a relatively studious way. they're not rushing to judgment as might be the case in health care. i think a lot of the things they're proposing have some merit. the registration of private equity and hedge funds seems to be rational. i don't think we need a consumer protection agency because i think we just put some stipulations in that help the consumer. if you're not careful, we're going to restrict credit as opposed to make it more ample. at the end of the day i think they ought to stay out of executive compensation and leave that to the boards of directors of each company. you can take exception to that, of course, i don't think they belong trying to understand that. hopefully they'll get it right. above all i hope they clarify who is accountable for this. you've got the commodity futures, trading commission, fcc, it's got to be one of the other. at the end of the day it's clear and accountable and we'll know who missed the boat and who didn't, and hopefully we make progress on that front. >> always good seeing you,

larry. make sure you join us on monday. "squawk on the street" is coming up next. this is cnbc.com news now. >> the world health organization has cut its forecast for how much h1n1 flu vaccine they will produce and supplys will be inadequate. dow component proctor and gabl bl is called higher after citi upgraded it from a buy to a hold. the fha is in danger of falling below mandated minimal levels. that's cnbc.com news now. we are first in business worldwi worldwide. i'm mike huckman. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. the nation's biggest banks could soon face curves on pay.

here we go again. report this morning say a proposal in the works would put the fed in charge. >> although it gives the fed the power to reject compensation it thinks encourage tos too much r. >> it gives them a veto it. >> gives them a veto but it sort of sounds like a lot of rhetoric and not a whole lot of anything. >> is it going to be like baseball arbitration or what? will they have to -- anyway. >> so, just going to be a big topic of conversation today. on this quadruple witching friday, which means you've got options of all sorts expiring. you get a let of action and volatility and sometimes big moves. investors are trying to decide if further market gains are justified. s&p up 8% since that march low. >> futures right now, nicely above fair value because fair value is minus 191. add them together, that's 5 and change above fair value.

good for almost 50 on the dow. let's see how it's playing out premarket. reporters are standing by. bob pisani. >> up about three points on the futures here. it's quadruple witching iks pir rags. it's been an odd expiration. we've had volume in the last two days but not a lot of volatility in the indienindieend indices. dow chemical, may say's, our parent company, ibm had a terrific day the other day. it's tln elsewhere, homebuilders are up. kb homes up 3%. jpmorgan upgraded them. also, procter & gamble upgraded at kriciti group. they're talking about their ability to win back market share in the near future. barclays raised their first quarter 2010 u.s. gdp profit to 5%.

tradertalk.cnbc.com. brian, how are we at the nasdaq? >> looking better than at the close yesterday, bob. interesting earnings report. all over the place was palm. positives and negatives. they lost money but lost less than expected. smart phone shipment was above consensus. that's good. q2 guidance, low. full-year guidance, high. goldman sachs is going to handle the 50-year share. it's up 0.9 of 1%. amazon makes private label products like 1,000 of them from outdoor furniture to chopping blocks, and they aquid zappos. very interesting article on the private label business. a lot of upgrades an downgrades today. so many i can't get all of them. apple upping their price target to 220. google at colin stewart, $600 price target. add sales are coming back. sandisk, the news for sandisk is from bank of america, merrill

lynch, buy from a hold. listen to this. the discount brother ranlg brok is interesting from goldman sachs. they are moving the stocks. let's go to sharon epperson at the nymex. >> oil is lower but trading around $72 a barrel. you're going to understand why. of course, it's a dollar and stocks. but this time we're looking at the dollar strength adding to a little bit of the weakness and the fact that oil is off of the lows of the session has to do with the fact that some futures are looking a little bit better right now. it really has been a case of the dollar weakness though that has helped oil prices this week. of course, you'euro hit that 14 level. that is significant. the dollar index falling to the lowest level in the year. another reason why we have seen the run-up in oil prices. fundamentals point to lower prices. distillate end ventories at 27-year high. a lot of refiners shut down production to do that turn around to make heating oil for the winter. dollar action is definitely

significant when you look at the metals as well. we still have gold prices firmly above that $1,000 mark. cop area different story. copper is down for four straight days. this is the longest moving streak for copper since july. the fact that we have a lot of inventory of copper has some folks wondering about whether or not that demand forecast that some have beening looking for really will be fulfilled with so many inventory out there. mark, back to you. asian markets pulling back overnight. nikkei and honk kang hang seng, post about 0.7 of 1%. shanghai composite down 3.2%. that one's very volatile. guy johnson in london, how is europe looking, guy? >> pretty flat right now, mark. it's been an incredible week. remember, a week in september which everybody said was going to be pretty negative. this week, for instance, london and paris are both down 3%. we've got the frankfurt market up around 2%. remember the germans go to the

polls this weekend. big general election over there, keep an eye on that story. so while we're having a quiet end at week it really has produced incredibly positive gains for the european markets. show you the stoxx 600 over the course of the week. this will give you an idea of the gradual ratcheting higher that we see. big week obviously in terms of overall performance. big day coming in the middle of the week. since then we've drft drafted sideways. stoxx 600 is down at the moment, 0.1%. jal, they are concerned that jal may jump ship because it needs capital. ba and american are said to be in talk which may involve some sort of capital index. anyway, ba putting a statement out today indicating that it does not want jal to leave the ally answer. we'll pull a few strings to make sure that doesn't happen. the other story i want to bring your attention to, lloyds banking group, so

controversially formed a year ago this week between lloyds in the uk. they want to wiggle out of the toxic protection scheme and it seems the government is having none of that. that is the story we're going to keep an eye on as well. erin, have a great weekend. back over to you. homebuilders are focused yet again this morning, it's been a big roller coaster ride for those names. kb homes and toll brothers on the back of the sentiment data, mark, banks coming out later upgrading them to overweight. that would be a call out on jpmorgan who says they have solidly passed the trough. but over the next 24 months we'll continue to cover. that is sending both home building stocks higher this morning. mark? >> but not so good news on the housing front from the agency that guaranteed about a quarter of all u.s. home loans made this year. cnbc has learned the federal housing administration, fha, may

be running low on money, cash. diana olick in washington, what's going on? >> mark, we've been warning about this for months. and now it's official. the fha which doesn't make loans but insures loans is being such high levels of delinquencies that the cash reserves will fall short of the 2% required by congress. the fha has gone from backing 3% of the nation's loans during the housing boon to now about 25%. and the percentage of fha loans in delinquency has gone from 5.4% a year ago to 8% in the last survey from the mortgage bankers association. in a release, fha commissioner announced credit policy changes and he said he would hire a chief risk officer for the first time in the agency's 75-year history. here are the changes. fha will require annual financial statements by the lenders. the lenders will have to have a million dollars in net worth. that's up from a quarter mill. the idea is to raise the bar which was low on being an fha

lender. fha will revise the re-fis requiring minimum credit scores and a cap at 125% loan to value. it will require appraiser independence. you know that one is going to be controversial. mortgage brokers and commission-based lenders staff cannot do appraisals. to be clear, the fund reserves are sufficient to cover our future losses so the fha will not require taxpayer assistance or new congressional action. that's a quote. but he admits given the size and scope of the fha and importance in today's market, these risk management and credit policy changes are important. you know we're going to be talking about this on the blog today. grow to it. real realtycheck.cn realtycheck.cnbc.com. fdic chair sheila bair speaking this morning on the health of the banking system and future of global finance. we are there with her comments. inside the numbers on palm, that stock has actually

quadrupled already this year. investors have been betting on that pre, smart phone. peter breaks down the numbers and the market right now to key technical level. that means stocks are going to break out to the upside or potentially take a big dip down. we'll get to the bottom of that. we'll be back.

it's been volatile. right now it's up. it was down earlier in the premarket. now, the company had very strong sales of that pre, a smart phone. but that wasn't enough to pull it into profitability. outlook appeared to be cautious. keep in mind, as we said, this stock has quadrupled in value so far this year. go inside the numbers with peter, technology strategist with cannacord adams. peter, this is concerning. you say they're vague, not disclosing some of the most crucial data. >> yeah, i mean, what i don't understand is, is why you just don't tell everybody how many pres you sold. what is the big secret here? we think they sold 600,000 pres out of the 800,000 plus they sold in. they don't tell us how many they sold through, the company did

about 800,000 units in the quarter, which is good. large percentage is older. plus, next quarter guidance, which is just awful. for such a hot-selling handset you wouldn't expect that going into black friday, key selling weekend in the u.s. it just doesn't add up. >> sounds like you're saying they're giving you an overall number of items sold but not of the pre. maybe the pre is really failing and they don't want to admit it? >> it could be. why not just say it. like the they sold 650,000 and their plan was to sell 700,000 or 800,000, say you missed expectations. or if your plan was to sell 650,000 and you sold 650,000, say it. it's been bet on the programalm. why not say it? >> they don't want to say it because they're afraid you might put a sale rating on their

stock. oh, wait a minute, you do have a sell rating on their stock. you've also had some experience with them that leads you to be wary or cautious. last quarter, for example, you point out they say they don't need anymore money and now raising a quarter of a billion dollars. >> i mean, yeah, they're not the only company to say three months ago they didn't need money and now they do. we're just point that out. we said last quarter that they need 250 to $400 million. they were adamant about it. the company was adamant they didn't need it and they're doing it. great, they're doing it at a higher price than last quarter, great for them. it would be helpful if companies said, look, wee need the money. come out and be transparent. don't be so opaque. i don't know how investors can analyze the company when it's so opaque, unless they're saying different things to different people. it's tough to deal with. >> i mean, you know, you got to use a little common sense here.

people are snapping up smart phones left and right, and yet in that market environment, palm's losses are growing. >> correct. and what's more troubling for me, is that the blackberry tour, which was certainly not as hyped a device as the palm pre is out selling the pre at sprint. you're asking yourself a device not hyped, not well promoted by the media is out selling it at their only carrier. i'm not sure if f. that's a great sign. clearly we are a seal. we don't think it's a great sign. >> peter, thank you very much. >> my pleasure. >> very interesting. why wouldn't they give the information? >> i don't know. up next, this does give you pause. up next, the word on the street and the buzz beyond on this quadruple witching friday. >> and later, why sectors which have underperformed may now be the ones to actually out perform. a variation of the dogs of the dow.

although a lot of dogs of the dow kind of dog year in and year out. we'll be right back on the edge for cnbc and "squawk on the street." (announcer) when you need it fast.

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all righty. let's check the futures. they are up 3, almost 4 points. that's good for 50 or 60-point open on the dow. joining us now on the floor, dr. know, gordon charlop.

still cost us? >> yes, mark, i am. >> are you going to stay cautious for another 1,000 points? >> well, you know, mark, we're going to get into this thing sooner or later so let's talk about it. s&p trading by 17 times forwardern aings, kind of rich. if you look at the number, 17%. >> the what number? >> unemployment. people out of work for part-timers looking for full-time work. in new york, 7% full-time work. prime mortgages near time high and credit card defaults. so what is the strength of this rally? it's people chasing returns. it's zero interest rate. so i think we priced that heavy. i think there's going to be a lot of volatility coming in through the end of the year. it wouldn't surprise me to see this thing go either direction. this is interesting here.

ro we are ready to trade. the data is telling you there are -- look. look at the treasury -- >> the market is telling you it's going up. >> you're a bright guy. treasuries, at 25 basis points, who is buying them? >> i have no idea. >> you have no idea. well, then if you don't know, wouldn't you think that would be a reason to be cautious? my work is done here. >> thank you, gordon charlop. have a great weekend. >> back up stairs to erin. mr. haines, let's get the buzz beyond the big board on friday. art hogan is here, at jefferies. good to see you, art. >> good to see you. >> talk about comp, a little concerned about housing. throw in a little dollop of quadruple witching and what do you see today? >> it's interesting, we talk about quadruple witching a bit and what ends up having, three

things. volume. that will be a pleasant change. we get some volatility. a lot of that has been muted over last couple of years on the expiration dates. we'll see if that plays out certainly usually replace where we go. that's and 80% of the time. we make more out of that than we really need to. i think what we really have here is a liquidity-driven market. central banks around the world are continuing the monetary policy. the place to be right now is equities until it's not, so like gordon said, he's cautious and he's been cautious for the last 50% of this move. who knows if he's going to be cautious for the next 20% of the move but it's a marketplace where the next 10% move could be either way. everybody is waiting for the september pullback. it's just not happening. >> so how much higher? do you say this out of momentum is going one way, i don't want to fight it, but fundamentally,

i'm incredibly unto acomfortabl i don't want to wait for it to go down? >> you don't want to fight it, correct. everybody believes we're going to see a pullback at some point in time. we came into september thinking september is bad month historically. we've run up too far, too fast. yet, nobody has found economic data stream or corporate news flow the sufficient catalyst to start that pullback. indeed you don't want to fight the tape at this juncture. as you look at what's going to happen over the next couple of months, third quarter reporting season, how does the market react, you know, to that if you don't see top line revenue growth. >> art hogan, thank you very much. i'm sure you probably heard mark there. see you in a bit. chairman of the fdic sheila bair just finishing up a speech on the health of the u.s. banking system. hampton pearson has more on her comments. he was there. what did she say? >> just wrapping up the speech

at georgetown university. sheila bair saying, first of all, let's deal with too big to fail as part of regulatory reform. the fdic has a system that worked when it came to closing banks but not systemic banks that pose risk going forward, it should not be used for that purpose. whether it's the fed, fdic or treasury, that should not be the case in the future. >> make no mistake, i support the actions we took to stabilize system. lacking a resolution procession, we did what we had to do. but going forward, they should not be used to prop up any individual firm, only to give system wide support. >> also the chair -- fdic chair had interesting comments on mark to market accounting. great for securities but it simply does not work for the bank system. all of that part of a regulatory reform panel going on all day at georgetown university. erin?

>> thank you very much, half on the hampton pearson. we have the final countdown to the opening bell. >> we're heading higher. >> just making sure. this is "squawk on the street." we'll be back for the opening bell in a moment. uuuuuuuuuuuuuuu

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you're watching cnbc's "squawk on the street" live from the financial capital of the world where the opening bell is set to ring in, what have we got, about 1:45. but first, our one thing. and i want to go first because i'm mad as hell and i'm not going to take it anymore. story we talked about earlier, bankers face sweeping curves on pay. a fed plan to give it the power to amend compensation agreements for bank executives if they feel that the compensation agreements encourage the bankers to take risks.

there's not much there there. >> mark, actually, you know what -- >> it's hard to see if -- wait a minute. >> not much is too generous. >> here's my over-arching point. >> yeah. >> it's the fed that did not act aggressively enough that allowed these people to take the risk, and then when they took the risk, tank their companies, the fed bailed them out. so, you know, in the big picture, the fed is encouraging risk taking like that. if you know you're going to get bailed out, you're going to take risks. so this is -- this is face-saving bovine fecal matter. >> to your point, what this is is a political thing, they're tightrope they're trying to walk, which is the numbers are going to come out for the top people and say there's changes for compensation. it's virtually impossible to say and impossible to make compensation deal with the risk

issue. you can't deal with it through comp. the numbers are going to look bad. the president can't stand up and say he's outraged when the numbers come out because he's signed off on them. this is a lot of rhetoric so they'll say they're acting tough and not having to do anything at all. >> all face-saving stuff. >> yes. >> here at the big board, actor alie gentleman woods celebrating the release of the film "9." and at the nasdaq, tong-ji nirks international, manufacturer of exterior parts for trucks. what's an exterior part for a truck? >> fender. >> okay. mirrors? >> mirror. >> in china. >> yes. the little rubber stuff that goes between the window and the door. all right. market reporters are standing by. bob pisani is with us. >> quadruple witching

expiration, what matters at the moment is the price at the open for the s&p 500. that's what determines where we settle out here. so there's a lot of stocks here that are delayed a little bit because of demand -- it hasn't been a big -- there's a modest volume but not a lot of volatility on the major indices. some names have had interesting dates. parent company, general electric, ibm, dow chemical, may say's, carmax, unusual names have had big moves up this week. we're lost waiting and some of the stocks, citi group right her, will have the reweighting in the s&p 500 if that's fairly normal. they had big add-ins to their common stock here. toll brothers and a couple of there housing stocks, kb home are on the upside. jpmorgan had a positive stock if upgraded the two stocks. those had generally positive comments on the home building sector. they're up 3% right now. procter & gamble got an upgrade at citi group. talking about their ability to win back market share in the near future. that stock is opening up 2%.

barclays had positive comments on the first quarter 2 010 gdp, raising forecast up. we have a lot of orders into buy to sell on the expiration. right now, brian, we are sitting just about at new highs for the s&p. we need another point or so. if we close here, it will be a new high. at the nasdaq? >> we're looking positive. i'm going to keep an eye on the tech sector. maybe it will push through today. quick check on the top stories. palm down quickly 1%. open slightly positive. they lost less than expected. they say it's smart phone shipments were above shipments. you heard the analyst come on, they want to know how many pres were shipped. apple and google saw price targets raised at various firms. yesterday's lag, quick check, intel up.

research in motion up half a percent. mike huckman is going to talk to the arena pharmaceutical drug. competitor in this space had secondary offering, yet they're up 8 1/2%. that's very impressive. maybe trading off the negative news with arena. upgrades and downgrades, genzyme downgraded. retails out of piper jeffrijeff overweight on starbucks and overweight on sonic. sonic is down another 1 1/2%. let's go to sharon at the nymex. >> oil continues in a tight range here. really the story this week, over past two weeks, have been natural gas. the violent swing we've seen in natural gas prices from the low two weeks ago today. around $2.40 to the high yesterday right after that inventory report.

$3.90. that's $1.50 range. crude dollar, $15 range. imagine if oil prices jumped to $90 a barrel in two weeks' time. that is what we're talking about here in terms of volatility. what accounts for it? there's plenty of natural gas in storage at 3.47 trillion cubic feet. up 16% above the five-year average. what's going on when you see the slight uptick in industrial demand. it's down. but a lot of traders say it's a simple short covering rally. we got to the very low numbers. 7 1/2-year low and rally from there. now the question is has this market found the bottom. marks, back to you. >> i don't know. stocks higher out of the gate on this quadruple witch. joining us in philly, jason, director of research. in des moines, iowa, founder and ceo of duway capital management. we always give those west of us the first shot because they're getting up earlier than we are.

so, what's going on with this market out there in iowa? >> well, the markets in iowa -- pardon me? >> how does it look in iowa? >> from iowa, it looks like it works probably just like everywhere else in the country. a lot of anxiety out here about what's going on in government and what's going on with the economy. and so people are kind of sitting back if i think it's one of those environments where it's very difficult for anybody to predict where this economy is going, where this market is going. and frankly i couldn't tell you within 1,000 points where this dow is going to be six weeks, six months, or six years from now. >> well, it's up 3,000 points while a lot of people have been sitting back, as you said, worrying about stuff. doesn't that tell you something? >> well, it tells me that thus far there's been a lot of enthusiasm about what's going on. the real question is how long is this sustainable for? i mean, you've seen investors go through two 45% declines in the market in the last ten years. people are ten years older right

now. i still think there's a lot of anxiety. i think it's changing the way people invest and changing the way people spend. >> jason pride, you say you haven't bought your dow 10,000 hat yet, but you're getting ready. now -- you might being looking for your 11,000 and 12,000 ones, too, three for one. >> exactly. we're positive at this point in time. i like what i'm hearing from your other guest on here, because i think it's that exact anxiety and that worry that keeps this market fresh and moving forward. basically, the most important long-term determine in performance is valuations. i think we're still sitting well below historic norm, even after this 50% rebound. when you look at valuations relative to determinations. another thing is, number one, markets can melt up just as easily as they melted down. we're in the middle of that down. expectations can surprise to the

upside. we are going through a very dramatic change in economic expectations. we're climbing a wall of worry. the amount of fiscal stimulus and monetary stimulus out there is pushing us forward. and starting to cause a positive feedback loop that's exactly the opposite of the feedback loop that we saw to the downside in march. that can force this market higher considerably at this point in time. so we're very positive on the long term. on the near term, it's still question mark. definitely has a lot of anxiety out there. we think the momentum and the re-enforcing positive cycle will likely carry us forward from here. >> what do you say to that don? this is optimism misplaced or does he convince you of it? >> well, i would say this. i think that everything has been stress tested right now. i think it's a much easier environment right now to make investment decisions than it was three or four years ago. and i don't disagree that i think there's opportunity in the publicly traded markets. i think our firm, in addition to

pubablily traded securities, focus on where the wealth is traded in this country with the wealthiest individuals and that's direct ownership of businesses, direct ownership of real estate and things of that nature. i think people have gotten further away and further away from their money. and it's our belief that direct investment gets you much closer to that. and we believe that some of the greater opportunities exist in direct investments and things like, for example, collateralized lending. there's a lot of great opportunities to buy stress tested assets right now at deep discounts there and in real estate and equipment leasing and, frankly, private equity. >> all right. we got to go, guys. thank you very much. john duwaay in iowa. up next, he's one of the top bankers in india. with the bombay sensai index up 73% year to say, we'll ask him where he's finding opportunity now. >> net worth, mark, is only a little bit less than yours.

$1.2 billion. >> wow. >> and from a top banker to a topper forming fund, the putnam voyager is one of the best performing this year. up 55% for 2009. by the way, overall market not anywhere close to that. that's what it is from the bottom. very different story year to date. $3.1 billion for this fund undermanagement. find out where they're putting the cash now. we'll be back.

this morning street gap, citi group ceo says $100 million is too much for an employee to earn given the bank's circumstances. ya think? citi trader andrew hall, 2009 pay package, that could be worth that amount. hall's plan has come under fire but it was put in place before the february date for the government pay czar. okay. sounds like grasso all over again. he's got a deal, you've got to

honor it. new disclosure rules for agency firms. they will be forced to disclose more of their ratings history and what is used to rate financial products with all credit agencies. senate majority leader reid endorsing a bill to extend the $8,000 homeowner buyer tax credit for six months. johnny isaacson has been pushing a bill through the end of 2010 and increasing the credits to $15,000 and removing restrictions on income. >> and. >> and the white house has yet to make a recommendation. it's set to expire at the end of november. erin, i think i saw data that said as many as a quarter of all home sales recently have happened with that $8,000 credit for first time buyers. >> although, mark, keep in mind, one crucial thing is that if you extend it, it is taxpayer money, or borrowed money for now. could cost up to $100 billion. they may not call it more stimulus but that is what it is.

>> it's stimulus. >> we've got to, you know, throughout the conversation, do we want to spend the money that way? our next guest says the way to stay ahead of the game is to stay disciplined. that's why this fund has done so well. putnam voyager up over 20% in the past year. 55% so far in 2009. joining us now to talk about why and what he's doing now, anything clause is the portfolio manager. blood to have y good to have you was, nicholas. 55% from january first, not from that march low. there were a few names that really help i'd you out. you bet on apple and wyndham hotel. >> what i would say is that really what's helped the fund is that on a very broad basis no, one stock has contributed more than 6% of the funds performance. but the market, even though it was very painful, did set the stage for what i think is one of the best stock ticking environments that we've had the two stocks you mention red examples of that.

apple was a company when it got down to $80, got to a valuation. i think it's sun of the great growths. valuation where if the company were never to grow again, in five years they would have as much net cash as the entire market value to company. that just shouldn't happen with the growth stock. especially one as good as apple. wyndham, not as good a growth story but sold at 15 times earnings, got down to two times earnings. the market was worried about the balance sheet. the real key with figuring out which companies are going to come out of this okay and which weren't. our team did a good sob of that. >> apple and wyndham today, are you holding them? did you sell? i mean, i don't want to read into your view on the overall market here but would you buy those two today? >> i was using thoses a illustrations of stocks that were way down and out and have been great stocks. my basic investment approach is to look for growth stories but focus on valuation. as these two stocks have rallied dramatically, wyndham is quadruple and apple is up over

100%, they're less interesting stocks to me today. >> what are you finding these days? aflac meet that profile? it. >> does. what i would say if the market bottom, exciting opportunities that were out there were cyclical stocks. now with the market having rallied as much as it has, i still think there are a lot of great opportunities but i think there's a balance between cyclical stocks and stable stocks. so you mentioned aflac, everyone knows about that aflac duck but what people don't know as well is that this company has grown areaings at 15 frs rate for 19 straight years. i think the growth outlook is still good. you would think a company like that would sell at a high valuation. instead, it sells at half the historic valuation because the market has been worried about investments they made on their balance sheet. our analysis says that it would take really armageddon like sent their yous to derail them. i think it can be a great stock. >> you also think the market is missing the upside to genzyme, huh? >> yeah, i think genzyme is

straightforward, they run into manufacturing issues. the products aren't complicated to manufacture. our view is it's a matter of time for the manufacturing and with the stock selling ten times 2011 earnings, there's a lot of upside to that. >> nick, i have sources in the industry who say actually you're fine at picking stocks but what you're really good at is fantasy football. they say, in fact, you are the single biggest fantasy football enthusiast. some people, that's bigger. they would like to know who you're starting this week. >> well, i would say my secret player is darren mcfadden. there you go. >> that doesn't mean much to me, mark. i ask for my sources. to you, maybe it does. >> yeah, it means something to me. >> there you go. >> all right. thank you very much, nicholas. >> thank you, nick. >> appreciate your time.

>> my pleasure. >> i have sources, mark. >> i'm sure you do. up next, stocks on the move, including a couple of online brokers. >> top bankers in india and member of the forbes billionaires list, after mark haines. with the bombay index up this year. we'll is ask him where he's finding opportunity in india right now. we'll be right back. we're up 50. bbbbbbbbbbbbbbbbbbbb

welcome back to "squawk on the street." i'm matt nesto here just plucking the chicken and looking for stock tons move. take a look at e-trade and schwalb heading in opposite directions here. e trade, 6% higher. schwalb being down dpraded to tell from neutral. e-trade being upgraded to buy from neutral. sandisk up 5% today. 30% in two weeks. 135% year to date. merrill lynch is chasing it. they upgraded to buy from out perform. they think the stock is headed to 30. brinker down 2%. it is still having a good month, but downgraded to market perform from out perform this morning at raymond james. another day, another downgrade, another decline for cove ventry

health. it is the fourth consecutive day of declines here today. and then lastly, eli, which is callaway golf, up 7.4%, raised to out perform from neutral, erin burnett, at wedbush morgan. the dealers out there, the gofrling friengofrl i golfing friends will tell you they like the 2010 coming up. >> erin is used to plucking the chickens, she grew up on the farm. >> takes a lot of practice. >> it does. we're spanning the globe looking for investment opportunities. today we're talking to one of the top bankers in india. he is executive vice chairman and executive. his stock trades in bombay has doubled this year. up 105%. member of the forbes billionaires list. we appreciate it. yes, you went in partnership

with a big transportation company in india. so your focus has been india, as in you didn't get into buying subprime securities elsewhere or lending money elsewhere. this is a purely india story, right? >> absolutely, pure india story. to the extent we have offices internationally and in new york as well. it's only a india product. and customers around the world or india. >> some say that india might fair the best in this global depression, recession, great recessi recession, whatever you want to call it, because the economy is so focused on india. there wasn't a whole lot of focus. is that true? is india more untouched than anyone else? >> it's primarily a domestic economy. the dependence on global trade is relatively small. january to march '09, india still grew at 5.8%. and the expectation for gdp growth in the current is april to march 2009, '10, is expected

to be more than 6%. >> what do you do to grow your company? grab market share from others? >> focus on building a business which is serving customers and we are in commercial banking, securities, investment banking. we have an asset management business and life insurance business. all dedicated to india product and/or india customer. >> 80% of your lending historically is to retail and commercial? >> that is correct. >> that small business loans, consumer loans? >> that is small business loan, car loan, home loans. >> all right. >> commercial loans. that makes as we go in the future would be more like 2-1 retail versus wholesale. >> i take it because of what you told us about the indian economy that you are not experiencing a dramatic uptick in defaults or delinquencies. >> they are basically only in the unsecured retail part of the business. but anything else secure,

they're doing fine. >> what is your experience, though, in the unsecured? >> in the unsecured, of course, of course, october 2008, there has been some pressure on delinquency, which has come basically because of the way the down fall happened and it's mainly in the small ticket. >> harley-davidson is going into india, which in india you see motorcycles everywhere. super incredibly high in product. and it's an interesting time to be going into india. do you think it's a good decision, as in, are you still seeing people move to that very high level of income at the same rate that you were or is that where india did see some of the pain? >> india did see some of the pain but it has come back. and sales in india have been growing in phenomenal rate, 20%, 25%. cars have been selling well over the last four or five months. india car business is growing at 20% to 30%. and i was here in new york one year ago and i'm here in new

york one year later. the world obviously issing looking much better. and looking from an india point of view, it just feel as the business is completely normal. >> and what about that middle class, 300 million people in india is middle class. the challenges of growing income there. is that group still going to benefit? particularly as especially in some of that technology outsourcing is where you really have seen, perhaps, a change. >> the biggest growth in india right now is happening in the mosque and the mosque of influence segments. high end is growing slower than it was. if you look at the population, if we can spread it more across, that will even further strengthen domestic consumption. heart of india story is con suffer shun. look at the gdp, 70% of gdp is consumption and 30% is investment. almost the opposite of china. >> the exact same, mark, as the united states of america. >> it is. yeah. >> thank you. wonderful to meet you. >> thank you. delighted to be with you.

>> appreciate your time. still to come, because you clicked, the gap. that stock near a 52-week high. don't go away.

stocks are rallying putting the major average on pace for best close of 2009. home building stocks are the best early performers after jpmorgan upgraded kp home from buy to knew tlal. the dow followed an upgrade to citi to a buy rating. that is cnbc.com news now, first in business worldwide. i'm mike huckman. live in the heart of the capital of the world, lower manhattan. this is the second hour of "squawk on the street." good morning. i'm mark haines. stocks modestly higher. 30 on the dow. procter & gamble leading the dow 3%. stocks hitting new 52-week highs

including the software and pepsi bottling. tech stocks also modestly higher. sandisk leading the way almost 5% on an upgrade from baml. erin is downstairs. erin? >> thank you, mark. mr. pisani, quadruple whipping. >> we had an exciting open at a quadruple witching. while the indices are not moving around much. don't kid yourself. you're winning by inch every single day. one or two down days the first two days of september and inching up, 9 out of 11 days. essentially a point away from a new high for the year on the s&p. let's not quibble. we're at new highs essentially. so, yeah, it may not look terribly exciting but bulls are winning every single day. a little bit, a little bit. then we had a great week with individual names. we keep talking about ge, ibm, caterpillar has had a fabulous week. car max, macy's, stocks that have lagged behind have had

interesting weeks overall. i think that's important. homebuilders are doing better. number op analysts come out this week talking agent homebuilders. i know it doesn't seem like things are -- what's missing is volatility. we're not getting any big move in the indices. >> sometimes in the middle of the day you have had that sort of going from 50 to 100. >> have you noticed they keep the market down. they're trying here. they need to try to drop in the first half hour. essentially, every single day if you try to drop the market it's ripped up in the middle of the day. >> do you buy this momentum, forget the reason, a lot of people weren't in the market and they're going to want to get in. and that really could keep us all of the way through the end of the year? >> yeah. the one thing i hear, i was at a meeting of hedge fund traders on monday night. and i've never seen a group that was more cautious and suspicious about the market when you ask them, so, you're short because you don't like -- no, we're long. they don't want to miss it.

well, they'll get fired. if they lag the market if you sold on monday because you didn't like the way things were, you're down 300 points in the dow on the average. you're lacking. if you let it every day watching you, you're in deep trouble. we see signs the retail guys are getting back. >> interesting what that means. what people are so fundamentally worried or nervous or negative, but technically they're buying. i don't know what that justice is. >> i've never seen so many people so unhappy about making money. they're making money and they're not happy. >> all right. mr. pisani, on that note, maybe that's a rather statement. brian, obviously a lot of stocks are hitting one-year high because last year at this time, we were sort of going off a cliff. so does the one-year high mean anything? >> well, you know, it means a lot of things, erin. investors, people watching often think, well, doesn't a 52-week high mean the stock has topped out. it's interesting, you've got to make that decision for yourself. look at the analysts. take apple, for example, it's a

good one. right around 52-week high. analysts are needing to restate their dynamic on it because maybe they've blown through their price target. make research, another firm that came out and commented on apple. they say they're upgrading to an out perform. 186 basically right now. are they 200, 210? well, they're at 220. so they think that they're significant room to run. same thing with google, stewart think they're going up. if they're bullish, it's by how much and investors need to know that. >> brian shactman, thank you very much. let's look at crude oil. $72.14. for much of the week, sharon, natural gas has been the story. what about today? >> today, natural gas is a part of the complex that's rallying. across the board in the petroleum complex we're looking at weaker prices. oil is still in this range that it's been in for about a month's time here. and the same factors at work and the question is how long will they continue to work.

we're looking at, of course, the dollar and, of course, what has happened to equities as well. those are the factors that have kept oil prices at the evil wills that i've with seen. oils that gained 4% in the past week on the strength in the equity market as well as the dollar index falling to the lowest level in a year. but the fact that we've seen the product crash, it may keep a cap on oil prices. yes, they've i'm 3r06d a bit over the last couple of days. they're still very weak and there are a number of analysts saying that is why oil seems to hit a lull when it comes close to $75 a barrel and it's up to those technicians who believe the stock is over sold and over bought. we could see oil prices hang around here for quite some time. mark, back to you. >> all righty. gap, one of the most searched stocks on cnbc.com. retraailer soars hitting a 52-wk high. does it have more room to run? joining us with his insight and

analysis on gap, because you clicked, brian, specialty retail analyst with jpmorgan. neutral on gap. why so? >> we think they've taken a lot of the expenses out of the company, you know, they've cut $600 million out of expenses. their inventories are down 20% on a two-year basis. and now it's time for offense. you know, can old navy and can gap start showing market share growth while we're in a tough economic environment and we continuously apparel deflation. >> so they play great defense. you want to see the offense on the field? >> exactly. gap was an amazing story last year. they grew earnings 21% despite the economic melt down. and they're going to have flattish earnings this year. pretty remarkable. the question is if the consumers were covering, will gap be left in the dust as they don't really have any top line as of now to show? >> do they need better marketing, better management, what, in your opinion? >> rights, the starters.

remember, old navy is more than 50% of gap right now. and we've seen some signs of a pick up. you know, those new mannequin ads they showed last quarter start to show comp improvement. the new denim launch, that's going to be the story. can they get back market share from the may scy's and j. crew'f the world where they donated market share in the last few years. >> your mike's not on. >> my mike on now? >> very good. >> now you can hear me. all right. when you talk about 50% of the business being just one unit, i am a little out of breath. i was running up the stairs. i want to ask this question. they have done some acquisitions this year. athleta, i use it, piper lime on their website, are either one of those going to move the need until. >> i don't think they're going to move the needle from a pop line perspective. remember, your online sales can have operating margins that are double your store businesses. so the more gap, you know,

between their current brands and piper lime and athletic can grow their online business, the more it should help margins. it's not going to move the needle compared to what both old navy and gap and, of course, banana republic has been struggling big time as well. they have three core brands. that's what they need to get going. >> if you were thinking longer term, though, brian, could you make a bet saying this whole move towards athletic type clothing for women that is also attractive and feminine is really the way we're going, banana republic may be a little bit more of the past, you're going to buy this over the longer term that that is, you know, you're saying the three brands now are gap, old navy, banana republic. maybe it's not going to be the three companies in five clears and that's going to power the stock. >> the problem is those three current store brands account for $15 million worth of revenue right now. it's going to be hard to find something that will grow a niche that ultimately will matter. let's not forget gap has $2 billion of cash on the balance sheets. they're definitely active in

stock buyback programs. that puts a buffer in the stock. as far as what gets the stock close to $25 or $30, it's going to have to come from positive same-store sales growth if we've seem some added at old navy last month and a lot of people are looking at gap with the relaunch of denim and new product categories to get some market share back. gap is not opening up any new stores at old navy or gap divisions. no square footage growth. it's about getting productivity back in their core stores through market share growth. >> all right, sir. thank you very much. brian, appreciate your thoughts. up next, how does the job picture look where you live? the government released a state-by-state report for august just moments ago. we will take a look at it. and american is richer for the first time in two years. we've been talking about this. $2 trillion wealthier in the second quarter. we're 20% poorer than we were in 2007. which headline is more important, increase or a

decrease. and then arena pharmaceuticals. no, mark, it's a different company than yesterday. no curvature issues, we don't think. the ceo fresh off the conference call. the trial of another experimental drug. that's next.

the federal government released the state-by-state employment report. bertha coombs has the breakdown.

>> thank you. we saw the unemployment level take up in augusto 9.7%. we're getting color on where that happened. the number of states above that level remain steady at 16. we are seeing worsening trend. particularly out west. and michigan once again has the highest unemployment rate in the country. inching up to 15.2% with a loss of 22,000 jobs compared to a gain of 38,000 in july. the good news is that unemployment is stable. but at 15% for three months now, the state hasn't experienced that kind of level of unemployment since 1982 for that long a period. detroit's unemployment now above 17%. take out the unusual auto restructuring and state officials say august job losses were closer to 10,000. july's gains were skewed because of the cash for clunkers seeing a lot of auto workers called back to work. from april through august, michigan lost 34,000 manufacturing jobs, compared to 9,000 last year. minnesota saw its unemployment

drop a tenth to 8% in august. but after seeing its first job gains in july, it gave back those 10,000 plus jobs last month. 8 out of 11 employment sectors saw losses. the bump in leisure and hospitality we saw in july was completely reversed. two-third of employers say they plan to maintain job levels in 2010, but according to the minnesota federal reserve study, the total workforce numbers have slipped. economists see the unemployment drop in fact reflecting more than 6,000 job seekers dropping out of market. a trend officials have noted in oregon as well. where unemployment ticked up to highest since the depression there at over 12%. another 6,000 jobs lost last month. over 12% there now for over six months. while there are signs of stability in areas like construction and manufacturing, oregon economists say the boost in job seekers at the beginning of the year have steadily dropped since april.

officials in georgia believe its slight tick down in august was also likely impacted by more job seekers dropping out of the market. that's one of the bad trends that people are noting. so when those headline numbers get better, sometimes underneath there's bad news. later on "power lunch" we will look at how p t. medown on wall street has new york's unemployment at new highs. that's one of the areas that saw the biggest jump in august. back to you. >> thank you very much. now, scott cohn at the breaking news desk. scotty? >> we have news that a lot of ubs account holders, perhaps thousands of them in the u.s., are getting today or getting very soon. this letter, which is part of the big settlement on sharing information on suspected tax evaders, it is now coming. and they have until next week to comply. so they'll be getting this ominous note, many of them, saying that they are potentially among the people that the irs wants information from and providing them with a number of

options they can essentially fight it with the judicial review process that's been set up in switzerland, consent to ubs turning over information to the irs or participate in the irs's voluntary disclosure program and submit it themselves. but people now are getting this letter which we have also obtained, telling them that they have until next week, the 23rd of september, to comply one way or the other, or at least initiate steps to fight it under swiss law. this again, part of that landmark settlement between the u.s. and the swiss and ubs. it is now being implemented. mark? >> thank you, scott cohn. still to come, our men in washington, john harwood, sits down with senator -- which senator? know, olympicia snow. talking health care, the baucus bill and the issues that still have to be addressed. plus, mike huckman back. mike, what do you have today? >> no genitalia today, i

promise. one of the three companies working on new diet pills. did the patients lose enough weight? we'll is ask the ceo and cofounder of arena cofounder of arena pharmaceuticals. ew job at the ry

welcome back to "squawk on the street." i am cnbc pharmaceuticals reporter mike arena is the last companies to unveil data on prescription diet drugs. the company met its goals and fda criteria. was this weight loss enough to sats fay investor appetite? joining me live from san diego in another first on cnbc is arena pharmaceuticals ceo and cofounder, mr. jack lief. good morning to you. >> good morning, mike. my pleasure. >> so patients on your drug, lorcaserin, lost 3.1% more of their body weight than those who took the placebo in this study. i know that you met another key

fda criterion for approval. but is that weight also enough to, number one, win fda approval. and if you do, to convince patients to take this pill? >> well, what we showed was that two-thirds of patients lost at least 5% of their body weight and over one-third lost 10% or more of their body weight. you know, we have a press release, we talk about 35 pounds of weight loss for the top cortile of patients. so i think the marriage of efficacy, safety, and tolerab tolerability is what they want. this is what is lacking in today's options that they have. >> the top 25% in this study who lost an average, as you said, of 35 pounds. but did vivus, which unveiled what many have characterized as unprecedented weight loss results just last week, set the bar too high for you? >> no, i don't think so.

i think we're really on the path to uk success here. we're providing physicians and patients with what they really need, a broad-based first-line therapy to be able to prescribe to most of their patients. and very dissatisfied market. number one drug today is a 50-year-old drug called pmentramine, amphetamine class of drug. what we shown was the side effects of lorcaserin was not as meaningfully different from placebo but patients lost twice as much weight. that's a big deal. >> that's the drug combo phen-fen pulled off the market more than ten years ago. your drug works similarly to phen-fen but so far, you have seen no heart valve problems in the studies thus far. >> yes, that's a very good point. we've engineered our drug to be very selective.

we only address the receptor that's found in the hypothalamus in the brain. that receiptor is not found in the heart. the old ones were completely nonselective. and because of our mechanism, we have no affect on heart valves and we've ruled that out to the fda satisfaction. >> so now that you, vivus, which i previously mentioned, are all out with your final stage test results, does the dance now begin for you guys to find big corporate partners and could arena either be left alone or have to wait to see until you get fda approval because a potential corporate partner might view your results as underwomening and inferior to the other two? >> i don't think so, might be. i don't think anything has changed. i think that corporate partners that we're talking to are very excited about the results to have an approvable drug is a big deal. i think we're going to be very successful in the marketplace to provide physicians and patients

this marriage of both efficacy, safety, and tolerability to allow patients to lose weight quickly and to stay on the drug long enough to achieve this cardio metabolic end point that they all desire. >> you plan to file for fda approval at the end of this year. thanks again, jack lief, for joining us first on cnbc. check out the blog and you can follow me on twitter at mhuckman. >> thank you, mike. and now, optimism about wealth in america, according to the latest reserve data,households rose 4% in the second quarter. what does the data say about america's overall confidence in the economy? chief u.s. economist joining me new face to our show, mike diver. he'll explain. which is it, mike? i want to make sure i get your name right. >> let me start with you.

what is the right headline? increase we saw in net worth in the second quarter and increase in stocks since the march low or the fact that we're 20% below where we were in 2007? >> yes. the process of repairing household balance sheets is just beginning. like you said, we're down 20%. it's going to take a good number of quarters of this repeat performance to get us back to where we were. but we not only need to get back to where we were, we need to go higher because the baby boomers are getting set to retire. so right now the ratio of household net worth to gdp is household net worth is a little bit more than three times gdp and that's a benchmark level. but as the baby boomers, as i said, retire, we need to be much higher than that. we need to do a lot more repair of household balance sheets. that's going to take some time. and then we just started the process. >> what would you say? it gets to some point improvement is nice, but if you want to look at a growing

economy, you do have to go back to where you weries in 07, right? >> you've got to start somewhere. that's what we're seeing now. $2 trillion is the increase in net wealth. it's a huge amount of money but it doesn't compare to the $14 tro trillion that was lost. what we've seen in this market is a train running down the track in the wrong direction. and now we're seeing the train at least move back in the right direction. and that analogy is very important for investors because they've been so scared to put any money in this market for the last two or three quarters. and now they're seeing signs of hope, signs of encouragement, opportunities and they're putting money back to work. that itself is going to help foster growth because one of the clouds on our horizon is the limited amount of credit available to either households or to businesses. and if we can get investors seeing some opportunities or some hope for change, they will be putting more money back to work and that gets us the tools necessary to not only get the economy back on track but to

lift that wealth up to the level that we eventually need. >> mike, raising the points, to zone in on where we had the increase this year, it was really in the stock market. now, would fifth% of own stock in one way, shape, or form. i'm not saying that's not relevant. to a lot of americans they're not seeing the inkraes at al they need it from housing or from other assets. so when does that happen? ell, housing is going to be lagging. housing prices always lag. but i think steve is right, that there's a huge amount of money in money market funds is ready to go to work. if you look at the ratio of the balances of money market funds to the equity value of u.s. corporations in the first quarter, that ratio peaked at -- it was -- sorry. it was 35%. >> right. >> and if you go back to 2006, that ratio was down to 12%. so that ratio essentially tripled. there was a huge amount of money

park parked on the sidelines and now it can go to work. there was a huge amount of room for that money to go to work and increase in stop prices. >> steven, final word to you. not all the money in the money markets are going to come back in. let's assume that people are scarred to a certain extent. are you betting on a lot of it coming back in or even just a little bit. would a little bit move the needle a lot for the market? >> a little bit does move the needal lot. it's not just the domestic players but internationally which we're dependent upon international funds to come into the market. another element is that we're seeing a slowdown in deterioration on the real estate side. i know that's not r5eally something to be hoorah hoorah about but it's important step. on the other side of the break, bullish sign. find out what it's saying about where the market is headed.

ubs sends a letter to account holders saying they may lose their opportunity. that's according to scott concern. oil trading near $72 a barrel. barclays raising its u.s. gdp forecast to 5% in the first quarter of 2010. firm also expects first fed rate increase to occur not until the third quarter of next year. >> let's look at the market and the internals.

dow up a third of 1%. nasdaq down a tenth. s&p up just a tad. so, what's market prep look like? pretty much what you would expect given those numbers? a little bit more losers than winners on the big board. and we should have a wider margin. about 400 or more on the nasdaq. >> all right. so coming from the corporate bond market about where stocks could be headed. let's check in with rebecca jarvis. >> as we all know, credit historically leads equities given what's going on right now. stocks are getting some very positive signals. we're seeing a flood of new corporate credit come into the market. a trend that's been in place since april after the haines bottom. the deal, the size of deals, it's growing and picking up, riskier companies are getting their fansing with spreads between the aaa and bbb rated desk below their 2001 level.

if you take a look at the volume, that, too, is really going much higher. yesterday $3.9 billion in high yield debt was priced. it was the most active day for deals since january of last year. and with millions in credit slowing companies from amr to kodak to blockbuster and mgm, they're all successly raising capital, reworking their covenant. while a lot of that capital is being used right now for balance sheet repair, brian reynolds of wjb says if the trend continues, and he thinks it will, the access liquidity will go toward growing the businesses. from a technical perspective, things are even more positive. the last time corporate debt was at these levels the s&p 500 was trading at 1400, so keeping with the theme of credit leading stocks, it's looking good. another positive signal, significant default risk has come out of the market. a cost of protection is falling. trade agent the lowest level

since may 2008. and john of citi group says high yield spreads point to default rate of 7 1/2 to 8%. if that holds true, the market is still fundamentally cheap. who is buying all this debt? will retail investors, pension funds, hedge funds, credit hedge funds, banks and insurance companies. and what we're hearing is that the biggest unknown in the corporate debt continues to be that consumer comeback, mark and erin. it continues to be this story that sort of rests on the shoulders of we, the american consumer. back over to you. >> all right. coming up, the $100 billion medical device industry scrambling to avoid a $40 billion fee or rather $40 billion in fees proposed in the baucus health care bill. a street fight minutes away with former medtronics ceo bill george on the one side and ceo

john bartus on the other. >> you'll have to wait and see who is on what side. you might think those guys would be on the same side. >> i would think they would both be. >> senator olympia snow, member of a gang of six. talking with john harwood. we want to talk to john harwood about, if you're the one republican who votes for this, is that ostracize you for the rest of your life? this is a fascinating one. we'll be back and talk about senator snow.

the hale care bill rolled out by max baucus this week includes a $4 billion annual tax on the medical device industry. the industry is up in arms, as you might expect. even some democratic senators

are speaking out against that tax. so these companies, are they being unfairly targeted? here to way in, john bartus, ceo of met assets to health care providers. and bill george, former medtronics ceo and now has a business school professor, also a cnbc contributor and author of the book "seven lessons for leading in crisis." john is our guest. we know bill, so we'll let john have the first word. for or against it? >> well, i think the question isn't so much for a need on us in our industry, the issue of tax but the issue of transparency, mark. our industry is really fought with information where it's not known to the public, it's not known to buyers. in fact, the class three medical device industry, which is the implantable medical device industry, is protected by confident iality agreements whih

says that the buyer, the doctor, that the patient, in fact, any third party can't know the price of a medical device. and as a result of that, medical devices class three implantable medical devices, because there are many, many great medical device companies out there, and i think the class three medical device companies build the best products in the world. the reality is because of lack of transparency, we pay the highest prices in the world in america. so that is driven by confidentiality clauses which says that no one, including the patient and the doctor, can know the price of the product and yet huge marketing expenses and sales expenses are put in play to influence the doctor to use these products. i'll give you an example. this is a pedicle screw. this screw is made out of titanium. it's attached to a rod. the average sale price for this in a u.s. hospital is $1800. and yet, the hospital is unable to negotiate fair prices as a result of the fact that there's

no way to exchange information due to these confidentiality clauses and that the doctor is actually deciding what products to use. >> john, i have to cut you off because i don't understand the relevance of what you're telling me to the baucus bill. >> to me the issue of the baucus bill is the yooind fication to the fact that these costs are very high and these costs have been increasing in u.s. hospitals. in fact, have been passed on to the government and when the government and we all know this, the government does not, in fact, cover the real cost of health care increase. and so businesses like ours, in fact, pay the additional cost of these products. and so today if we're bgoing to fund more coverage, the government issing looking for somewhere to fund that. >> bill? what do you think about this? >> well, i have a lot of respect for senator baucus. this is, mark, the worst idea i've heard about the health care reform. this attacks on innovation. if we want to go backwards and not have solutions for terrible

diseases like cerebral policy and parkinson's and health failure, this is a good way to do it. $40 billion tax over the next ten years and innovation is going to kill the r&d and innovation on new things or be passed on to the patient. we have just the opposite effect of what john is proposing. >> do you think it will be passed along to the patient, bill? you're talking medical devices. i talked to insurance executives who have been honest off the record that they will pass this along. >> i think it will be passed along, result in cutting r&d. i think it's precisely r&d we need to get at the cost issue. i tell you, medtronics from 1989 on had a policy never to increase prices on any given product. and it is intense price competition. it's not really patent po p protected. intense competition between the mafrs, j and j and st. jooud and boston scientific and medtronics. competing on price to win the

business of the major hospitals, the hospital groups. so i don't think that is an issue. >> that is simply not true. that is simply not true. your r&d cost is less than 10%. sales and administrative costs are 35%. you spend far more money selling to doctors, wining and dining them than you do on r&d. if you had sincere price competition how does this screw, which looks like a wood screw from home depot that costs 53 cents and made out of the same titanium cost $1700 in the average u.s. hospital? that's a fact. >> bill, what about this broader issue? and i know, i'm sure you could debate specific numbers. it is true when you look at the amount of money spent on marketing and advertising by insurance companies, device companies, it's pretty astounding. you've got to think, gosh, if that money was going to r&d, would we be better off? >> well, i think you have to understand how it's being used. it's being used to support physicians, often in the operating room.

two-thirds of all procedures have something this running them. that screw goes in incorrectly you're going to have that -- that surgery is going to fail and you're going to have a $10,000 or $20,000 resurgery coming up and the patient in great pain. >> wait a minute. isn't that the doctor's role? it has nothing to do with the screw itself. >> it has a lot with to do with the technical support, complexity. electronic devices, pacemakers, detib write laters. it needs that level of support. i think that's -- it's not wining and dining, i can assure you. >> there's plenty of wining and dining. we all know that. >> a lot of that money is going into education of physicians about how to implant these devices. because it's not like taking a drug. this is a very, very different business. and i think the outcome, the quality of the outcome is where we need to if cuss. is it really saving cost to the health care system? i'm convinced it is. in heart failure we've saved tens of billions in cost. but it's only the innovation

that's going to address these diseases that people tell me every day, my son was saved because he had your diabetes pump or because my life was restored because i got the pedicle screws that john is talking about. procedure for back surgery and now i'm well again and i can lead a full, active life. i don't have to be in an't ho, i don't have to hospital or in a nursing home anymore. >> time waits for no man. thank you. up next, why now may be the time to pick through some of the stocks that have not participated in the rally. your friday trade, mark, on this quadruple witching friday. but first, oh, melissa. >> oh, mark haines. coming up, cnbc exclusive, we'll talk live with congressman baucus. and everyone is lamenting the weak dollar, especially larry kudlow, right? is it pushing commodities higher? rekindling talk of inflation. can it actually be good for american business snes we're going to does that, all that,

plus, later, news and reaction only on "the call" at the top of the hour. but first, "squawk on the street" is back right after this break.

ladies and gentlemen, welcome back to "squawk on the street." i like a good fight. i got a good fight on my hands here today. it is week to date winner fight to who is going to win the cover vetted week to date nesto award. it's neck and neck. meredith versus gannett. both media stocks. up 17% on a week to date basis. meredith, fifth consecutive day. magazine's websites, local tv office depot, down. second day down from one-week high. and also, check out the stock with the longest name in the russell 1,000. allskr allscrippshealthcaresolutions, holy mackerel, it's up from overweight to neutral.

initiated above average at karas. boyd gaming, 16 casinos, from buy to sell at argus. they like the cost cut and the market share game. they run the local gambling, not the destination casino as much but to you. >> thank you, matt. senate democrats struggling to gain support for health care reform. whether they can get that has come down to one person. senator olympia snowe. she spoke to one person about what she's thinking. john harwood has that information. >> everybody's wondering whether or not olympia snowe is going to perhaps provide the 60th vote on the legislation in the next few weeks. she's not yet saying how she's going to vote. when i sat down with her

yesterday, she offered encouraging clues. in particular, she said the thought president obama was a moderate, not liberal, on health care. she thought it was financially responsible in terms of its impact on the deficit. she also thought her republican party has moved away from her. >> it's interesting, i don't. in fact, i sense the opposite. he's the -- been very realistic in his views on health care. understanding the implications. >> do you see him as a moderate? >> more moderate than liberal. >> are you satisfied that the cost containment in the bill is add quaut? >> i do. we were adamant in our positions, it should be budget neutral and then the escalation of inflation within health care. and it does begin that trend in

the first ten years. >> but are you optimistic? >> it's hard to tell. probably more optimistic than less. >> if a bill is a whole bunch of democrats and one republican, would that be a bipartisan bill? >> obviously, i'm a republican, but i'd like to have more -- >> you'd like to. but do you have to? >> i'm going to support the right policy. >> how important is your republican identity to you as a legislator? >> always been a republican for the traditional principles that have been associated with republican party and i haven't changed as a republican. i think more that my party has changed. >> it's interesting to see the changes that olympia snowe wants in the bill. she wants more subsidies for lower and middle income people to buy coverage and wants to add a triggered public option which may be congenial to the white house.

>> john, olympia snowe has an awful lot of wiggle room. the other senator from vermont is a socialist. >> she's from maine. the other is susan collins. >> i thought that was wrong. okay. >> but she does have some wiggle room in the sense that maine is a state that went for barack obama last year. they like independence in their senator. you see them showing that and it probably benefits them politically just as it benefits southern democrats to go against their party when barack obama or bill clinton's in the white house. >> may not help in the party, but at home. >> exactly. >> good. i thought i was losing my marbles. i thought -- i'm never sure.

up next, why stocks lagger. we are getting your money ready for the weekend in today's friday trade, which i promise this time, we really mean it's up next.

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we're back. time for your favorite segment. i know it's ours. well, maybe this is our next favorite. the friday trade here on the floor, mark harris. and in chicago, charlie. >> morning, mark and erin. >> charlie, your farther west, so you get first crack. give us the friday trade. >> what we're looking for is not what worked in the past. you want to look for what's going to work in the future and right now, what hasn't p participated in the rally is high quality. so we're looking for high quality companies. two of the highest quality

health care are j and j and baxter. >> excuse me, charlie, let's say -- you're in chicago, right? you're out on the lake in your boat, you see the storm coming. you turn around? >> no, but if you're in a well protected harbor, you don't get afraid. >> maybe it's just a mere squall. >> the last time we had a storm was 1994 when hillary tried to change the health care system and over the next five years, j and j went up five fold. >> i believe you agree that the health care situation may be a mere squall. >> i'll agree with my partner here. baxter's