >> so that's the allure there. you know, you had a bounce in your step i saw walking up this morning. >> it's funny, i talk to some bank, they say things are going to get busy, others are very, very morose, but things have picked up in the last couple of weeks, somewhat sur prissingly. this is obviously a huge transnational bear hug and then you had the two deals from last week. ba baker hughes, you must have been excited about. >> yeah and how about jpmorgan and ge? did you see that today? >> i heard about it. >> i changed my name, i gave up on morning joe, but some guy has country joe. what about ge joe instead of g.i. joe? because i don't mention it inordinately because of the parent company, that's a pretty big move, it's a dow component, up friday. it's up. a lot today. >> what's the key argument here?

>> that it's one of the last companies that can read j pchlt mo morgue en -- one of the last companies that just a little bit of good news will move the stock a lot. what else did he say? one of the last big blue chips that can still respond to it's still undervalued, the consensus is still that it's not going anywhere. it was sort of backhand compliments from the jp morning analyst but you saw tom lee over the weekend, different tom lee, the strategist at jp morning was saying you should buy any of the stocks that had been heavily shorted. >> works for aig. >> he had a list of buy rated companies that were heavily shorted at jpmorgan and also mentioned it as a newt trachlt then you saw bichl, i don't know how excited you get, 976 is the estimate for the year. company said they're going to do at least 970 which i think is pretty good. you know, you've got two quarters left and we're going to hit 970. >> in this requirement.

>> so are you going to stay on this? >> i will be on this, like trident on the bottom of your shoe. >> is mark there? >> yes, mark is here. >> you know, you remember when faber asked me if i was on the hershey train, i guess? >> i remember that morning well. >> i started sweating, hyperventilating. he totally left that out of any discussion today. i asked him whether -- he said that was so long ago viewers will not remember me. >> the only people who remember that is you, me and mark. >> truly disgusting. >> there will be a few viewers. >> there is a train at hershey park. >> we know! let's not go there again. that was great, guys. air force one. >> stocks on the move up next from hogs to biotech. >> plus jpmorgan. it's one of the most clicked on stocks on cnbc.com and you know that turns us on. is it because shares are up

about 165% since the famous f faber bottom in march? >> that's disgusting. >>. >> or is there something else capturing your attention? we'll have some answer next.

welcome back to "squawk on the street." i'm mary thompson with your real time flash. we're looking at smithfield foods. right now, it is slightly higher. it's been jumping around this morning, recovering from an earlier decline, the pork producer with a wider than expected first quarter loss. lower hog prices is one of the reasons for that disappoint iin number. however, smithfield said a new credit facility is going to help keep from violating its debt covenants. look at royal bank of sco scotland, up slightly higher right now. "the wall street journal" reporting the stock is higher. the sale could take some months but seen in a key step for a reinfrastructuring plan. osiris therapeutics a the

big loser. two tests failed to meet the main goals of the study. and facet biotech saying $355 million bid is inadequate. now let's look at j pchlt mo morgue en. up 160% since the haines bottom. which is one of the reasons the stock has got viewer attention. because you clicked, jeff hart. it's always good to speak with you. >> good morning. >> jpmorgan gets a lot of attention because it was seen as one of the better run, if not the best run banks during the entire crisis. is that justice department, a 1 160% gain since march?

>> i think what we saw in march was jpmorgan and a lot of banks were priced as if they were going to fail, we were going into the great depression. now that's not the case, the real run is justice department. the question for investors becomes what happens next? is there going to be another run from here. i'm nextfest cal financials in general could have another big run from here. because there are still a lot of underlying fundamental problems. but it's not sur priss people are looking at jpmorgan, it's one of the best managed banchs out there. >> isn't there a potential problem for them coming in commercial real estate? >> i think there's definitely a potential problem in commercial real estate, but you've got to look at the relative exposure, if you're going to own financials in bank land. jpmorgan, they've gut a lot less commercial real estate exposure than regional banks. so on a relative basis, it's a safe place to be. >> i remember when a lot of investor s we

investors were worried about that and i asked jamie dimon, he got a little perturbed, he wanted to make it clear commercial real estate was not as big an issue for them. so it's interesting that you agree with that point. the question here is when you say you're nervous about jpmorgan because they've already come so far, what the reasonable negatives there? do you agree with their chargeoffs on, for example, credit cards and mortgages where they obviously have huge exposu exposure? >> they've been ahead of the curve in some of the loss problems we've had. as prime mortgage has gotten worse, they're one of the first to talk about it. so they're one of the first of anyone. when you think about commercial, back to three years ago. say saying, we're bracing for the storm. they've been planning for commercial real estate to go wrong for a will and reserving appropriately. >> in terms of your buy, final question, jeff, you're saying jpmorgan more of a hold for you. you do have a buy though on the

big bailout ka hhunas, citi and bank of america. how much upside left. >> in b of a, it's run itself out. it's tough to get bullish on financials, toufr stoort s.t.a.r.t. looking at name where is where you get some downside protection but upside commodities. it would be the name i would push people towards, i would probably be looking at goldman sachs. i'm not calling forren andy of the world here. not a lot of sells, but a lot of holds otherwise. >> thank you, jeff harte, we appreciate it. still to come -- >> this is not good. but is it time to start investing in real estate again? we were just talking about commercial real tate. the morgan stanley reits index up more than 70% stenson since the now famous -- >> infamous.

>> find out if reits are right for you? >> later, life insurance. most of us have it now wall street plans to secure tiz it, acronymize it. is this an idea that could end up going bust? great report, i believe by jenny anderson on that over the weekend. >> run for lives.

live from the financial capital of the world in the heart of lower manhattan, this is it, second hours, fun filled, exciting, entertain, enlightening, profitable, "squawk on the street." i'm mark haines. 21 of 30 dow stocks higher led by, are you ready for this? general electric. which hasn't led to the up upside in maybe a decade. al ccoa and caterpillar also in there. harley-davidson helping the s&p 500. an executive at boeing says he sees aviation recovery in 2011 and a return to growth in 2012,

a adding he's confident the company can deliver the first dreamliner fourth quarter next year. erin? >> thank you, mark. we have a bunch of questions on what's going on in the market. matt nesto, let's start with this one. had this huge pop expect midfutures. we were going to open up 80 or 90, but didn't. why? >> it's concern concerning. able to move high owner a lot of good news. when we have ample good news, we stumble. definitely strength in the energy stocks up more than 2%, but that's skew xued, if you drill down, it's being led by coal stores, which is back to the material shanghai play. i think the currency market has become the indicator of choice. we talked about oil guys looking at stock. stock guys looking at oil. everybody is looking at the market. >> the old chicken and egg problem here. >> we do. but the currency market seems to have it right now and the whole

trade there is belief that the global recovery is good. so why take shelter in the dollar if you believe the economy is recovering globally. >> you have a report from the chief strategist at citi. >> they kick it out for 2010. their price tar get about 20% higher from today. gains are likely in 2010 but expected to be uneven, goodco spike above 1100 during early parts of the year and back off. so what are we saying about the second half of 2010. make your hay or chop up your wound store it away. >> question on the double dip. >> you got it. >> let's get to scott wapner looking at an upan upgrade. >> it was morgan stanley really playing a big role in how the nasdaq is trading right now. they made a call on the enterprise hardware space, upgrading it to attractive from in-line but they specifically

mentioned names like altera, pmc-see area and xilinx. you've seen some money coming out of tech names that have seen gains in the last couple of days or so. remember, the nasdaq was up on friday, so coming off a good session here as hike row scientist and ebay are pulling back. morgan stanley also made a positive call on apple raising the price tar goat to $200. it's those positive calls from morgan stanley, the likes of apple and computer hardware names, giving an initial boost. costco, morgan stanley bumping that up to overweight as well. but the nasdaq is pulling off its best levels of the morning really with the overall market. >> thank you very much, we can see that on dow up 15. also the best levels of the session, oil and gold, biggest

stories. gold above $1,000. sharon epperson, why? >> we're looking at oil prices that have to do with what has happeneded to the dollar. we were talking about the dollar being at the lowest level in a year and that is why we're seeing not only oil but commodities across the board including gold an silver and copper all higher. the fact remains that $75 oil is something that the saudis have been pushing for but also something the nonopec country weren't to see as well to get the oil out of the deep water so we could see oil go back to those levels pretty quickly. keep in mind we were just there august 25 ath so not too far away. also as we lock at opec members, it doesn't really make sense mentally for oil to be here but once again, we're following equity, worry following the dollar, being at the lowest level since last september has pushed up not only oil but has also caused gold to go back over

1,000, we didn't see that dollar correlation last week, silver on a tear as well as copper. rick, do you in chicago. >> yes, thank you. sharon, you're exactly right. if you look at the dollar index in terms of its graphic, its chart, whether it's an intraday down 0.75 of a cent. it's huge, listen, america, everything you know is denominated in dollars. that institutional u.n., that oil for food, they must have learned about about oil as an exchange because they think the world needs a new currency. there are great protagnoists in those sanctions we tried to implement years ago but many in the world are looking at the dollar in a negative light but matt also pointed out maybe there's good things, less flight to quality. we have t-bill, interest rate, mostly unchanged but security slightly elevated. >> rick santelli, thank you very

much. after being down 40% in the last year, the dow jones reits index making up those losses in the past six months. is the recent reits recovery sustainable? is now the time to eight add them to your portfolio? bmo capital markets sponsoring a real estate conference this week. joining ulg before the conference kicks off, richard anderson, senior reits research analy analyst. >> thanks for having me. >> thank you for coming. first question, i'd like to, if you could clear up some confusion for me. on the one hand i keep hearing a crisis is coming in commercial real estate. and that of course is what most reits invest in and on the other hand, i'm hearing it's time for reits. how do those two jibe? worlds do collide with reits and rhett of the real estate

marketplace. reits, while overleveraged relative to their former self are underlever around relative to the broader industry. so when we talk about the next shoe to drop, when we talk about commercial real estate that may happen to a fairly large degree but with the reits being positioned, ability to raise equity and go on the offensive and buy properties at a fraction a of the delay, it really could be a great time to own the publicly traded reits at this point in advance of the fundamental recovery and in advance of this whole next shoe to drop fn none that may be in front of us. >> i'm reading in your research, if you want to make money in reits, you have to be early. >> you have to be early, mark. when you look back in history, all the past few psychings, fundamentals didn't recover until 1995 but you did yourself a favor by investing in the publicly traded companies in the early '90s. same held true in the early 2000 time frame, fundamentals did not recovery until 2005 but if you bought reits in the early part of 2000, you did yourselves and

your investors a favor. so we think ear we're about in that spot right now with the publicly traded reits today. >> limited new supply. that's playing into the market how? >> well, i mean, at the heat of the housing boom, there was so much resources and manpower being directed into the for sale residential marketplace that commercial real estate got left to the side so in a perverse way, we have a really good supply picture from a fundamental perspective for the commercial real estate marketplace. so when we look to late 2010 and 2011, it really sets up quite well for the reits and for the commercial real estate overall once we get back this hurdle. so if you look at historically trends for new supply, about 2 1/2% of existing stock is the norm. we're bow low 1%. we're about one half of one

percent for the commercial real estate secretary. >> juror picks are camden. duke realty, i want it get them all in. duke realty, dre and first potomac realty trust, fdo. avalon bay that sounds like an apartment reit. >> one of the premiere apartment companies with assets in the high barrier entry markets of no, boston, northern california. this just a class act organization with a great balance sheet and the opportunity to again be offensive in this marketplace. so good management team, great balance sheet. we buy quality right now. >> cam ben property trust what do they do? >> same thing, different areas, but jazzed up about this name because they are in the epicenter of the housing bust market, las vegas, florida, southern california, and i a think they come out of this stronger than some of their peers so this might be a really good opportunity for camden. >> they they don't own property in camden. >> not camden, new jersey.

>> you don't want to do that. >> duke realty. >> value call on the office industrial space, just a longstanding company that's rated its balance sheet and rated its development exposure, a great name in that area, value call. >> no time, very quickly. first potomac, who are they. >> washington, d.c. metropolitan airy office name, should benefit from the job market in washington. >> okay. rich. richard an anderson loved in $6 million man. >> thank you. >> that was that abilitier's name, richard anderson in "$6 million man". the ghost of september make an unwelcome visit. >> plus looking for some stability? we found seven firms that profited during the crash. and are expected to thrive even as things improve?

pretty interesting. we'll talk about what they are. plus wall street's next big idea to make money. death bochbds. >> they're going to do for insurance what they did for subprime. >> but is it another exotic investment that will eventually go bust. >> one year later, can wall street get out of its own way. we'll be back. >> u.s. government has seized control of

takesover talk. we were supposed to open up 80 points or more higher. we have not hit that yet. we are at the highest level of the session, but that's only up about 40. i'm not sure if that's an ominous sign or not but we have to be care. september is known as a frightening month for investors. joining us is a cnbc market analyst from cincinnati. peter sorrentino. >> what do you make, gordon, of the fact we were indicated to have a much higher open than we

had and we were not able to get up to that level? >> interesting trading session, so far, aerin. just a lot of conflicting statements. gold is up, dollar is down. so you start to get concerned about inflation, but you look at the treasury yields and you say that's not a factor. merger activity appears to be on the rise, but not company buyback, not a good thing. inflection point at these levels, hard to figure out where it's going. >> what do you stay, peter so sorrenti sorrentino? where are you putting your money? >> we think we're getting a leadership rotation here. we saw some things happen in the summer that didn't make sense. the bread crumb trailing is start ing starting to emoerch here. gold and oil higher, even though the fundamentals don't support higher oil, but if you look at the there are on its own it tells us that basically the dollar is going to be softer. so there's sectors that the consumer in particular are going to suffer from that. the industrial secretary, basic materials are going to do well in that virment an have pricing

power. so we want to basically go where the tide is recognizing and that takes us into the early cyclical industrials. >> hey, dr. no, aren't you worried about getting stampeded into stocks here? >> i have to agree you there, mark, there's money on the sidelines coming n short cov covering in that, but there's still a lot of questions be a what is the exit strategy of in terms of this government pulling out and consumer buying in? inflation is still out there. but you have unemployment, getting near 10%. we want full-time work. maybe closer to 15%. so there's some things that still have have to be reconciled, sir. >> peter, you think we break 10,000 before the end of the year. 1100 on the s&p. but we're right in the middle now. we're 9500. that sounds like neither great

reward nor risk. >> our basic tenet is this is a bear market rally. >> oh, no. you can't be serious. >> you think -- >> bear market rally. we think you trade it. this is a multi year deflationary cycle. >> we're up 3,000 points, this is a bull market. >> no. not really. >> okay. make your case. make your case. >> we're looking at basically the driver of the u.s. economy over the last 30 years has been the u.s. consumer. we've got an aging population, we've got a shift from goods purchasing to servicing. growth is elsewhere in the world. twunt focus on those companies that benefit from that or those that are out of the way of it. you go small, you go international, play the weakness in the dollar for manufacturing and basic materials and the consumer stocks not in the u.s. you don't play them. i think you look elsewhere. >> all right. now, how long does it last? you're going 0 say that worry in a secular bear, peter. is this manage that ends in when? do you have any sense of time

frame? >> for the u.s. consumer and u.s. government to start to get their balance sheet in order, i mean start to get their balance sheet in ompltd you're looking at 2014. it thabs long. we dug a big hole, it's going take a long time. get used to the concept, trade the market, be willing to move rapidly and exploit opportunities. the reit recovery, you can make money in reits, no question about it but you've got to be very selective on location and property tincht thanks very much to both of you. he raises one interesting point though when you think about the labor market. i'm not trying to make a point about the market at all, but the labor market going to take years to recover. it's this whole issue of fewer people making more things and incomes that have not gone up. it's a bruder issue that on some level has to be addressed. >> agreed, but we have a, quote, jobless recovery earlier in this

decade. >> how many of them can you have? >> i don't know, but i think we're going to find out. >> fair point. >> up next, stocks for any economy. we found seven companies that profited during the crash and are expected to thrive as things get better. when he name names next. >> is it too good to be true? later, health care reform verse sis deficit spending, the president is focused on one, the market is focused on the other. we'll see what it means for your money and what is being heard on k street. i'm here on this tiny little plane, and guess what... i've still got room for the internet. 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.

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plastics which are lighter and advanced hydrogen technologies that could increase fuel efficiency by up to 80%. stocks in the current economic is certainly not easy. the magazine's october issue hits newsstands today. seven stocks are featured that

they believe are fit for all season. let's talk about some names. the executive editor of kip linger's personal magazine is with us. you found names that minority countercyclical in that they will do well when others do badly but they are all cyclical, right they did well in the crisis and you think they'll do well now. >> right. we weren't picking pawn shop operators or 99 cent store, these were company that grew during the recession an expect they will do well during the recovery. >> let's get to a few names. you profile many in the article, we'll touch on a few of your favorites here. cognizant tech solutions whachlgt do they do, how do they grow? when it was horrible? >> this is a technology outsourcing place that is india's fourth largest outsourcing company but it has a twist, it's based in teaneck, new jersey just a stone owes

throw from your offices, that's a selling point for the customers, helps instill confidence, the company benefits from the desire of companies to lower their costs of technology operations, they do software, onsite soft way, onsite maintenance. this is actually one of the great growth stocks of the past decade, the stock came public in 1998, a spin outfrom done and brad street, adjusted price of 84 cents a share. you can see what it's done now. >> what about flir systems. also on the nasdaq. >> infrared detection systems manufacturer. we call it the original green stock bought technology was originally designed to uncover waste and inefficiency in buildings. the technology has expanded to other area, particularly government uses and the military. so the technology is used in search and rescue, terrorism detection, and other aspects that the military finds useful.

so many customers are the u.s. military and foreign governments as well as law enforcement agencies. >> what about gileads? their s this a biotech? >> yes, it's leader player in hiv treatments that has about 71% of the market. 81% of its revenues gave from aids treatments but the company is trying to diversify and made two major acquisitions in the past few year, cv therapeutics and myogen to move into the cardiovascular area and also has a treatment for hepatitis-b and also a joint treatment with roche for tamiflu. >> one more. intercontinental for ice. the growth here about pretty stupendous. >> yes it has been. revenues in 2004 were 108 million and should approach $1

billion this year. this is leading electronic marketplace for trading of energy futures and so-called soft commodities like sugar and coffee and orange juice. this could be a play on cdss as well. if the government regulates default swaps more stringently, its venture with nine banks to trade these on exchanges to be a boone in the future. >> all right, manny, thank you very much. we appreciate it. manny has listed four names as reasons why they'll grow when times are good and terrible. but there are more in the magazine. go on newsstands today. the brain is back. you've seen him. hair lock trimmed, up next, it is there more deal action on the way? david would know. he's back just in time to tack that will in the next faber report. you are watching "squawk on the street" right near the high, up 45. the futures did not foretell the

trade, at least not yet. we'll be right back. eseseseseses

and welcome back. in the headlines at this hour, small business owners are more optimistic in a glass half full way of looking at. the national federated index rose to 88.6, up 7.6 points from its recent low which coincided

with the market low in march. greenlight capital's david einhorn said he's shorting mcgraw-hill, parent company of s&p after a federal judge handed down a resulting that would allow investor lawsuits to proceed. they were trying to use a free speech sort of defense which se seemed rather feeble, but we'll see. there's always appeals. oil rising above $70 a barrel as the dollar continues to take a drop. mark? >> in fact, terry mcgraw from mcgraw-hill is down on the floor talking to people, saying -- >> he's exercising his free speech. >> saying don't worry about us. the markets and internals down 0.5 of 1%. s&p down 0.75. big board, that's nice. 3:1 winners over losers. volume is not nearly as the advanced declines. nasdaq 14:9, can't really reduce

that any further. but we're looking good. >> let us get to the brain who is back. we really did miss you, david. >> why? was i supposed to think otherwise, erin? >> i just wanted to make sure i emphasize it. >> thank you. >> we miss you and the hair lock, too. >> the hair is getting long. going to have get a haircut, but last days of summer. it was nice and always nice to be become and nice to see some m&a back. you've been watch, you of course know this year has shaped up as one of the worst in quite some time in terms of transaction volume in the merger and acquisitions arena. why are they important have they help fuel confidence? they impart values to the market and they are just generally seen as good business, certainly for wall street as well. look at that global m &a volume falling off a cliff. this is shaping up to be one of the worst we've seen in quite

some time, but these past few week, perhaps a sign things will pick up in activity. in speaking to a few bankers, even this morning on the cadb y cadbury-kraft deal, they're indicating that we have a few other things out there that may come. last week, we saw two deals announc announced, the market would seem be to the most important component in that but there are others as well. but when you have a stock market is that up and seems to perhaps has stableized it does give confidence to buyers all of who awhom are running businesses not private equity to make a move, perhaps a bold move embodied in an overture or a deal. so we are seeing signs of that kraft has been waiting a long time to do this deal or i should say make this overture to cadbury. quite some time. i ren rosenfe

irene rosenfeld has chose ton do it now because markets have reached some stability but also because financing is back. a year ago as we come up to the anniversary, of course, of the bankruptcy of lehman brothers and all that other fun, could you not have said with a straight face, oh, yeah, $8 billion in financing for a leveraged transaction, 3.75 times levered, even an investment company, no way. there would be a layup in terms of getting financing. that has changed. nobody is even talking about kraft and the $8 billion it needs in financing being an issue, it's simply a question of when they will move handy tie that up. that is a different environment. one that may also embolden other companies, strategies to go ahead and also make bids in the past they might not have embarked upon. we'll see if we have more coming. disney making a move last week. along with baker hughes and dj services, another large deal, then this week beginning with

that bear hug from kraft for cadbury. we'll see if there will be more particularly in the food rene narc mark. of course, when you see one company make a big move for another, it does send these things on a path. the wrigley-mars deal in some way, perhaps a forerunner to this bid from kraft, back to you guys. >> thank you, david faber. just ahead, we want to bring your attention to some stocks on the movement chicago chip maker and casino play, a different kind of chip. your real time blast on the other side of the break. >> plus with the mortgage business gone bust, wall street is looking to make its next big bet. there are a lot of things they're working on. today we focus in on debt bonds. is it a sign wall street is up to their old trick s there anything wrong with a debt bond. >> just think subprime.

welcome back to "squawk on the street." i'm mary thompson with your real tie flash. aig is being cut from neutral to underperform seeing no value in the common equity. it's down $3.31, decline of just about 8%. mgm is up higher at 49 cents. 8.25. in an interview the ceo has said they have seen a profound improvement in the casino opened back in 2008. take a look at intelon a big inwerer on the nasdaq today. the chip maker therus

communications is buying the maker of home electronic, did is down slightly on the news. it does see the acquisition closing in the fourth quarter and adding to its earnings in the second half of next year. also raising its third quarter forecast, down 77 cents. >> tyime to get a check of whats making news outside the world of business. monica novotny. >> good to see you. president obama heading back to school today with that speech for students across the nation. now speech is helicopter meant to highlight the importance of goals an hard work for students but also drawn fire from critics who influence the young and impressionable. meantime the white house is sending up criticism that led to the resignation of van jones a youtube clip appeared in which he use a expletive. in london, court has found

three muslim men guilty of trying to bomb three transatlantic airliners that could have killed 1,500 hundred people and come to rival the attacks of september 11th. and to leave you on a more positive note, smerz fun video, fish were jumping so high, the anglers didn't knee a pell to catch them. mullet fish weg w being chased to the surface by predators as the migrating schools made a run to the ocean. i wonder if that counts for the fishermen, looks like cheating when they're jumping at you. >> definitely cheating. >> believe it or not, i've been there and done that. >> really? ? >> when i lived in florida. >> when they're jumping up like that. they get chased by sharks and they just start a frenzy, just wait into the water with a shirt and come up with all these fish. it's the great. >> here's my question. there's a shark. there's fish running from the

shark. you're wading in the water. >> you want to make sure you get out before the shark gets there. >> quickly. monica, i -- >> i'll just stand on the dock. >> i would have nothing do with that. thanks, monica. up next, president obama's big week, what's at attack for the commander in chief as he tries to get the health care agenda on track? we'll tell you what is being heard on k street. >> it's not hard. you can get out before the shark gets there. >> he knows a lot about sharks. >> first. what's going on? >> i wouldn't play chick weren't ashark either, mark. coming up at the top of the hours, as we return from the holiday werngsd the big debate on wall street is can the rally continue or is it going to be a selloff? the dollar continues to be under attack, now the u.n. is calling for a new global currency to replace the dollar. should which be? that's our debate. all that plus the latest market news and rae action coming up at

the top of the hour. first though, "squawk on the street" is back right after this short break. i've been growing algae for 35 years.

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in this morning's "sound check" from the credit rating agencies to housing, a look at where we are one year later. >> a couple of years ago, on the high soo side, aaa ratings were given to entities that never should have been aaa. now there's a lot of flux in the makt both positive and negative. so incentives are critical. >> i think we're starting to stabilize and some of the programs put in place have been slow but we're starting to get progress on the refinancing program, the modification program. >> from our standpoint, on the residential mortgage backed securities and the commercial mortgage backed for that matter, too, we had the housing recession wrong. now the fact that lot of other people had it wrong doesn't help. you know, but we don't like that. and that's where our problems began.

>> and check out health insurers, they are lower this morning on reports that new health reform proposal will contain components negative for the industry. united health care a huge company in that space, down 2%. down 2% on aetna, down 1 and change on humana. >> this comes as president obama is trying to jump start his health care reform plans tomorrow evening on the hill. some say one idea might be floated as well, charge those insurance companies to insure everybody. that may or may not involve a p public option. still so many question marx. chief economics correspondent with "the wall street journal" is with us and our chief economics correspondent john harwood. what is the latest you are hearing on these key issues about who pays for and public option? >> well, before i get to that, erin, i was impressed by how mark was moving during that sound check. did you teach him that stuff?

>> he's a tap dancer extraordinaire. >> that's disco, mark. >> that comes from running away from sharks. >> that was not bad at aurchlts that reminds me of the bee gees, late '70s, early disco. >> you were are there. >> john travolta. >> he know if he pulls his back out with his new health care refo refo reform -- >> on the public option, it looks like where we're headed, erin is this triggered public option that is favored by olympia snowe, the centrist republican from maine, who may be a critical vote here and at merit or virtue public option from the standpoint of the white house may be that liberals can say we've got that as a fallback if we need it and conservatives can say we haven't voted for a government plan because we're going to give the insurance marketplace time to work. i do think the process is working towards the taxing insurance companies provision you just mentioned to pay for the bill rather than taxing

employer provided benefits which many health policy people would like do but the president campaigned against the idea when john mccain proposed it. they're going something indirect by going after the high-cost plan, the question is how much money can they raise and how much effectiveness can they get in terms of bengd the cost conserve? some of bending the cost curve. >> you think they're hear iing e same thing? >> i think the last thing was the critical thing from the folks i'm talking to, bending the cost curve in the long run. the problem for financial markets, central bankers, is that we have this huge budget deficit. in the first ten years, the reform plan the going fo potentially expand the deficit. the justification for deficit point of view is can you bend the curve and you know, i think the whole part of this debate, that's the part that hasn't been

proven yet. >> the way you bend the cost curve is take away incentives for medical treatment. what is the value of health insurance company you tax for that purpose, but have objections from people like chuck schumer saying if you tax plans with premiums of more than $21,000 a year, you're hitting a lot of people in new york. not just wall street people, but firefighters and police officers. he's talking about raising that amount subject to taxation higher, but you get less revenue and cost control. >> this is one of the fundamental problems with this debate. all the things that need to be done to change incentives of people and how they use medical care is unpopular. you could raise the retirement age for instance, so that you know, so that people are using more private insurance further

into life. >> careful. >> but no one's talking about that. and then you also mentioned the employer-provided plans. that's wup of the huge incentive mix-ups in our whole approach to health care coverage is that employers are in the middle of household choices on health care and that's politically unpopular to get rid of, too. >> and we need to go after medical malpractice reform. >> that could be a compromise at the end by the way, to get some republican support. >> it's a public option or co-ops, is that dead? >> i think they're fading in terms of appeal. i think the triggered public option as a fallback has a significant chance. >> thank you very much.

what have we got coming up? >> a lot of these questions, especially on the deficit -- >> this is the big thing you're doing thursday. >> and taxes, geithner was instrumental in setting everything up and we'll be talking to him at 7 p.m. on thursday. up next, the big banks rolling out more investment vehicles. >> one year later, can wall street not stop itself or is this really a great idea? actually, 47. ladies and gentlemen, mr. larry mccarthy. amidst today's financial turmoil, our sophisticated wealth transfer strategies... and philanthropic expertise ensure your legacy... is passed on to family or your favorite pastime. ♪ northern trust. wealth management. asset management. asset servicing.

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big bankers are looking to light insurance policies. does such an chotic investment signal wall street up to their old tricks one year later? here with us today, vince darrell. chief investment officer as well as a cnbc contributor. vincent, good morning. is this a case of stop them before they secure again? >> beware of wall street geeks bearing formulas. this is the old stuff all over again. if you rolled it back and took a look at the first subprime

offers, you wouldn't be able to poke many holes in it. you look at this, can't poke many holes, but they're there and are going to come back. i don't know where, but they're going to come back. >> does this plan sound like it may work? >> it will make a profit for wall street. now, will the investor make a profit at the end of the day, they're going to have very adverse selection up front. you want to buy policies for people who are ill, that are not going to last long because the investor will continue to pay the premiums. the one way so circumvent this is to say, okay, you're going to generate a lot of short term profitability, but you're bonus is going to get paid in the stuff you just created. i bet you that would scrub out a

lot of the inefficiencies that are there. >> isn't that on the table for financial reform and already for the subprime mortgages? >> it is and should be. when you get a lot of money and creative people, you're going to find all sorts of stuff. but it's almost like a new drug, erin. you have a new drug introduced and you don't know the side effects until it's tested for a while. you can't do the same here, but we've had such a bad record of creating derivative stuff with all these formulas. the test is you get paid the same stuff. if i had to review the bidding on the stuff i just put together to sell the clients because i'm going to own it, i might do it differently. >> this tells a bigger story, doesn't it? it shows that one way or another, wall street willge