caucus in the house is very much for something like that. >> it doesn't matter whether the senate and baucus and the change decide to have -- what passes the senate will be much more tepid than the conference committee. lit be written at the white house but it will be written in the conference committee and come back for an up or down vote. >> and goes to reconciliation? >> could be a reconciliation bill. i'm not sure they won't need that and i won't they won't use that pass because that does damage the senate. >> and you think there's no way to make it not a predatory public plan? you think sooner or later people migrate to it? >> i think the coal goal of thi congress is to put in a plan that has the government take into control -- health care. i mean, some people are very open about it. it's just inevitable. you know what we didn't talk today about was the fact that the universe is reordered. cincinnati beat -- >> i know that. we have no trophies. pittsburgh is trophy town.

2320. how's that trophy working for you? >> congratulations. >> thank you very much. >> big win, thank you. >> thank you, senator. good to see you again. make sure and join us tomorrow. "squawk on the street" is coming up next. this is cnbc.com news now. >> xerox is acquiring affiliated computer services for $63.11 per share in cash and stock. abbott labs is buying solvay. and president obama will travel to copenhagen on friday. he's taking part in chicago's presentation to the international olympic committee. the windy city wants the 2016 summer games. that's cnbc.com news now. we're first in business worldwide. i'm courtney reagan. live from the financial capital of the world, this is "squawk on the street" on a monday morning. i'm erin burnett. we have a merger monday for your money. xerox buying computer services

r nearly $6.5 billion. abbott labs buying the drug making unit of the belgium solvay. it's not a beer company, for $6.6 billion in cash. good morning, matt. >> good morning. i'm in for mark haines. of course, xerox says this deal is going to transform itself from being just a printer company. earlier on "squawk box," ceo spoke first to the gang about the deal. >> we actually are clearly focused on core document management processes in the office. front office and back office. acs is focused on business process outsourcing. the connection of these two companies is called for by our clients. they've been telling us overtime, as we engage with them more and more, either acs with xerox, we need to bring these two infrastructures together and help them become significantly more significant in their business processes. that's what we're doing with the combination of these two companies.

>> it was a 36% premium. meanwhile, abbott labs, they're trying to boost their prescription drug business. what they are getting is a key cholesterol drug which will reduce their reliance on the drug humera. several drugs are in late stages of testing. >> it is a trifecta of deals. johnson & johnson buying an 18% stake in the dutch company crude shell in hopes of developing a universal flu vaccine. >> let's take a look at futures on the back of all of those merger headlines. we are well off the highs of the session. we have cut them in half in the past half hour, matt. >> wait until you see the lineup today. people everywhere, tracking the action. reporters starreding by, champing at the bit, none more than mary thompson at the big board. >> good morning, matt.

the futures are higher on all this merger news we have on this monday morning. the dollar and oil slightly higher today. keep in mind, it's expected to be a day of light volume here at the new york stock exchange because of the jewish hol kay yom kippur. this day they are focusing on the jobs data on friday and other reports out including the other sales numbers and reports on manufacturing. once again, today the focus is all this merger news. now, in the wake of today's announcement xerox is down 9%. affiliated computer services is up 20%, they're buying them for $6.4 bll billion. that's a 34.4 premium. they are able to reach those numbers in premarket trade. abbott lab is buying solvay. $6.6 billion. it's a deal that could be worth $7.1 billion. abbott is up on that. kraft is going to up its bid for cadbury, $17.5 billion from

$16.7 billion. this coming out of the uk east server in the wake of this. kraft and cadbury are unchanged in today's trade. let's go to the nasdaq with brian shactman. >> apple computers, the iphone -- apple now, it's spanning the recent deal for the ek and china approximately china y unikom will sell it. buy up 2 1/2%. you talk about merger monday it's up 55%. wall street believes it's going to happen. barron's are cautious on oracle saying the maintenance contract under third party basically on price competition. also cautious on dell and acquisition strategy could weigh on stocks a little bit. if they continue down that road with acquisitions, here are a few names they talk about. gl again, it's just conjecture.

cisco up to overweight at barclays. i want to talk about juniper and qualcomm, both price targets raised at goldman sachs. let's go down to sharon at the nymex. >> we're seeing moderate weakness across the board on the energy complex. oil prices down about nine cents right now. but the sell-off that we saw last week, that 9% slide, really seem to have been stand by the news about iran and the news most recently that iraq n is te firing long-range missiles p. this after obama on friday accused iran of a covert nuclear facility. that it was building a second one, has been found. all of this has led some support to oil prices. john at the global saying it really stopped the slide last week in its track. that sell-off. after we got the news about

iran. we continue to monitor that as well as number of refinery shut-downs that have helped put just a little bit of product prices. keep in mind we have plenty of gasoline and heating oil. really just points to the weak demand picture out there when you see a number of refineries shutting or extending their maintenance operations or having those mant trans operations occur earlier than expected. still, they're weaker. natural gas meanwhile, a little bit of sell-off here. keep in mind this october contract is going off the board today. rick santelli, to you in chicago with the dollar index a little bit stronger today. >> it is a little stronger, but keep in mind that there's a euro sent trick bias to the dollar index. having said that if you look at the pound, the pound really has gotten pounded over the last several days. we've gone to the mid 160s to 158 handle. while that's going on, we're losing huge amounts of ground in the dollar yen which now trading around 89.5 is the lowest level

against the yen since the mid '90s. we need to pay attention to the various dynamics at work there and be cognizant of the fact that the half year for japan's fiscal scenario ends at the end of september, in a few days. that might have somepayepayry. let's go back to senior nesto. >> rick, thanks so much. let's check tout foreign markets. asian, overnight, shanghai composite closed 3% lower. nikkei down 2 1/2% to a two of h month low. kospi as well as australia's asx both slightly lower. germany, one day lower. she's preparing to form a new center-right government with a business-friendly pre-democratic party, adding that she's committed to cutting taxes.

but she refused to say when. >> they are still the world's largest exporter, germany. >> i'm going to cut them, i don't know when but i'm going to cut them. let's find out what's really going on with guy johnson in our london bureau. >> the question is can they afford to cut them. that is the question everybody is asking today. yeah, that new german government is going to be interesting to watch. germany up until now has had a precommitment to get rid of the nuclear power station. that may now not happen. some of the big utilities doing well on the back of that. the german market leading europe higher today, matt. we're up by 1 1/2%. the rest of the european market both generally trading to the upside on the back of all the m and a news. belgium, usually talk about beer but today it's pharmaceuticals. one of the few markets to be in negative territory. let's show you how the session has developed thus far in europe. actually getting better. and really it's on the back of your coattails over there with the u.s. futures really driving

us higher. up 0.6% on the stoxx 600. we've already talked about the abbott labs acquisition. let me show you solvay is down 2.3%. analysts over here saying they didn't get enough for that pharmaceuticals unit. the price should have been higher. the stock is taking a beating on that back of that. that is having an impact on the belgium market at the moment. mary is mentioning cadbury as well. there is la lot of talk surrounding what is going to happen next. there is an expectation and this is certainly what they are talking about this weekend that maybe krvt goes hostile this week to keep an eye on that one. matt, erin, back over to you. >> thank you, guy. up next,nesto's nugget, talking about a bullish bowski. and the word on the street and the buzz beyond, like you've never done it before. and later, because you clicked, that's right, at&t,one of the

most searched stocks on cnbc.com. so we rang up an analyst from ray jay to find out what they're all clicking about.

welcome back to "squawk on the street." let's check out something. i like to start the monday off

with reading the strategy note. he's out with a piece here today called "making sense of market valuation." he's the chief marketing strategist at oppenheimer. if you look at the bounce, 50 plus percent return has a lot of people worried here today. one of the things he points out today, is yes, it is a much larger than average return following a bear market, but it also followed a much larger than average decline. so you move through this thing, and he points out that the market's resilience continues to surprise many investors, particularly the bears, which he points out are actually scrambling and searching for new bearish arguments to try to make their case. he also says he can't envision a scenario of a significant near-term correction happening to this marketplace, try as you might, the expansion is more reasonable from a historical perspective than most investors realize. lastly, maybe most importantly,

by three different models that they use, their year-end price target for the s&p 500 is 1140 or 10% up from where we are right now. coming off a three-day losing streak. as we start the week, it was at only 2 1/4%. worse weekly loss we've seen in three months' time for the s&p 500. last week, telecoms were the best performer. down only 2%. all ten sectors were down. the materials group was the worst performer with about a 4% or 5% giveback pop on a monday-to-day basis this is interesting, the the industrials are still the workhorses, up 6% so far this month. look at the financials. interestingly and only the financials are the only one of the ten sectors that ain't getting it done so far. >> wow. >> in september. >> and from your chart, you're saying the only withins that aren't, but they're only down 0.4%. makes a big statement in and of itself.

>> it's the loneliness of it. they're the second largest. s&p is up for the seventh consecutive month. you need financials to move the market. >> get another 10% by the end of the year. a couple other headlines. we talked a little bit about deals, commodities obviously also a major focus. we talked about coffee the other day and the surge there. let's just show you a few of these. you've got wheat, this is down today. aeg commodities have gotten quite a bit of focus. corn, also lower. let's show you the coffee trade. that's down a little bit. soy beans are up. that's sugar. sugar is up. and soy beans and coffee. and the reason i wanted to get the coffee is because it's the time of the morning and i would like to have another cup, matt but there are have been technical trading in coffee that had caused it to surge up last week. a lot of these guys are linked

into the currency trading. coffee is up, you know, weather matters. we know that. but when you look at a thing like coffee it's also interesting because you're looking at africa. >> fair trade. >> yeah. >> yeah. >> okay. and then a couple of there headline on the deal front. glaxosmithkline reportedly a billion dollar deal with brazil is on the docket here. this is for a vaccine to prevent pneumonia and meningitis. they say guarantee sales of vaccine over the entire life of the product. at one price. now at a lower price. in out years, which would make sense. the deal is said to be a landmark arrangement because both drugs are sold over a lot shorter time frame so they have less duration risk. so obviously the jury is out on whether that will change a lot of drug deals and how they do it. but it is interesting in terms of press as we talk about reform and prices for drugs. >> it's amaze that every chart looks the same from that march low. >> yeah. >> if you don't, you've got big problems.

speaking of problems, financial regulators are working on short-term borrowing rules. fda saying officials are worried about that capital alone will not be enough to prevent a run on the banks. it needs the overnight markets for funding. they are thinking about proposals to prevent banks from become overly dependent on short-term borrowers. the firms may need to operate under new ratios measuring their dependence on short-term funding and susceptibility to market shocks. do bureaucrats. good luck on that one, right? >> all right. japan's finance minister is denying ever approving or supporting a strong currency. he warns the currency moves are becoming one-sided in favor of the rise of the yen. he's backing away from our earlier comment suggesting that intervention was unlikely. the growing belief is that the government would not intervene to halt the yen strengthening is one reason the currency has risen to eight-month highs. matt, as you pointsed out, when you look at the dollar index the world has shifted so

dramatically, just so far this century. literally, it used to be the yen was the key currency and now it is the euro. >> by what percentage? >> 57.6? >> she's good. the girl is good. you know who also is good? sean "fuf dpuff daddy" diddy, g to leave warner brothers. a source confirmed the departure but the joint venture with bad boy entertainment is going to continue and the bad boy catalog luckily remains at wmg in per tutity. trath ahead, the word on the street and the buzz beyond. it's going to be good. carry down to the opening bell, 13 minutes away. and later, what are you doing right now? if you're a the chief market strategists with $450 billion in assets under management? we are not sure. but we will find out. he's sitting over there, mr. orlando. reading his notes, not listening to me. he's coming up in a moment. we'll be back.

welcome back to "squawk on the street." t-minutes nine and counting until the opening here today. futures positive. s&p up just about 15 right now. the dow is up, what, 28? so that's off of a little bit earlier level. but kind of close. let's bring in the man himself, art cashin, is here today. direct irof floor operations at

ubs. so there's some jewish -- >> there's an old wall street folklore that you sell them on rash hash shana and buy them back on yom kip pupur. other thing is people are going to be watching the dollar. mr. zelik from the world bank may be raising the question of the reserve currency and the dollar status. and we'll see. >> you've got a couple of deals today. they're not huge. xerox is probably the biggest. drug deals as well. and the markets are drifting higher here today. there still feels like a lot of fear though. how do you balance it all out? are all the investors going to be wrong? >> i think it is going to be tough. what you will see is how the market will go through this week. what happened last week could have been critical or it might just have been a speed bump and we lost a hubcap on it.

we'll see if there's any real damage to the car. >> thanks very much. talk to you soon. erin, back to you. let's get the buzz from beyond the big board. chief market analyst at evergreen investments, join us. good morning. john. >> good morning. >> the monday with a lot of mergers. do you think this is a positive signal? >> absolutely. i think, you know, we've seen nothing but extraordinary technical factors propelling the market higher. when you look at dell, you look at kraft, you look at abbott labs and xerox today, i think that is very positive for investors on the longer term scheme of things because you get large companies with strong balance sheets, cash flows looking to fund their growth for their future. i think it's a positive development. >> and obviously the age old question of mergers is always, okay,so they're confident in the future and willing to spend some money. but a lot of times companies over-pay and studies show that. we're back to these premiums,

30% to 40% plus. are you concerned that a lot of companies are over-paying? >> i don't know if that's the case just yet. i think it's a trend we'll have to monitor as the year progresses. i think, you know, on the early stage of things. i don't think you see the over payment. i think when it gets long in the tooth, i would consider this to be in the early stage of mergers. i don't think it's quite there yet. you right, it's something we need to watch longer term. >> matt was talk about the bet among strategists that the consensus view is that it could go up another 10% by the end of the year. are you betting on that? >> yes, i am betting on that. reluctantly, if i can emphasize that. the technicals are better than the fundamentals. that's something the investors need to appreciate. we've overcome a variety of technical hurdles. we do see some positive. earnings will be less bad than feared. we have to look at, you get to that 1100 range on the s&p 500. i'm looking at $65 in operating earnings. maybe 10% below what the street is looking for. at that point if we get there by

year end or higher than year end, we're looking at a 16, 17 multiple and still deflation air environment. i think that's something that they need to be cautious about. >> that's pretty interesting. so technical exponentially better which sounds like you could be among those who say, look, it should be going down a little bit, but anyone who missed the rally is going to get in so i'm not going to fight the tape. >> be prepared for a trading range. >> john lynch, thank you very much. we appreciate it. the final countdown to the opening bell is coming your way on the other side of this break. we're going to get the higher open. futures recovered open to the highs of the session.

welcome back, everyone. you're watching cnbc "squawk on the street." we're getting you ready for the opening bell on this monday morning. lots of mergers to talk about. i have a couple headlines but i know you had a few you wanted to get in, too. >> oh, yeah, looking at the dow. the dow is on track for the best quarterly gains. 14 1/2% in a decade, which is going to be interesting just to see if we can get that one in the record books. it doesn't hold for the s&p or nasdaq but the dow alone has had a heck of a run in the third quarter. also, the other thing i was watching is last week's big and almost by itself giant loser was going to be the real estate index. on a monday to day basis it still swings to number one. we're still getting over the three problematic reit ipos last week that really poisoned sentiment. remember, the real estate is the funky little unfollowed corner of the financial sector. one of four industries that make

up the financial sector. but real estate is going to be an area to watch again this week. >> one other thing i'm watching as we get ready tort bell is what's going on in china. thursday is the beginning of a eight-day holiday there, celebrating 60 years of commutap, communism and capitalism. the investors are going to try to get out of trade before that. that could matter to lot of people here. there are the bells on this monday morning. the new york stock exchange employee volunteers are doing the honor here at the big board. at the nasdaq, ocean freight, ocnf, owner and operator of tanker vessels worldwide. >> market reporters are standing by. nyse, nymex. mary a is the the big board. >> as expected we have a higher open here on wall street. thanks to all that merger news. the dow is trading up 11 points after printing down one at the very open. light volume is expected today.

of course, because it's a jewish holiday, yom kippur, a number of people are off today. the jobs report for the month of september, auto sales and watching any activity that has to do with a quarter end of this september, of course, for the third quarter. now, one of the big stories today, of course, is news xerox is acquiring affiliated xur services for 6.4 billi$6.4 bill. it's affiliated. you can see the crowd here around xerox at this time. also, abbott is buying the pharmaceutical gel bam solvay. $6.6 billion. what abbott is going to get is a cholesterol drug, humera. also, reports that kraft is considering upping the bid for cadbury's at $17.5 billion. smaller deal here, dividian is going to buy them.

all of this merger news helping a positive tone to the markets today. dow is up 26 points. there's also a continued news on this cf industries acquiring terra pharmaceuticals. 7% of terra in the open market cf industries has been aggregate take over. the dow holding on to two-point gain. let's get a check on tech and for that, brian shactman. >> up half a percent. it's good for 11 points at the open. want to talk about a few big names at the start. research in motion in trying to big itself up off the mat after last week. down 0.3%. ebay up. amazon up about half a percent. apple is in some ways the story of the day. i told you about expanding the iphone use in the uk and china. china starting off. now we're getting reports of 2 billion downloads of the ap

store. i'll talk about that more in the next half hour. goldman sachs chiming in on regional bank names. first, niagara gets a buy. we get a sell at hudson city. you can see the difference. up 0.2 and down 1.8%. also want to talk about arega initiating a bri. and starbucks, william blair getting very positive on the stock, saying its margin's moving forward looks good, even two years out. it's up 1.1%. and also want to point out a couple of solar names in barron's. gordon johnson, very cautious on this space. first solar highlighting. down 2.8%. let's go to sharon at the nymex. >> talking to traders on the floor, there seems to be a bit of a tug of war going on here about whether or not the fundamentals are going to continue to be in focus or whether geo politics will rule the day. after all, we do have the iranians test firing the

missiles. will that support oil prices here? we are above $66 a barrel here for crude. we have plenty of oil out there, plenty of petroleum supplies. high inventories and weak demand that picture may weigh on prices. we also have the dollar which is being supported here. the dollar that is against the euro. that is also perhaps weighing on prices down the road. it's really the bearish fundamentals and the supply picture that may continue to pressure prices. 150 million barrels more petroleum in the u.s. today than there was a year ago. even with the iranian situation and those nuclear talks taking place in geneva on thursday, do we really need the iranian oil in the first place? over the you to rick santelli in chicago. >> thank you. indeed, as we watch things like oil and gold, denominated in dollars, then look at the dollar index which is doing okay. but break it down into some of the components, we see that last night the dollar/yen was

actually in the 88.25 vicinity. currently 89.34. that's the metric of the dollar versus the yen. so 15-year lows and we're even off of them just a bit, and still flirting with some very significant changes on. on the euro side in euro is holding them well. it's pound that even with good housing numbers yesterday, this morning, we see that it is getting hit pretty hard. bill options, adp wednesday. employment on friday. all of this is potentially going to continue to fuel buying, a bit counter intuitive in the face of supply. speaking of supply, this week it's t-bills. next week we get back in the longer dated maturities. now let's go back to matt nesto. >> rick, and everybody, thank you very much. so markets are modestly higher here today out of the gate. all ten sectors moving north if you will. here on the set, phil orlando, cheefr market strategist.

and another chief market strategist, steven wood from russell investments joins us here today. so, i'll start next to me. steven, it says here that you are, what was the language, guardedly lly optimistic. i like that. like a goalie. >> a goalie. >> you want to keep keep the points that you have. >> in some respects. i think what we're looking at is a transition period. we're transitioning from recession into growth. but the growth is going to be slow. the consumer is not dead but he's damaged. corporate earnings recover a bit. we're not going to recover back to the 2006 levels any time soon. so in that environment, i think we're also transitioning from an earnings game into a revenue game, as we go into 2010. so the broader market, i think, is probably less interesting than those areas and those firms that can drive revenue and actually, you know, shall we say, raise prices going into 2010. guardedly optimistic. i don't want to get ahead of myself here. strategic interest points have been something we've been

advising our clients since february. both fixed income and broader equity market. >> you said you're looking for maybe 15% more in the market? >> right. >> is that really bullish in your point of view or would you agree with what john lynch said earlier, the technicals are better than the fundamentals and siding with momentum. it's not out of a real belief things are improving? >> the technicals are good but the fundamentals look good, too. up 60% in six months. year not going to have another 60% rally in the next six months but the fundamentals are good. the recession is over. we think it ended in the second quarter. third and fourth quarter corporate earnings are going to be better than expected. stronger than expected bottom line because the productivity, the operating margins, all of that. and estimates continue to move up, we think the market is going to grind higher. we think we're going to be at 1200 in the next three to six months. >> you say other places might be more attractive than just stocks. bond is another area that had a huge surge. >> in the fixed income area,

junk bonds is our favorite area. back on the domestic equities, small cap stocks are still going to give us some juice. we still love international particularly emerging. and as long as the dollar stays weak, large cap domestic companies doing business over seas are going to continue to get that bounce. >> stephen, you're nodding in agreement here. i had a friend e-mail my that ccc rated stocks are all having a good run. junk stocks are out performing as well. >> i think also what your seeing, too, is money looking for a place to be. a lot of liquidity sloshing around globally. when you're looking at, you know, treasuries as being unattractive, being sources of liquidity, for many investors, they are going to need to look n. a risk adjusted return basis. you talk about leaving the points on the board, that's always the way it is. you want to make sure you have your risk accounted for and then that's not going to be the same for every person. you mention international, you're going to need to look

global. i think a global portfolio, global perspective, a lot of drivers from consumer are going to be emerging markets. i think the u.s. is going to have of look at that. a global perspective is going to be a necessary one. >> he is saying the bears are scrambling to find the bad news. i don't think anybody wouldn't say this is over-shoot, but maybe they would say it's not over-shoot. but whatever it is, it's going higher. >> i think the broader market, to me, is less interesting than those names within. fixed income is where a lot of people are going to need to look. high yield is going to have some of that. corporate bond space for the right plan is going to be a necessary way to look. a europe probably does better in currency than it does in the economy. merkel won re-election. t tapestry together going forward,

i think the fed is on the sideline until the end of next year. i can build thated optimistic case. >> you talk about price increases, this sort of how long can america keep borrowing at such rock bottom interest rates. a lot of americans had brought savings. they have a huge exposure to treasury and they might end up getting burnt. do you think that's a real risk? >> i think it is a risk. right now our fixed income is taking our duration fall to 95% because we think the treasuries down here at 330 is too low. we've got to see the yields move up. i know the fed commentary in the journal on friday caused quite a stir. our view is the fed is not going to start tightening policy until we see the rate of unemployment peak and start to recede. that's likely not going to happen until the middle of next year. the funds rate is not coming off of zero until the junior august meetings of next year. rates are going to stay low. >> we have a pause, a problem. >> the fed has a lot of balance

sheet to unwind. that's going to take them through the second quarter of next year. >> i think that's a known quantity though. you need to surprise th markets and move the market. guys, obviously, we've got to run. steve and phil, thank you. i invite you to stick around before our next coming seg chlts, which is, because you clicked. at&t, one of the most searched stocks on cnbc.com right now. we're going to go behind it and find out what's out there, performance since the bottom has been, well, nothing to call home act. >> a lot of drops on that chart? >> look at that. >> drop. >> we got it. first time. >> yeah. you got the analysts from raymond james on the other line. and later, our newest segment if you had a million dollars and you had to investment right now, would you put it in gold or oil?

welcome back to "squawk on the street." time warner largest shareholder predicts the company will sell the magazine unit. the managing director of capital group says time warner will become warner brothers, hbo and turner network. they currently own "people" as well as other titles. goldman sachs hire 2:00 more people to build the asset management unit. the firm executive told the financial times the bank is taking active measures to move up from the 17 tt place ranking in assets under management in 2007. that has always been an area the firm has desperately wanted to improve upon. and world bank president robert zolig says the u.s. should not take for granted the dollar

status. he stands at odds with the white house who argues will t. position will unchange. matt, only for a moment imagine what would happen if the white house said the dollar didn't need to be the main currency in the world. forget what they actually think, you can't say any such thing. >> no. the telecom sector has been slow to join in the broader market rally. now might be the time to look at at&t. is now the time? we have all you need to know about that stock because you clicked. joining us now, telecom analyst with raymond james. at&t, looking at the chart, hasn't been one of the best performers since the bottom of the market. does that mean it's going to get a huge surge from here or is that a sign that you might want to be concerned? >> well, we stuck in a las vegas in kell cotelecom. we have been looking for poor areas in the telecom immediate space that has had better growth. you've seen the cable names perform better, data center

names perform better. the basic wire line has lagged. as investors put money to work in the areas that have better growth and prospects for better growth down the road, then once those names have worked you will see them start to look at telecom. at&t will have a good third quarter because of the iphone sales to be able to push the ads up and see the revenue per user come up with ail la little bit. a little bit of concern there. but in general, i think you will expect to see telecom lag the broader telecom and media space goi going forward. >> the telecom is leading the market again today. it was leading last week. it has weight problem because it's such a lightweight sector in terms of its about to move the markets. there's only, what, eight or nine stocks in the telecom index in the s&p 500? >> yeah. it's very few. it's really heavily weighted toward at&t and verizon. numbers have come down for both names recently. quest looks more attractive. they've been firming their

guidance. it's much less expensive and has a better dividend yield. there have been investors attracted to the dividend yield. until you see the prospect for their growths to return a little bit you will see money flow to other parts of the group. >> frank, what about the future for at&t. they've got that iphone deal that's been lucrative. they spend a lot of time locking in devices. it appears that maybe not so much time investing in the networking, making sure it is consistent and the best in the business. is it something that could hurt them? >> well, over time, the iphone was really sort of an anomaly. fantastic product but revolutionized the data usage on the wireless side from the customer base. so i think that caught up with them very quickly. particularly with the latest version of the iphone and video up loading. that would put a strain probably on any carrier's network. that's something they're extremely focused on. that's going to get addressed over the next six to eight months. and then we'll see where that goes going forward. i'm not quite sure what the

future of exclusivity of various handset devices or see oot iphone any time soon. i think that's something that they are heavily addressing. >> and so they're going to put a lot more into the network. is that something that that could, if they really put in that money, could threaten one of the most attractive things since owning the at&t, which is the dividend? >> i don't think so. these companies are up a lot of cash flow. it's really more shifting around. if they spend some morme money n the wireless network this year, less on something else, they can move that money around within their cap x budget. in the long term, at&t and verizon are wireless playing and seing to large businesses. they're making an investment in what's the most important of their network. >> thank you very much, frank. we appreciate you taking the time. >> thank you. all right. prices for solar panels are plummeting as demand rises and more supply is coming online. but, what does that mean for solar stocks? >> always in the tug of war, aren't they? as we go to break, though, check

it out. the dow is up 90 points right now. all 30 are trading higher here today. the best performer cisco up 4%. the laggard, unchanged basically, as ibm and kraft. we'll be right back.

welcome back. the price of solar panels have been falling. it might be a good time for consumers maybe putting one on your roof. but can the same be said for taking a look at the solar stocks? a clean technology equity analyst at barclays. we're squaring them off for a street fight today. what do you think about this here today? i mean, there is a lot of supply that came online quickly and supply doesn't go away. it just gets mothballs. >> that's right. i think what we've seen so far this year is a significant amount of supply coming online. material has readily become available. supply is a little off balance

in shortage at this point. just last week at the conference in europe, a lot of the companies were essentially sold out. they were sold out through the rest of the year, for a number of reasons. first, since the financial crisis last year a lot of solar kissing customers have been working and as a result the levels are lean at this point. secondly, you know, demand and lastity in the sector is significantly high. as price declines were accelerating last year or early this year, a lot of customers were holding back on purchases and now stable pricing. a lot of customers are going back and putting in solar panels essentially ahead of reductions this year and ahead of next year. there's going to be a more balanced supply, but it's not for everyone. >> prices go down and then maybe demand picks up, particularly on that much -- very price sensitive residential market.

is it all fully priced in or would you still sell? >> i think we're still on the sell side here. we don't agree that the capacity has been fully absorbed at this point. we think there is still a significant amount of over capacity in the sector and we would be concerned about the fact that a lot of companies in this industry are pricing very aggressively. when you look at the chinese companies in particular they're being supported in some degree on those efforts by the chinese banking market where they're poring a lot of short-term capital in the market. you still have a massive supply of over capacity, you would like to see it take place. we're not seeing it because a lot of chinese companies have the banks to help them. >> it feels like deja ethanol all over again if. >> i didn't know where you were going with that. >> isn't it? heavy-handed government intervention trying to create demand in an industry that's viable but not necessarily able to stand on its own two feet. >> i think that's the t. problem with subsidized industries. you end up with the boon/bust

cycles. you have great subsidies. the government was going to pull the plug on them when they were expecting this would go on forever so they continue to go capacity. that's what puts us in the position rear in today. >> to play the devil's advocate here, one position is that solar isn't like ethanol, in that, the ultimate power for everything does come from the sun, right? so we could make the argument this is the ultimate power source. >> i think the difference between ethanol and the solar is the size of the market and the. clearly, i think we are talking about a five or six gigawatt market. i think we also concern about the supply issues that are impacting the sector. i think not all of the companies are going to make it in the long run. is the cost and technology leaders that have a focus on the downstream. i would say the size -- the opportunity there is huge and

focus on the cost and technology and you'll be fine. >> thanks very much to both of you. >> thank you. >> i knew what i was saying was a very -- how many feet, how many miles away is the sun? the whole point is it is the sun that heats the earth. and it's linked to hoe -- to tides and to wind, so ultimately it is a power source, which you don't have to have any intermediaries. it comes down on its own. it is something to be said for that. everything else has a process cease which requires energy and input and, therefore, cost. >> i think i am on the record. for the boon/bust cycle, when you start meddling around with industries and creating subsidies and taking them away and changing policy, you know what, there's a lot to talk about with alternative energy. we're going to stick with it. we're going to talk about carbon capture next. is this a viable solution or a dangerous tinkering with nature? but first, why you should

not discount junk bonds just yet. hey, still way above where they were.

it doesn't cover everything. and what it doesn't cover can cost you some money. that's why you should consider... an aarp medicare supplement insurance plan... insured by united healthcare insurance company. it can help cover some of what medicare doesn't... so you could save up to thousands of dollars... in out-of-pocket expenses. call now for this free information kit... and medicare guide.

if you're turning 65 or you're already on medicare, you should know about this card; it's the only one of its kind... that carries the aarp name -- see if it's right for you. you choose your doctor. you choose your hospital. there are no networks and no referrals needed. help protect yourself from some of what medicare doesn't cover. save up to thousands of dollars... on potential out-of-pocket expenses... with an aarp medicare supplement insurance plan... insured by united healthcare insurance company. call now for your free information kit... and medicare guide and find out... how you could start saving.

xerox shares are lower on the announcement of the 6. $4 billion deal to buy computer services. however, acs is soaring. apple says past 2 billion downloads for ap store. doesn't say how many were sold and how many were free. president obama will go to copenhagen to participate in chicago's pitch for the 2016 olympics. that's cnbc.com news now. i'm courtney reagan. live from the capital of the world, i'm matt nesto, in for mark haines. we are galloping along. the stock is higher 113 points on the big board. cisco up more than 4%, leading the way today. affiliated computer services being bought by xerox. the biggest overall mover in the s&p. good for 15%.

on the nasdaq, virgin media, big winner there. almost 5% higher here today. erin? >> i'm on the floor with mary thompson. let's start with the dollar, which you're saying is very key today. >> well, what's interesting to note is f. we see the dow is just off the highs of the session. we're seeing a little weakening in the dollar index. we know the dollar has been weaker against the yen but we see the stock started to move higher, this continuation of an inverse relationship between the dollar index and stocks. so it's a dollar index pulls back, we saw stocks move to their session highs today. that's something to watch and something that we've seen happening over the past several weeks? >> terms of groups within, it's tech. >> techs are strong. also seeing strength in recent insurance but it's techs leading the we today. you can trace that back to the fact that xerox is acquiring affiliated computer services. if you look at acs and computer sciences, all of them are strong

today. a positive report in bearron's this weekend, up ggraded to a b at citi group. >> high, and right back up at the hi. >> 115. >> it's everyone. >> it's a broad-based rally. it's hard to find some weak areas today if you look at the dow 30, cisco is the big e. gainer. upgrade there. seeing strength in dupont, ge as well as at&t. as it stands, we're all expecting it up again because of the jewish holiday. but a broad-based holiday boosted by a weakness in the dollar index and the merger news. >> oh, japan is down, what will happen here? now here we are, up 120. mary thompson, thank you. mary is talking about the strength in tech, so let's get to brian shactman and the detail there's. for you, brian, i know it's coming down to apple and some news there. >> yeah, whole bunch of news with apple. 2 billion aps downloaded is amazing number.

we don't know how many were paid for or not. 84,000 aps. incredible amount of momentum. then you get the situation where near going to start selling them in the uk and in china starting october 1st. it will cost them $132. it's just the company, so many people, well, is it a top? there's a lot of momentum in between the 2 billion downloads and more iphones to be sold across the planet, erin. a lot of strnt in the stock. >> what about research in motion? i know that got the lion's share of the conversation at the end of the week. a lot of people said buy the dip in earnings, this is a name that's going to go higher. >> yeah. >> is it happening? >> it is not happening. it's been a direct contrast to apple. competitors. they're also trying to broker a situation in china. there competition to get involved with the telecoms there. no, several analysts came out on friday and said, no, it's a buy in the dip opportunity. we were staring down the barrel of $90 a week ago and now it's not holding 70. it's down another almost 2%

today, erin. the sell-off does continue. they're not necessarily heeding those analyst calls. >> brian shactman, thank you very much. in the commodities corner today, i'm looking up. you can see a move higher in crude. also higher, a little bit higher in gold. let's check in with sharon epperson and get the headlines. what are you focused on? >> a lot of traders came in today expecting the iranian news was going create a rally in the market. we didn't see that in the early morning hours until the stock market opened. and then we saw oil prices start to rally. so once again, it is oil following the equities market today. that seems to be why we're above $66 a barrel right now. traders are also very focussed on the dollar as mary mentioned, that weakness or coming off of the highs from the dollar index. that is significant as well. and with it being a very heavy week for economic report, the dollar will certainly be in focus. the jobs report on friday. and then, of course, tomorrow we'll get that number on consum consumer confidence as well as

home prices and auto sales. also, though, think about the fundamental picture and the fact that gasoline margins are at their weakest level since january points to the overall aband dance of supply that we've had here. will the market start to focus on that. it brings gasoline into play as well because, of course, they import most of their gasoline. what kind of impact would that have on the gasoline market or will tighten tensions overshadow all of that. a lot to watch here in the rick santelli, to you in chicago. >> thank you very much, erin. we're all looking forward to next tuesday, wednesday, and thursday, not only because, of course, it's going to be end of the new quarter, end of the new half year for japan, but also we get coupons supply in the form of 3s, 10s and 30s. today we will have three and six-month bills like every monday. 59 billion up. a billion as far as the data sharon pointed out, employment data laggering or not is probably the most important area for traders to continue to trade on in handicap.

although it hasn't steered many in the right direction in terms of equities. even with that very big equity rebound from good lels to less to now close to the new highs of the session, even including overnight. we see that interest rates failed to move much higher like they normally do. we want to pay attention to the 330 area and ten-year note yields. matt, back to you. >> thank you. corporate and municipal bonds have had a nice run this year. lower yields and heavy demand raising risks, will the sweet spot in bond funds? tom o'reilly is the co-manager of newburgher fund. they're up 40% year to date. they have a five-star morningstar rating as well helping them along. tom, what do you think about here, high yield, can you still get more blood if you will, out of this sector? >> absolutely. if we look at where yields and spreads are currently at. spreads are still near plus 800. yields near 10% if if you look

at default rates for next year, many think that default rates are coming down into mid single digits. we think we will see further spread tritens. returns in the next year in the 10%, 20% type range. >> improving economy, correct? >> correct. we've seen a lot of assets come in. a lot of money come into our market. recently we're actually on track for record in flows in the high fields. with those record inflows companies have been able to refinance their balance sheets. they're bif they've been able to maturities out. for them to be able to run their businesses without to default. >> at some point, most people are saying not at least for maybe another year or at least 3/4 of a year, we will see a rising interest rate environment, which is typically not good for bondholders. >> right. and again, for high yields because of our hi current yield at 10%, rising rates should not have much of an impact on our returns. that usually would happen when

we're in a spread tightening environment, where spreads are very tight. from where we're at now, higher rates should not have an impact on the returns of our market. >> so you're sitting at a 40% year to date gain? how much higher do you think you can go? >> again, if we look at the next 12 months, sitting on a 10% yield, and further appreciation in pirinciple because of the outlook forward, we think next year, the next 12 months we could see another 10% to 20% return. >> if you take a look at sectors or specific names, is there anything that appears to be a common theme or something that jumps out at you as being attractive? >> as far as on the attractive side, we're still looking for sectors where we think that the companies can manage through a slower growth environment, such as utilities, such as telecom. and mostly companies that have repaired their balance sheets. as we move flew a slower growth

cycle, we want to make sure that the companies we're investing in have the resources and the liquidity to make it through the cycle. i think on the flip side, some of the sectors that we're concerned with, we're still avoiding some of the deeper cyclicals, mostly that rely on the consumer for discretionary spend. so some of the leverage retailers, we've not been in. and we are concerned about the ability for the consumer as we go through the next few years to spend. >> tom, real quick final ten seconds here. what's the big risk out there? what scares you the most? >> i think what scares us the most is a double-dip recession. we don't see that happening. but certainly if that were to occur, that would concern us the most. >> okay. and there we disagree, but i appreciate it. very insightful information. time o'reilly, appreciate it. next, merger monday, we've been talking about it. it's back.

but is this thing the long stocks into the fall or is it a sign that when companies start paying big premiums, you might want to just take your gains and get the heck out? >> i feel like the bear that is chasing the bad news. i'm like, yeah. so, injecting a power plant carbon dioxide into the earth save our planet or do more harm than good? later. if you had a million dollars, i'll letter written sing it, she's loving this song. >> only mark has the voice to be able to sing the baritones explode through the airwaves. >> if you had a aforementioned, would you let it all ride on oil or gold? two bulls are going to be along to do battle, maybe even sing about it. next on "squawk on the street."

another 113 points of cushion here. september is typically a scary month for the market. doesn't seem to be the case this year though. as of today, all three major equity indexes are positive for the month of september. should you be worried that october will be rocky? well, compared to september, here to give us some idea of what october might feel like are pete costa, president of empire

executions and cnbc market analyst as well as joe oh donahue, head of equities at cowen and company. what do you think of the month of october? that's where the black mondays tend to reside. >> yeah. if you're a historian, you definitely look at it that way. september has from time to time been rocky as well. we're kind of maybe through the first half of this volatile period. the only thing i'll say is the last week or so we've seen a pick of up in the put/call ratio where people are looking to buy downside insurance but not to a dramatic effect. it hasn't spiked at all where people are putting bets on. i think october it will be interesting because third quarter reports will be be coming out and that could be a good catalyst one way or the other. >> let me ask you something here. there's more etfs than ever before. a lot of them are skewed, double skewed, triple skewed to the downside. what's that going to feel like the you feel a put buying all up and etf positioning going up when the inevitable correction

does occur? >> obviously it's going to -- i won't say survey, i don't know if that's the right word. they will accelerate it a lot. it does scare me a little bit. i'm getting a little more tentative about my bullish approach. and you know, this is not a good sign when i start turning bearish. this level and a little higher. i don't think the market has run out of steam. you know, we've had a good day today. but you're talking about a holiday. and i think there's a lot of news coming out this week that's going to really, you know, it's going to change the whole focus of the market probably for the last three months. >> unemployment at the end of the week. there's two other perhaps important things happening over the next ten days. rick santelli was talking about one of them, the news out of japan. and then you have this eight. day holiday where nobody is going to be doing anything in china. does that mean it's the fog or it's going to keep going up or is that something that can cause issues here? >> well, it may from the

standpoint of especially in the treasury market with issuance and stuff like that. from the standpoint of the stock market, i think to agree with what pete said, we're kind of at a stalemate here at this 1050 level in the s&p. i was apprehensive enough it would run through 1,000. my real thought on this though is we're probably going to be more microfocused on companies to see how they come in. balance sheets have been repaired and a lot of work below the cost line has been effective. the issue is whether on the top line we can start to grow or not. i think that's where the next catalyst will be for the market. >> and john, everyone says that catalyst, some people say it will come from the u.s. obviously conventional wisdom is asia, they weren't hit as badly and recovering more strongly. there are a lot of eggs in that basket. any reason to be concerned about that story line, asia is going to grow? >> meaning that asia, in fact will, be the catalyst to grow the world economy out as opposed to the u.s. as it it was before? >> right.

>> look. i think if you read some stuff over the weekend, especially about managed economies which, you know, a lot of the asian economies are. there's an interest n.ing dichotomy between that and the full-blown free capitalist world. i would tend to think that demand, if demand is what we're looking at, vis-a-vis job yes asian, will come out of asia. >> i talked to you earlier about leadership and telecommunication sector. it's an unfortunate problem for the market if that's the best you can put forth. >> well, you know, right now that's where it is. but i think, you know, going forward we're still looking at commodities. they'll start bouncing back. telecommunications to me is almost at the point it seems like a tired industry. and you know, if that's our leadership, i don't like that idea. >> interesting, if you look at the month to day, financials, although they have now turned positive, they're the worst per

f former. nasdaq put 6% on the board for september. again, arguably the most important leading group for the markets is already started to underperform in zseptember. >> they had a great run. i mean, they were up more than 55, 60%. you know, that's good. that's going to, you know, stop at some point. so, yeah, i can see that. but, like i said, i think this month and this whole week is probably going to be indicative, we're going to have huge indications of where the market is going to be in the next three months. a lot of people don't like put that much stock in one week but there are a lot of things coming out this week that will change the tone of the market. the this is where i'm getting scared. >> all right. peter costa, thanks so much to you. >> thank you. ahead of jpmorgan chase, this is a greatly ironic statement. apparently jamie dimon says it is bad long-term policy to have banks too big to fail. is he willing to break up yp

morgan chase, which has gotten a lot bigger? >> he was unwilling to fail. >> it is indeed definitely too big to fail. why do those institutions still exist? and then clean coal. >> clean coal is supposed to help the planet. unintended consequences. could it do more harm than good? take that one up when we get back. this is my small-business specialist, tara. i know landscaping, but i didn't know how wireless could help my business. i just don't know how wireless can help my business. tara showed me how i could keep track of my employees in the field and get more jobs done faster. i was blown away. i'm blown away. only verizon wireless has small-business specialists in every store to help you do business better. we should get you a hat. now buy any blackberry, like the new tour, at our lowest prices ever, and get one free.

♪ today ♪ must have been one of the strangest days ♪ everyone may face the same uncertainty. ♪ some would say that you won't find ♪ protecting yourself, however, requires good decisions. find strength and stability with mass mutual, a company owned by its policyholders. ask your advisor or visit massmutual.com.

united states gets roughly half of its electricity from coal. we've all heard of the term clean coal as one of the ways to reduce greenhouse gas emissions. there are several ways to clean coal, some of them from the market and some not. last week the mountain near power plant in west virginia became the first coal firepower plant to capture some of the carbon dioxide it turns out and bury it in the ground. that's one way to make it clean.

the hope is that the co2 will stay in the ground for thousands of years instead of entering the atmosphere. here for more on the technology, supplying the capture and storage facility for the mountaineer plant. we appreciate it. it's one of those things, carbon capture that sounds good. you're taking the co2 out of the air and putting it into the ground. but it does beg this question of, do we really have any idea what the repercussions could be or unintended consequences of sticking this stuff in the ground? >> okay. that's usually one of the fundamental questions. and it's a question that could be for the people. we have been using this technology for years. and mostly oil and gas company have been using it. and there is absolutely -- this is absolutely technology.

in this area, what is more important, i think, is to look at what we are talking about. we are talking about cleaning what is apparently causing one of the major problems in the environment. and we are using safe technology. the plant that will be operating in a few weeks is already reaching a size which ask just the size before we can go commercial. and then guarantee to consumers. that is why we have been chosen by aep and other plants. >> how does it work? just in very simple terms, at this mountaineer plant, they emitt some carbon dioxide and then what happens? how do you get it from there to the ground? >> yeah. first of all, we -- it's a very simple action. we use apommonammonia.

this solvent absorbs the co2. the gas out of the coal. and then after, we get the co2 from this solvent. then we come prepress the co2 i pipe under pressure and put it into the ground. or we send it to the sea fit shows another type of savage. in the case of mountaineer, we put it down by the plant. >> during the election, president obama had said that we will bankrupt you, essentially to coal plants. i'm sure that has softened up a little bit just given the need for electricity domestically and globally. do you feel there is a supportive environment for continued growth of clean coal technology in the u.s.? >> yes. you know, you know, your have to go back to basic and 50% to 60%

of the electricity worldwide is produced from fossil fuel, coal or gas or oil. china is building one of the plant for coal. all this will come. i like to say the co2 emission is already backed up, so we can try and criticize the fuel, but the problem is not the fuel can use or not. you will have to use it. and now the problem is how to turn it clean. and this is why it's so important to invest in this technology, because asia continues to equip itself with coal plants electricity generator, as the united states or germany or poland are doing it. so there is not a choice. the choice is when and ch for

which way can we clean the coal, not if we can clean the coal. >> thank you very much. ceo of alston. >> we're going to keep talking a lot about it because there are real questions about costs, how expensive it is compared to nuclear and other things. but it's a real technology that obviously is going to get a talk. we have a lot of it. still ahead, more money flowing into the fond mutuals this year. should you be taking money out?

welcome back to "squawk box." september, dallas manufacturing activity index down minus 6.4. as a note, this is the 23rd straight negative month, which began in november of '07. last month, unrevised at minus 9.1. of course, i will comb through the subtext to see all the different categories like employment and inventory and prices. but suffice it to say, it's worse than expectations. and even though certain areas in the country are improving, manufacturing, i'm not sure that dallas is in the mix in that category. back to you. >> thank you very much, rick santelli. in the headlines at this hour, as on the back of rick's

headlines, up 130. so right near the high of the session. we have four stocks hitting the one-year high. highlight is affiliated xur er is computer services bought by xerox. and snap-on, highlight, it's a tool company trading within 59% of the ten-day average. and liberty mediation new nasdaq winner, up about 5%, matt. >> let's dive into the internals. i'ming looking at sectors. nine out of ten are up right now. imperials and tech are the leaders there. nasdaq, 2% higher right now. so we snapped that creative losing streak with about a 4-1 out h out-performance here today. they are higher right now. there's a.d. line, positive at the nasdaq as well and no real

surprise there. >> earlier you heard tim o'reilly saying the great junk bond rally had room to run. they've already locked in. here to react is kevin giddes at morgan keegan. good to have you with us, kefr v kevin. do you share that optimism? >> not so much. tom has done very well over the last year. here's the thing i'm worried about, erin. if you look at high yield spreads in particular, these things are v. tightened almost to pre-lehman levels. if you look at where spreads were in march of '09, 1600, 1700 basis points over the treasuries, they have contracted to about 800 which tom mentioned. you go back to late 2007, these spreads were around 600. so the danger in this now is how much more do you think that these spreads can tighten before we hit a real danger zone in high yield? the same thing is happening in investment grade but primarily

in the high yield market, great run. my concern is about defaults as well because unlike -- i really don't agree with tom on defaults. it lagged the economy. if we haven't seen an economic rebound, we haven't seen a lot of defaults yet. >> you're thinking, when you're saying, what were you saying, matt, mid single digit ge default rate, you're thinking how much higher is real list is? >> i think we can see more in the upper double digits of default rates. even more importantly than just the default rate, the recoveries. and because that's the key. it's one thing to default. what are you going to get out of it when it happens? i think we're still premature in thinking we're out of that ball game right now. >> but let me ask you here. his big fear was the double dip. are you a double dipper? >> yes. >> do you think this economy is going to be strong and we're going to see those default rates come down? that's really the nucleus of the whole continued rally story for

junk. >> yeah. i'm a little less optimistic about the economic recovery in general, matt. and i'm thinking that this is going to be, you know, a slow, ugly "u" rather than a "v." i tend to think that we have not only the chance of double dipping, we have a chance of a very, very slow recovery coming out, which is going to drag these companies who are on the edge right now, it's going to drag them further and further down the spectrum and increase their chances of default. so i'm less optimistic, but who knows. >> final ten seconds. do you think there's a correlation between the melt-off that we've seen in the stock market and now what we're seeing in the junk bond market as well? >> yeah, i think there's been tremendous optimism. you look at that market in general. it got really beaten down. the peak increase in yield are spread widening happened in september 2008 when, you know, we were all in a quick panic. we have narrowed that gap on

optimism, you know, a good 100 basis points. and i just don't -- i mean, 1,000 basis points. i don't think we're going to see that much more of a contraction. >> tokyo, london, memphis and los angeles as they like to say at morgan keegan. thank you. coming up, jpmorgan chase jamie dimon say it's mistake to have a bank too big to fail. is jpmorgan going to be forced to slim down? >> great question. gold and oil, they're both very hot here today. again if you had a million dollars -- this is woven into the show, has it not? where is the better bet? you're watching "squawk on the street."

national car rental knows i'm picky. so, at national, i go right past the counter... and you get to choose any car in the aisle. choose any car? you cannot be serious! okay. seriously, you choose. go national. go like a pro.

jpmorgan, chairman and ceo jamie dimon slamming the idea of too big to fail. listen. >> i think it would be very bad long-term policy error to have banks too big to fail. by that, i don't mean make the bank smaller. i mean, we're large because we have a reason to be large, but that you don't want -- you don't mind if a company fails. what you mind is if a company fails and it destroys your economic life. >> even if we all agree that too bag to fail makes for bad policy is it realistic to think that regulators to fix that policy? soon your fellow of economic fellows at the brookings institution and he spent 20 years as a an investor banker, primarily at jpmorgan. and cnbc contributor and author of "a million is not enough."

wow. i don't know if it comes with the music but it should when you open the book flap. so what don't we big offset, if we can. michael, you know, i think this whole too big to fail is just a more comfortable saying for systemic risk for parlance of wall street and something that's about to be attempted to be legislated out with this new, what, consume protection agency that is going to see what no one else has been able to see in the history of man. i think you know how i feel about this. >> i'm with you, matt. you know, it's a huge problem, too big to fail. it's great when jamie dimon comes on and says we need a policy against this, but, you know, i think we might as well have a policy against hurricanes and natural disasters. i wrote about this on the cnbc blog and on our website. you know, the problems gotten worse. not only is it a bad policy but there's not a lot we can do about it.

all of the banks are intertwined. they all have counter party risks. as consolidations have occurred. as the 95th bank in this country failed last friday, we've got consolidations and this problem has been exacerbated. >> doug, watch that little comment, though, i sort of laughed because there's jamie dimon sitting near the sheila bair say toog big to fail, we shouldn't have it. it's become the biggest bank and his bank is the definition of too big to fail. is there not an iron any in him saying that we shouldn't get rid of them but not making them smaller. what is he saying? >> he's saying we find some magic way to make it less painful when these large banks fail. that's not realistic. it's simplistic to think that we're going to be able to take banks that are so huge and make it not painful when they fail. >> right. i mean, he's saying there's no -- he doesn't want to make jpmorgan smaller, but it doesn't

seem like there really is any other way to pr veevent that systemic risk that matt's talking about. >> i agree with michael. too big to fail is like cancer. we're all against it but we're not going to see it eliminated in my lifetime. all we can do, as the administration is proposing, is to find ways of reducing the probability of failure and reducing the damage when they do fail. >> to be able to departmentalized the risk and gain clarity and transparency into the cubbyholes of risks creating in the wbohemoth banks. we're trying to get ourselves out of this financial crisis. and through all of these patches and nailed on sheets of plywood we're building a new financial structure and nobody really has a set of blueprints and the government hasn't articulated at all where we're going. i think, you know, the too big to fail is a problem. but what are we doing instead is

the other problem. i think we really need an answer. >> you know what, though, we love bubbles. we love bubbles in this country. and i want to meet the person who is smart enough to point out what is the next threat to the system, what we never see them, we allow these bubbles to go because we like them, we make money on them, they create jobs, they create wealth, and they are allowed to go. but there is a political problem because we can sit here and talk and say, you know, systemic risk, with know it's not going to work. but, in other circles, it's good plit the red meat. they're going to do something even if it's the wrong thing, i think. >> i have to come back to this point about jpmorgan which has behaved itself well and jamie dimon has run a company that got through this crisis and if they weren't strong enough to buy these banks we would be worse than we are now. everyone understands that. we're at risk of treating jamie

b diamond a dimond and jpmorgan chase differently. >> i think we have to be careful of think that any institution will be run so well they're not a problem. these institutions are run by people. people change over time. other people make mistakes. he's not always going to catch them. >> you're saying you think what he's trying to say is, and again, it was funny even watch that and watching sheila bair's face when he said that ridiculous thing about being too big to fail. he doesn't want to change the capital requirements. he's trying to say, hey, i'm your friend and i'm not going to fight against all the regulation, right? >> the good thing here, too, in jpmorgan's case is, at least, you know, good things are happening to good people, that jpmorgan kind of kept its nose clean threw a lot of this mess and is a stronger position. >> but that's now, right, michael? >> same moral risk. >> what happens when jamie dimon goes, to doug's point.

you're creating this institution which is so gigantic and built upon's one person's belief and one man. >> warren buffett and it creates a risk all in and of itself, too. >> let's not forget hank greenberg. >> no question. >> the next bubble might percolate out of jpmorgan. >> keep your eye on u.s. treasuries for the next bubble. >> that's it? >> sign me up. >> without wisdom, yeah. pension, government pension. >> doug, michael, thanks very much to both of you. >> thanks a lot. let's get a quick check of what's making news. good morning. >> good to see you all. defind iran setting off international shock waves once again. iran's state television says the country has fired one of its longest range missiles today. the third round of military tests in two days. the missile is capable of tearing a warhead and has the potential range to strike israel and u.s. bases in the region.

this comes just days after tehran revealed the existence of a second nuclear facility. president obama and the first lady will travel to copenhagen to make a personal push for chicago's bid to host the summer olympics. they've are expecting to announce they're decision on friday. several european countries are push for director roman polanski to be free on bail. he is facing possible extradition back to the u.s. for having had sex with a minor in 1977. pulitzer prize winner writer sapphire was a speech writer as well for the nixon white house. safire was 79 years old. back to you guys. >> thank you, monica. next if you had a million dollars would you put it all in gold or oil? you can't cheat and ask what the time horizon is. the point is, gold or oil. is battle is next. >> what if you put it in a bank

that is too big to fail? i don't know. first, trish "table for three" reagan, what do we expect on "the call" today? >> not yet. we've gotten more weeks to go. at the top of the hour, it is making money monday on "the call." we're going to take a look at this return of the merger monday. we're also going to look at gold, whether you should be investing in them right now or whether you should be looking at oil stocks versus natural gas stock. plus, ceo bill hawkins is going to join us with his take and concerns about the nation's health care policy. and we're going to talk about the weak dollar and how it could impact stocks in the fourth quarter. we've got a jacm-packed hour. but first, "squawk on the street" is back right after this break.

okay. we're up 125 for the dow right now. just off the high of the session. oil and gold, though, are --

well, they are the stuff of a lot of fights. both up since the march bottom. many will say the benefits to investing in oil and gold are very similar. but if you had $1 million to play with and you had to put it all in either one or the other, which would you choose? joining us now, president and cio. global commodities strategist with bmo capitals market. jerry, make the case for why oil really is black gold. >> sure. oil has two distinct advantages over gold. principally the supply argument. in the case of oil supply, we're seeing pretty rapid deterioration now around the world in oil production. it's being masked, obviously, by recession. and you won't really appreciate the effect of it probably for another year. drops by a million and a half barrels a day.

combine that with the world's need for oil to grow. in other words, in the case of gold, the price of gold might be dependent on a lot of things. it's not necessarily dependent on economic growth. oil is. if the world economy is going to grow over the next five or ten years, it's going to need more oil. you combine falling supply with rising demand from an economic standpoint, and oil really has a very solid base going out over the next five to ten years. and it's not as dependent on some of the more monetary-driven fundamentals that gold is. >> bart, he makes a very good case. particularly in that we do burn oil. we need it. we're going to need it for a very long time, no matter how successfully all this alternative energy push ends up being. why would you bet on gold? >> well, i think for two reasons. reason number one, i think the u.s. dollar is likely going to weaken over the longer term. and gold seems to be the perfect pitch to protect against the

devaluation of the u.s. dollar. the u.s. government is issuing trillions upon trillions of new paper. and that will eventually erode the value of the u.s. dollar. the u.s. dollar needs to weaken in order to re-establish some balance of u.s. current account and trade deficits. at the same time we see inflation increasing quite a bit. and gold is a hedge against inflation, the physical demand will likely increase because of that as well. at the same time, odds that wealth in china and india increase, their propensity to consume the stuff is going to be much greater than it has been in the past. very much like oil, the supply side is quite constrained, indeed. >> i would just say that oil oes down 31% from a year ago. gold is up 30% from a year ago. i'm going with -- i'm going with the oil trade here. >> i would agree with you. i would point out that in the case of gold, too, remember, oil benefits from all the same monetary fundamentals that gold

does. i would add that as like a third leg to the oil stool. as you can see, as the dollar's weakened, oil has appreciated. big economies like china and india, they're going to be building massive oil stockpiles over the coming years as they consume more gold. so it's almost a parallel support for one with the benefit of demand from the economy from the other. >> that said, bart, last i checked there's no lobby in washington looking to put big gold out of business that i can think of? >> no, there isn't a lobby trying to put big gold out of business. but for the same reasons that have been mentioned for oil are also happening in spain for gold as well. we are having china and central banks around the world, in fact, accumulating gold. as opposed to disposing of it. and, after all, it is -- balances supply with demand. with a riskier environment going

forward in terms of the currency and inflation, gold should do pretty well. and i would say that gold tends to do much better than oil does in terms of inflationary situations and at a time where the currency is in question. >> all right, guys. thank you very much. jerry and bart. appreciate it. >> a lot of good arguments made there. let us know what you think, by the way, on gold versus oil. but next -- >> a quirky little last check on the markets. as only seen on "squawk on the street." we'll be right back. we know why we're here. to build a new generation of airplanes to connect the world. airplanes that fly cleaner and farther on less fuel. and make nonstop travel possible to more places. announcer: around the globe, the people of boeing

are working together-- to bring us together. that's why we're here. i just want fewer pills and relief that lasts all day. take 2 extra strength tylenol every 4 to 6 hours?!? taking 8 pills a day... and if i take it for 10 days -- that's 80 pills. just 2 aleve can last all day. perfect.

choose aleve and you can be taking four times... fewer pills than extra strength tylenol. just 2 aleve have the strength to relieve arthritis pain all day.