good morning. we're closing the book on the third quarter, winners, loseres and where to invest from here. troubled cit group hits a fork in the road, the commercial lender nearing a deal to hand itself over to bondholders. the markets at this hour show u.s. equity futures trading higher. a mixed picture in asia overnight. but a positive start in europe. it's september po e, 2009 and

"squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. carl is on assignment today. stocks are set to put in a very impressive quarter at the start of the quarter today. it's the start of the third quarter. the dow, s&p and nas dax are both up by 15%. the best performing sectors were the financials, followed by the industrials and materials sectors. the dow is up nearly 3%, s&p up nearly 4% as of september and the nasdaq up over 5% and the russell is taking on over 6%. the s&p 500 is up more than 44%

of the period. at this pace, the s&p would record its best closing number since may 1996. right now, we are up by 1295 for the quarter. if you see a gain today, you could see the dow putting in a record performance just in terms of points. >> and it matches up nicely with the month that i think of when the skeptics got most vocal. do you remember? it was july. >> july. >> july, august, september. that's when the market had moved about 25, 30 points. that's when all these really well non-su-sayers said it's way ahead of itself in july and that's when it started and it's still for the quarter, yeah, best quarter in how long as the experts, the guys that, you know, you look to to have seasoned advice, have been around a long time, know how

markets work, able to gauge -- >> the markets always fool the greatest number of people. >> right. well, yeah, but the ones that are so sure of it because they feel like they know so much by now. >> and they've seen everything. >> and they've seen everything. how long? best quarter since when? >> 1938 for the s&p. for the dow, we're talking about 1998. >> that's like being as wrong as you can be. >> i feel sorry for whoever is coming up in our market guest. >> i don't think the people that i'm thinking about are on today. >> anyway, the number to watch this morning, the adp report at 8:30 a.m. eastern time, private sector payrolls dropped 240,000 is the number. the release helps get us ready for the friday number. adp is far from a per expect

indicator, as you know, but it's always fun to watch because you never know whether it's going to be really wrong or really right. >> and the market moves on it. >> it does. friday's report suggest it will show about a 175,000 job loss in september. the unemployment rate, 9.8% is what we're expecting. so if you get an unexpected number -- >> 10%. >> we heard someone say 10.5% will be the high. >> adp will be the morning's headline, but it is not the only economic event to watch today. we have weekly mortgage applications coming out at 7:00 a.m. eastern time. we get a second read on adp at 8:30 and chicago purchasing at 9:45. there will be plenty of things to the markets to watch today. atlanta fed president dennis hockhart will be speak iing and

fed vice chairman donald kohn will discuss exit strategies at 12:25 noon. there's a human number of these guys that are talking this week and everything is trying to figure out how -- >> people have heard of him. >> oub charles plosser. speaking last night, he's a well noted hawk, he told a pennsylvania audience that the fed has the tools to shift its policies when needed. he's not a voting member of the fomc this year. but he warned inflation will pick up more than some people think. mostly you'll see that in the latter half of next year. >> that sounds a lot like what we heard from marsh last week, the talk that got people really

concerned about this. >> although he sounded like we thought we should do something earlier. but losser said very aggressive when they do start that. >> when this do do it 37. >> speeblging of recovery, it's warned that the global economy will be. rob wamton, the watt mart eo says walmart sees great potential growth in china and the company is just getting started when it comes to india. >> looking for the headlines here. >> what's up? the public plan went down hard yesterday. >> the schumer plan? >> both of them the the rockefeller plan, the less robust schumer plan, both of them went down. just as an ominous -- what am i,

a media watchdog? the journal decided to play -- is this the lead story in the journal? >> no. cit is the lead story. front page, where are you? here is where the journal decided to run it. if you want to see it in the times, the "new york times," 8:18. 8:18. you will be able to find the story on i-18 if you're really aggressive about looking. if you need to read it and you really want to know about it. >> this is the lead on their national page. >> you can find it on a-18 if you get through the fist 17 pages of the more important news. >> shaes kind of shocking. >> were you here the other day when i -- "i did it the other day. but it was classic where the times had something. oh, korea, the general election pup weren't here for that? >> no. monday. >> oh, my god, the journal, front page, just multiple articles in the "new york times"

with this deliverer on the ride, it said merkel claims that could have been sort of a win for people less progressive than they should be, basically, is what it -- all right. in corporate news, cit group is reportedly coming up with a plan to work on an exchange offer to cut 30% to 40% of its more than $30 billion in august debt. are people ready if they do go, or if with he to shut down -- >> no, i am actually very worried about this. and everybody was coming in talking about how small businesses and average americans have a really, really difficult time getting credit right now. i think this last ditch rescue bit, even if it comes through, even if the company is saved, you're looking at a company that is loaning a lot less money and is being much more cautious. now, they got into trouble because they started doing

things like student loans and some of the subprime mortgage bids. but as a result, these companies are going to be the ones to suffer. and it's a lot of small business owners, duncan doughnuts franchisees they give money out to. maybe we could talk to darden's ceo later this morning if this is something that affects his business or not. but you're talking about companies that -- >> and they own a bank, i think, and they've called to try to get some terms that other owners got and regulators just -- as the phone is ringing, you know, it's call i.d. >> well, they say it's not systemic. but for somebody who is a small business owner, this is huge. >> definitely. they think if we take this on as a government responsibility, we could end up -- >> granted, you have to talk about not continuing every single bailout. >> and this is worse off than some that they have come to the

aid of that can stand alone eventually. >> i guess how do you fill the gap, though? >> well, we'll have plenty of time to figure this out, and competitors that are in a stronger approximation should want this business. it's a good business. >> yeah. oh, my turn. story. the imf is starting its estimate for global write-downs and banks for other financial institutions. it pegs the number at about $3.1 trillion, down from $ trillion. but they report unemployment is likely to rise been right now, let's talk about the markets this morning. right now, the futures are indicating a stronger open. dow futures are higher by about 31 points ahead of var value. we have a lot of economic data that's coming out today and take

a look at what's mapg right now with crude oil prices. they are up about 1.8% to $67en 92. crude oil prices are up after we saw an increase in crude oil supply yesterday. analysts take a look at the 10-year notoriety now. all this is happening. yield on the 10-year notoriety now, 3.315%. the dollar is weaker across the board. it's down against the yen right now by 89.59. that's where the yen stands. the euro is trading at 1.4664. the pound is at 1.6099. and a quick look at gold prices, as well, gold prices on a day when you're seeing a dorm, up by $1,002 an ounce. >> let's get to the overseas markets right now. we're going things off in london with steve sedgwick. >> and to see you, becky.

good morning to joe, as well. you're talking about this wall of worry that has been climbed in some fashion over the last quarter. in july, they were bearish on this side of the atlantic, as well. but it turns out to be one of the best quarters in living memory. and that's the good news. the ftse witness for instance, up 22% in the third quarter. that is one of the best quarters, according to stock market historians we've ever seen. the problem swb all that worry they've had in the last quarter, in december, they know historically is a long month, as well, only then to be struck by the tmt wubl bursting in 2000. it rallied access he then. we could still face some form of double bursting in the near term. but at the moment, the broad based europe 300 up 56% from that low in march. you were talking about that imf

story, as well. aren't we all glad that it's not $4 trillion of write-downs? united states only $376 trillion. the u.s. banks have written down 60% of bad loans. the europeans have only done 40%. we've still got a way to go. now out to christine in sting pore. >> that kind of put pressure on markets like hong kong. the hang seng fell 0.3% as a result. the market in china was boosted by plans to buy industrial and commercial bank of china. icbc to aware china's icl bank. icbc and china is the world's biggest bank by market value. elsewhere in japan, cautious trade ahead of key economic data coming out.

the nikkei 225 rose 0.3%. we had shares of toyota falling after the automaker said it was recalling 3.8 million vehicles in the u.s. thanks to doormat. this supporting speculation that rates could hike, could get out by 25 basis points for november. >> advice teen, thank you very much. joining us use it now is hashman achutan. also jeff ivory. gentlemen, it's good to see both of you this monk. >> good morning. >> good morning. >> lakshman, we've been talking a lot about the fed this morning. plosser was out with numbers last night that sounds like he was hawkish about what he sees. i realize he's not a voting members of the fomc right now. but when you add up everything we've been hearing from fed officials lately, what does this make you think about where

they're headed over the next six months? >> they're not really going anywhere. they like what they see. it wasn't that long ago. we just suffered through the g-20 meeting with all these leaders together. and i was thinking back to april when there was database you know, you have this alphabet soup about where are we in the business cycle, an l, a u, a w or a v. and back then, they were all saying the d word, they were worried about depress. back then we were saying the recession would end this summer and the recovery would begin. indeed, that's what we've got going on. the g-20 is as good a metric for that as anyone else. i believe they're playing catchup still.

they're saying, okay, there's a recovery here and immediately we have to go through this kind of very basic simplistic view that if there's a recovery, there might be inflation right around the corner. that is not how cycles work. we are seeing some good news on the inflation cycle in that the leading indicators have risen off of 51-year lows. and that's exactly what they want. they want to back away from deflation. for the time being, the deflation scenario is off the table. but we are not looking at any surging inflation. and, therefore, they're going to take their time. coming out of the last two recoveries, i think the fed waited on the order of a couple of years before raising raits. >> is this all just job owning, then? >> yeah. >> they're trying to walk that fine line. watch what they do, not what they say? >> look, there's no central banker who can say they don't the care about central bankers. you'll get asset inflation.

that's what they want. home prices have stopped falling. you know, we're at the bottom of a home price cycle that's turning up. that's really good news in the big picture because that's the epicenter of the crisis that we've had over the last two years. and we have some stock price inflation. joe was mentioning thaerve missed it and i can that's a good point. but we have about 50% rise that's asset inflation that you want, as well. it's the positive wealth effect. we lost $14 trillion in the crisis. we gained back somewhere over 5 trillion already. >> and jeff, you think that this run that the markets had, we may have seen the best of it, but you're not looking for any significant pullbacks any time soon. >> no. i think if market has stabilized. i believe the investor is getting pulled kicking and screaming into this market. and boy, for those folks that missed this piece of it since july, that's tough to swallow.

you know, the main street is still concerned. yes, housing prices are stabilizing, but they don't feel it yet. the market has recovered quite a bit. but i think the shock over the last ten years, particularly people who have just retired, i think the shock has been psychologically extremely damaging. it's going to take these folks a little bit of time to recover from this and quite frankly, i don't think they're going to be the same type of investors that they were, clearly wg, back in the 90s. >> what do you think, just more risk averse. >> yes. their portfolios have been taking damage. they have to be more risk averse. they don't have an option. but at the same time, i think there's some nice, fundamental

economic underliars that are going to help continue to support this rally. i just don't think we're going to see the huge jumps. and quite frankly, does it matter? i mean, longer term for investors looking out at a duration of time here, you know wab five years, this is what they want to see, a nice, stabilizing recovery out of this recession. >> jeff, are you -- would you recommend to people that they just invest broadly across or are there specific areas that you think are going to see the biggest gains? >> you know, i still think there's some specific areas that show some additional positive movement. i like high yield bonds, especially, you know, u.s. bonds and emerging market bonds. i think there's nice yield play toes be made there. now that the fed has come out and they have swhoo stabilized the interest rate concerns that are out there, i think those spreads are still very nice. i also like small caps. i think small cap space has not recovered, small and mid still have some nice opportunities and i think there's some places to get additional yield.

and finally, even though inflation is not around the corner, you have china, india, the growth in the global community coming on board, so i think commodities are still a nice play. and buy them now. get in for a piece, a nice hedge early before inflation, before people start to jump on the bandwagon. that's the best time to start looking at these opportunities. >> lakshman, we were talking about the cit story, about this reorganization plan that may or may not work out. but how big of a concern is cit and no matter what happens to it? what does this mean for small businesses in toerms of getting credit? are there other places that they can get that kritd credit? >> yeah. as big of a story as cit is, what's critical is where you are in the cycle. if the cit story had hit a year ago, it could be devastating, literally devastating. it's hitting here in the early stages of the recovery, which is going be a lot stronger. this recovery is going to be a lot stronger, i think, than the

consensus is anywhere near willing to dealing with. and that means that there's going to be other people who are going to be loaning small businesses money because, with look, we're trying to essentially heal the banks by giving them capital at zero interest and then they get to loan it out and that's how you heal them. they're going to want to make these deals, especially with small businesses that are via e viable. so you'll see -- there's a few things we're seeing. year going to see credit growth, nonfinancial credit growth, that small business stuff. you're going to see that in the first half of 2010. it's going to keep slows the credit growth until then. but then newyou're going to hav credit expansion. you're going to have actual jobs growth, in particular in the nonmanufacturing sector where 91% of us work and you're going to get higher consumer demand. the consumer is already recovering and you're going to see stronger consumer demand than people expect.

all because this recovery is not really that different from past recoveries. those four words, it's different this time, are going to be -- are going to prove to be the most expensive words a lot of people have heard. >> gentlemen, thank you both for joining us. we appreciate it. >> thank you. a few quarterly reports of note. after the bell yesterday, let's start with darden restaurants, olive garden, red lo lobster, the two straurestaurants that t chain owns. you can see what happened to the stock after the company warned that full year same-store sales could decline more than expected and that profit would be at the low end of its forecast. we check in with darden ceo clarence thomas just about every quarter. they've been managing this well by not offering some of the discounts and incentives that others have offered. the stock was rewarded from 13

to 36 based on that. it will be interesting to check in with clarence and to get his take on what's changed, whether it's the macro situation or whether it's things specific to red lobster examine olive garden. >> i think he made some comments where he talked about inflation not being as big of a problem as they originally expected. >> something wrong somewhere. we'll see what that is. >> shares of jayville circuit the is getting a boost. revenue beat expectations. jabil announcing that it will cut 4,3 00 jobs following a restructuring mrae ining plan. >> nike, the world's top apparelmaker, warning that it expects a cautious holiday weekend, that was a huge winner. what's going on after the bell?

>> we heard from carl. he is ul early. >> is he in the kansas city airport? >> i don't know if he's there now. he was in the cans ckansas city airport. >> i love those. they're always current. they've always got all the latest stuff. >> and he sent us a picture from the kansas city -- >> he did. mine is in cincinnati, i think. >> here. let's put mine on my screen. >> oh, yours is going to be on your screen? who, is it maria or erin? no. >> you? >> not jim. there it is. >> whoa! george from seinfeld? oh, no, no, no, that's ron insanna. >> it's ron. he's up in the picture. carl sent that to us. thanks from kansas city. >> thanks, carl. let's get a quick break now. check out the cnbc store in your area. >> and send us a picture. >> maybe you'll see the see

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all right. welcome back to "squawk box."

as we take a look at your business traveler's forecast here, we will be watching several areas. really, as we move into parts of the rockies where we have the biggest threat for some wind, also some snow, believe it or not. also a severe weather setup as we go through time. as we take a run around the lakes, cleveland seeing light nuisance showers, also. moving down to pittsburgh, chilly conditions, as well. scattered showers and storms around south florida. here is that big storm system that will be cranking out in parts of the west. we have numerous weather watches and warnings in effect. pick your poison out west. salt lake city, boston, likely some delays. miami, scattered showers and storms. low ceilings around the pittsburgh area, as well. but great weather for traveling around the atlanta metro area, moving down through the queen city of charlotte, north carolina, as well. that's your business weather traveler's forecast. keep it here. "squawk box" returns in a moment.

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick. carl quintanilla is on assignment today. before we get to the market flus, another -- an earthquake is being reported in indonesia, felt as far away as singapore and malaysia. it's a 7.9 magnitude quake, sumatra region. we'll let you know about that.

but let's get right to the markets here. in this country, jessica hoversen is standing by at the cme. we're closing down the quarter, jessica, and what does that mean for people that didn't enjoy any of these gains in the quarter? do they -- it's too late to try to book it now, isn't it? they have to hope they don't underperform next quarter. >> well, i think the amount of cash sitting on the sidelines still speak to the fact that a lot of people are cautious about the economic recovery and the euphoria that we did see in the stock market. there's a lot to focus on this week. i think the market's attention will obviously look forward to the earnings season, but keep an eye, very acutely focused on the data. today we have adp, we have the chicago pma and obviously we have the ism and the nonfarm payrolls coming up this week. i think in terms of the trade today, we'll probably at least start out with a positive tone given what we saw overnight. equities were stronger and also we looked at the german unemployment data which fell and

the ecb 12-month refi, had a subscription of 72 billion. analysts were willing for something along the lines of 137 billion. and it's a far cry from the 442 billion euro that banks pledged back in june. so for right now, the european banking sector does look a tad bit healthier, so i think that's going to help for a stronger day today. >> jessica, we keep going back and forth on this stock market. just referring to it as euphoria, do you think that's indicative of kind of a point of view? of the 9,600, 9,700 to a lot of people, pu just take a long ter pekt speculative doesn't sound very euphoric. but if we keep calling it euphoric, that breeds skepticism that keeps people out in something that may have only been a snap back to where it should have been. maybe it was overly pessimistic when we were at 666. maybe that was a total joe shoot

on the downside and now we're back to something more normal. >> i think one of the functions of the equity market is that it does very much follow sentiment and that's why it becomes oversold and overbought. and part of the reason i believe it continued to travel to the upside was so many people did call it euphoric. they focused on the positive etf surprises. we had improving economic data, but i think the mokt overran itself. now as we move into third quarter earnings, i think the market will heavily recruit nice these reports from companies. if the guidance is poor, a positive etf surprise won't do it what it did in the second quarter to the equity markets. >> i've got my dow 10,000 hat. my original. i don't know what year it was, but it's very oemd. >> vintage. you should try and sell that on ebay. >> but it was at least -- how many years ago was it, 10? probably, right? i mean, i just don't feel -- how is 9,700 euphoric when i wasn't

even euphoric ten years ago? >> the number really is dependent, that number, that rally number is dependent on where we are in the cycle. and i do believe that, you know, right now, the market is quite schizophrenic. there's so much to focus on. it doesn't know which way to turn. the market is exceptionally confused. it saw an incredibly robustly improving economy. even tu look at the data in europe and now as we sort of take a step back and recognize this recovery has been significantly fueled by government stimulus, we need too look forward and say, well, what's going to happen when the government stimulus starts to unwind? and i think the market is starting to digest that. one of the things people are talking about is the inventory rebuild and how that will provide a lift to the third quarter. but if you look at the daddy, i think you could see another really big pullback in

inventories in the third quarter and i think that could have negative implications for -- definitely for gdp in the third quarter and for the market as we are looking for, you know, the inventory rebuild, the cash for clunkers to help improve that number. >> all right. dow 36,000 is euphoric. that's where -- that was that book that came out when we were on the way through 10,000. >> 10,000, yeah. >> the risk premium is gone now, there shouldn't be any different and 36,000 is a more accurate number. now that's euphoric. thank you. thanks, jessica. >> thanks a lot. have a good day. >> that would be euphoric. >> 9,000. >> a little above 9,000. >> it would be 25%. >> yeah, you're right. cnbc is rolling out a special series today, the swine flu. is corporate america ready for a possible pandemic? >> we provided 100 million doses of flu vaccine to the world health organization, including

10% of the very first batches to be produced. and the second thing we are doing is offering tiered pricing. so for poorer countries, we're selling it at a lower price than in higher income country peps. >> meantime, one small manufacturer is seeing such high demand for medical masks that it has stepped up production to 24/7. bertha coombs is live in salt lake city from this production area. >> good morning, becky. this is a day shift. they just started at 3:00 a.m. eastern time. the demand for these masks, the so-called m-95 masks, they filter out about 95% of moleculer smaller than the influenza virus. while many companies are preparing for the flu season, manufacturers like alfa protack, it is full on battle against it already. they have seen orders up 200%. that was just from the first

wave of the flu. they have back orders going well into the end of the year. so they've ramped up production 24/7. is in the second quarter, they saw sales up 63% and their mask sales up nearly 200% overall. so they are anticipating that this is going to continue well beyond flu season. >> from everything that we read and heard and studied on the h1n1, i believe it's coming through in phases. we're looking probably at two to five years and i would imagine we're going to run at this pace of manufacturing for at least two more years. >> now, this is a small company, about $14 million in revenue last quarter. 3m much bigger. they have also seen a huge backlog of orders for their m95 masks. they have ramped up production and added another 20 million. over the last three years,

though, they had ramped up capacity around their global facilities by 40%. so they'll be up around 50% in terms of capacity at 3m from where they were in 2006 and they, too, are running around the clock. why such a big demand? the health and human services department says if there is a severe outbreak, just in the u.s. alone, there will be a demand for n95 masks of about 5 billion. at the moment, according to the cdc, as of the end of august, u.s. stockpiles had just over 80 million respirators of these types of masks. so they can't keep up at this point. they're trying to catch up and they are going 24/7. when you do that, guys, you're putting your staff at risk, as well. coming up in the next hour, we will talk to them here about what their contingency plans are if there's a big outbreak in this community. back to you. >> good luck, bertha. i want you to brick that back, bring a couple back for us. would you wear with them?

>> sure. i think it would look especially good on you, though. >> yeah, on certain days it would definitely look really good. thanks, bertha. our next guest is hoping his company will become a significant part of the health care solution. here now with more, chris begley, from hospira, a global especiallity pharmaceutical and medication delivery company that just a couple days ago, you beat forecasts and raised your outlook even though spending is tough right now for a lot of things for hospitals. what, if you can give them something that can help cut costs in the future, they'll still buy it? >> joe, that's exactly right. we just increased both our sales and our eps guidance a couple weeks ago. and the reason for that is, if we really listen to our hospital customers and what they're telling us is they need to have costs reduced and we need to help them do that, but we also need to help them improve the overall quality of patient care. and that's really what our focus

is. our hospital customers work on razor thin chargins and cash flow is king for them and we support those in this effort. >> medicare, in a lot of ways, does not cover a hospital cost, right? that is correct. which is why they're always trying to squeeze down their cost and their labor to become more efficient. what we do is we develop injectable generic drugs to keep the high costs of pharmaceuticals down. so when the patent expires, we launch on the first day of sxiration a generic drug and typically prices will drop about 80%. >> that is amazing. there's a lot of controversy about how long a drug company or a biotech company needs that exclusivity. and i think the biotech industry won in health care reform. i think they got what they wanted and i think pharmaceuticals did, too. it's 12 years, right? do you think that's too long? i think that's too long.

>> that's because you're trying to knock off their drug. >> keep a couple things in mind. the battle of the evergreen clause is not over with yet. the patent legislation is really what protects innovation in this country. and when you innovate on a product, especially with a biological, you nd up with long patent. president obama believes it should be seven. the ftc has come out and says it should be five. rtc has done a study and saying that a biological company ends up recoup b its costs within 2 to 5 years. >> even though drugs cost billions to develop. what are you saying, if you get thal, you don't need this artificial exclusivity? joe, that's exactly what i'm saying. >> i'm getling a lot of things right. it sounds like you're in a

position where you're arguing from that side. i guarantee i could have pfizer in here and you guys would be at each other's throats. >> and i think the key here really is let's not rewrite the patent law with an exclusivity period. the other thing that concerns me is there is a loophole around evergreening where if you end up taking a making a small change on the product, you'll end up getting another 12 years of exclusivity. >> you get an extended release version and you keep charging like 180% more than you would charge and then you use that on marketing to convince people they need the xl version, right? >> that's exactly what happens. >> a lot of things. i know this. >> joe, meanwhile, you know, we're the only u.s. company that has launched a generic buy logic in europe and we've brought costs down by 30%. but we can't do it here. >> which one was it? po. >> why can't you do it here? >> there's no legislation to

allow us to do it. we need that legislation so wefk bring it to market. >> you said this is still out there. this is still out there with the current health care debate? this is something that could go either way? >> it's still there. it's part of the current helthd care debate. it's one of the hard costs which will lower costs. so it's something that we do need to get right and we need to make sure that our xhirs and the patients get that cost reduction as soon as possible. >> who are your champions in the house and the senate? >> you know, there's a variety of champions supporting this, as i mentioned earlier. president obama is behind it. he believes 12 years of exclusivity is too long. we've got organizations like arflu studied it, as well. it's something we believe needs to get done, but it needs to be done appropriately, as well. >> would you push for a single payor system? would that help you? >> a single payor system would be the impact us either way.

the cost would be almost like medicare for everybody, right, so that if hospitals aren't being reimbursed for the amount of care that they're providing, they come to you even more to try to get cost-effective treatment. >> well, and that goes back to if we expand coverage, we freed to find ways of taking the hard costs out. >> are we doing that in the current plans, in your view? >> we need to do more of that, buy logic legislation and reducing the exclusivity period would help. i think we need to do some type of tort reform, as well, and we need to do that if are federal standpoint. >> we don't have time to do all these other things you wanted to. >> well, we have to find time to do it. >> i beg to differ. we need this by wednesday and we're going to do it. >> well, what we've got to be careful with is we can't take this and make it like a balloon where we squeeze costs out of one area and it pops up somewhere else. we have to truly take costs out of the system. >> you're only on board for -- >> i'm on board for a lot more

than that. i would like to see brt quality for the patient. >> ae all would. we have to have you in again. maybe you can sit in for a longer period. >> that would be great. >> i know a lot. you saw how much i knew. incredible. >> you're a smart man. >> if you have any comments or questions about anything you see here on squawk, e-mail us, squawk@cnbc.com. when we come back, we'll get to the news making headlines outside the world of business. stick around. if you're taking 8 extra-strength tylenol...

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welcome back, everybody. timing for a check on the headlines outside the world of business.

monica novotny is here. >> we're getting reports now that a magnitude 7.9 earthquake has rocked indonesia. this comes hours after that earthquake in the south pacific that triggered a tsunami that has slammed the island of somoa. at least the 99 people are confirmed dead there. many missing. we'll be watching those numbers. suspected terrorist na najibullah zazi plead not guilty. investigators say he may have been planning to launch an attack on the anniversary of september 11th. one of the world's top 20 high quality stones. the finance director at the mining group says that this could be valued at around $20 million. that will cover costs at the

mine for about two years, they say. wow! used to find crystals like that. i would see that and think this was a crystal. this comes from the same mine in south africa, home to the world's largest ever rough diamond that was found. how big would you guess that was? this one was 500. >> 570 carats? >> 3,000. >> wow, a ring no one would ever believe was real. >> you didn't just read any of that stuff either. you knew -- >> oh, no. i walked in. i walked in this morning knowing all that. >> you knew all that? >> uh-huh, of course. >> incredible. thanks, monica. >> bye, have a good one. >> thanks. toyota announcing a major recall. serving up the consumer for breakfast. the ceo joining us with a unique take on the u.s. economy. you're watching squawk box on cnbc, first in business

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welcome back, everybody. futures are indicated slightly higher today, up 26 points above fair value after a down day yesterday. toyota announcing a major recall, affecting 3.8 million vehicles in the united states. at issue is a possible safety issue with the car's removable floor mats. we'll have more from phil lebeau later this morning.

also coming up, we'll be joined by former white house chief of staff john padessa. you are watching squawk box on cnbc. first in business worldwide. (announcer) when you buy a car

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will the markets close the quarter on a high note? key economic data could tell us just how scary october might be. what companies are doing to battle swine flu. the business roundtable set to release the -- how prepared companies are for an outbreak.

what's cooking, the darden restaurant. we'll check in with the ceo of starwood to see if the company's corporate facelift is attracting customers. second hour of squawk box starts right now. >> we'll take it! "dumb & dumber." that is no reference to us, since there's only two of us. >> oh. >> good morning. welcome to requests squawk box. >> we're at their mercy. >> i know. clarence otis is joining us in a few minutes to talk about the company's latest results. also minutes away from john podesta, ceo of the center for

american progress on solving america's debt problem. they talk in the journal today about some of the things his group has proposed. >> he has a little tough love we'll be talking about. meantime, let's check the futures after the markets closed on a down day yesterday, a little bit of a disappointment after you see the gains. futures above fair value. right now you're talking about those dow futures, higher by about 20 points, s&p up about three points above fair value and today we hit adp, very likely to move the markets coming out at 8:15. crude prices up better than 1.5%, $1.12 to 67.83. take a look what's happening in the bond markets, ten-year note is yielding 3.32%. more hawkish speak coming out of various federal reserve members. we'll be keeping an eye on that

throughout the morning. dollar is under pressure today, down against the yen, trading at 89.48 and the euro at 1.5649. up $9.10 to $1,003.50 an ounce for gold. key economic data will be out, a did p employment report is expected to show private employ employers cut fewer jobs in september. analysts are expecting a loss of 210,000 jobs, down from the loss of 298,000 in august. we'll bring you that thumb at 8:15 eastern time. 8:30 am, second reading on second quarter gdp. nike shares are set to move higher after cost-cutting shares helped the company with its latest earnings, seven cents better than the street was

expecting. as you can see after hours, that stock was up sharply. cit group may be in the hands of their bondholders. they still have to get bondholders to agree to this plan. if they don't, they could seek to restructure in bankruptcy court. ims is cutting its estimate, peg the number at about 3.4 trillion dollars, down from the earlier estimate of $4 trillion. the imf still reports that it's set to rise. last year, the walmart program offered ten different toys for $10 for holiday shoppers. the world's largest retailer is expanding the $10 program to over 100 toys. walmart's move comes as the chairman warnsative lethargic

global economic recovery. this will be the case even though he still sees significant growth potential in china and india. his remarks echo those of ceo, who said it's likely to be the largest in decades. working to try to find a solution for the nation's mounting deficit, john podesta, president and krechlt o, former white house chief of staff under president clinton. great to see you. thank you for joining us. >> good morning, becky. >> your message today is one of tough love. it's a little bit of a difficult message to dole out, but one that might be required right now. why don't you lay out what you're talking about, looking at higher taxes being necessary, but also some cut to costs, cost cutting on the other side as well. >> right. with the center of budget

priorities, a premiere group that looks at the affect of the budget on poor people. short-term deficit is partly the result of the deep recession and president obama's response to it, which was necessary. and we need to ensure that we don't cut the deficit too quickly so that we stall this recovery, which needs to stabilize and take place, but over the long haul, the president inherited a fiscal mess and we need to fix that. that will take a combination of things, first and foremost, feks the health care system. we need to think about restraining spending and find some revenue. that's what we're going to talk about all those things at the conference this morning. >> john, when you start talking about raising taxes, are you talking about raising taxes on the wealthiest americans or something that will have to be across the board? >> we need to look -- again, we're a progressive institution, as is our sister institution that's looking at this.

what we need to think about doing is try to find a way that's fair to everyone, to see if we can -- and we'll throw some alternatives on a table to a panel that will look at revenues. raise i raising taxes only on people that make $250,000 a year, there might be some ability to take tax breaks out of the corporate tax code and still raise revenue even as you, perhaps, lower rates a little bit. we're trying to look at things like can you construct a progressive value-added tax? which i think would enhance our competitiveness. if you do it in the right way, we'll cushion poor people or people in the middle class from having to pay higher taxes. >> one of the things you're looking at is not having to tax people who make less than $250,000. that was one of the things the president promised in his campaigning, that he wouldn't tax people making less than that. you sound like that's a potential option at this point, you may have to reach below that? >> no. i think the president is quite

firm in his commitment not to reach below that line. it's important at this stage to look at these long-term trends. this is a huge problem the president inherited. the publicly held debt increased 75% under president bush. our borrowing from china with his a tenfold fleece under president bush. we'll have to deal with this at some point. maybe not today, tomorrow or next year, but we have to get the long-term debts going down. i served in president clinton's administration. he was able to do that and created a much more robust economy than was produced under president bush. we had twice the gdp growth and ten times the job growth by taking account of putting our balance sheet in order. >> john, one of the big issues, though, if you're tackling debt over the long term has to be looking at those entitlement programs. when you start looking at health

care, there are a lot of people who say health care spending, health care program being proposed right now is going to increase those entitlements dramatically. how do you argue back against that? >> one of the things that's happening on capitol hill in the finance committee and the other committees, this has to be deficit neutral. the bills that aren't deficit neutral won't make it through the gate. >> are you talking over 20 years? >> i think, again, president obama has put a line out there that has to be deficit neutral over a longer period of time so that you have to have the resources that are available. but the most important part of that is that you have to control the increase in the growth of health spending, which is just out of control at this point. again, in the previous administration, the medicare prescription drug benefit was added without any account. it was just put on the credit card. it may be a good thing to have a

prescription drug benefit. i support that. you have to find a way to pay for these things and ultimately you have to bend that curve down. that's where the big savings in the federal budget are, to get this entitlement curve bent. you know, it's become a cliche in washington to bend the health care cost curve. we are spending twice as much as the average and we're not getting results that are any better than other countries. so, we've got to find ways to have delivery reform that's going to create savings over the long term. we think particularly we have done a lot of work on this. we think that's definitely achievable and you could get real long-term budget savings in the federal budget. particularly in the next ten years and ten years after that, if you get the delivery reform in health care right. >> value-added tax, what sort of alternatives and things are you thinking about when it comes to that? >> again, most of our trading partners, including the japanese, europeans, et cetera,

have a value-added tax. and they give that to their manufacturers when they export things. it's important to have a small value-added tax constructed in a way that actually uses some of the revenue to rebate to people who are working, people in the middle class, people at the bottom of the spectrum. there have been proposals out there to do that, so that you relieve the middle class of paying income tax and, instead, move to a small value-added tax, which will increase our competitiveness. >> john, thank you for joining us today. hope to see you back here in the studio soon. >> happy to do so. >> if you have questions about anything you see here on "squawk" e-mail us at squawk@cnbc.com. ceoo of red lobster and olive garden, darden's. group out with a new senior have a on swine flu

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now the answer to today's aflac trivia question. the term "first lady" was first used in 1877 in reference to what presidential wife? the answer, lucy ware webb hayes. low-end of the range the company has been giving is now more likely than the high end of the range, full year same-store sales also expected now to be weaker than expected. joining me now first on cnbc with more insight into the numbers is clarence otis, darden's chairman and ceo. we see you about every three months. last time you were on, you were talking about how you had avoided some of the -- i guess some of the discount iing or so of the promotional activity of your peers, stock was doing

well, low of 13 or so, up in the mid 30s. did this throw you for a loop? what happened? what surprised you recently in the trend? >> well, joe, first of all, we had a very good quarter from our perfect expectative, 15% earnings growth in this environment is something we're pretty proud of. i would say the first quarter from a same restaurant sales perspective in the industry was softer than we expected. it was a tough quarter for the full service dining industry. we still outperformed the industry, gaining market share. we were able to do that without participating in a lot of the discounting, even though over the summer discounting really accelerated. good news is that from an industry perfect expectative it got better toward the end of the summer. august was a better month for the industry than june or july. so far in september, and the

data is a little sketchy from the industry perspective, but so far september looks a lot like august for the industry. same thing for us. we look a lot like august. >> when you forecast same-store sales to be weaker full year, than you had previously thought, i thought you just said august and september seemed a little bit better. you're only in your first -- this is the first quarter you're talking about. was there enough of a weakness in the first quarter for you to guide lower on the full year same-store number? >> there was. we think that given the weakness that we had in the beginning of the summer -- and it was significantly weaker than we thought, that the prudent thing to do really is to establish for people that full year, if you take that into account, would be a touch lower than we projected back in june. >> is this because -- just the

malaise that we report on 24 hours a day here? or maybe we have repeats, but close to it. high unemployment, you know, just general slowdown we've seen, given what happened over the past 18 months? >> i think so, joe. i think it continues to be very sluggish. so, we've got a little bit of improvement toward the end of the summer, but i would say sluggish improvement. and i think it reflects the fact that a lot of consumers are under pressure for all the reasons that you just stated. but in addition to that, those that aren't under that direct pressure are being very cautious, which is probably something they should be. >> all right. you had a tailwind to some extent with inflation or with costs. are those under control? >> they are. so, costs -- sales were softer, sales environment than we anticipated. cost environment was a little better than we anticipated. so, we did benefit from that.

that certainly helped. in addition to that, teams in our restaurants, outside our restaurants have been doing a great job of managing controllable costs. so, the combination of those two, our cost management effort contributed to the earnings. >> clarence, what do you think is happening? why was there weakness in the revenue outlook and weakness in sales, overall weakness of the consumer or is there something else at play here? >> no. i think it really does reflect the overall caution on the part of the consumer. i don't know that there's a whole lot else at play. you see it across a number of different consumer categories. in fact, if you look at restaurants, we've held up better than many categories, some of the special apparel categories and others. >> i read an article that some restaurant chains are trying to lure customers in, drink specials, especially alcoholic

drinks, but risk taking away some of their best profits if they do something like that. would darden consider doing moves like that, extending happy hours, offering lower priced drinks? >> we have been very, very cautious about price discounts. we think that we're gaining share, gaining the share that's worth gaining, the profitable share. we do think that protracted discounting ultimately doesn't not only help your margin -- we had margin growth without a lot of discounting in the first quarter -- but it also damages the brain. you're telling people that this is what your brand is worth over the long term. >> you have nine months before these numbers are final. is this -- are you saying that by making these lower projections, are you saying you don't really see anything improving for the next nine months? >> no, not at all. so, what we've got is a pretty broad range, as we look at the

full year. so, we've talked about sales, for example, ranging from for us -- and earnings would go from roughly flat to up almost 10%. very broad ranges, because it is so difficult to forecast what might happen. >> do you feel this is a permanent reset, clarence, or one of those things that -- that would be odd. things are never that different, it seems like. you figure within a year, it will be back to normal? >> i don't think it's a permanent reset. we do a lot of research ourselves, subscribe to third party research. one of the question wees ask consumers is what would they do more of if they felt more comfortable economically and going out to restaurants more often is at the top of that list. >> all right. and you don't -- i guess it's not a great time to expand into the mexican states. i always ask you that. you know, so this is hurting me,

too, the overall -- i can't tell you really to do that. i don't know if that's a good idea for you to do that right now. >> it's probably prudent not to take on a brand new category right about now. >> all right, all right. if you did have a mexican restaurant, could i get a margarita there too? >> sure. we are unlikely to enter a category and not be able to serve beverage alcohol. >> okay. keep us updated. thank you. the ceo of starwood hotels talking to us about the hotel business and a recovering economy. also, as we head to a break, let's attack a look at the most widely held stocks. "squawk box" will be back in a moment. ♪

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toyota is recalling about 3.8 million vehicles because of a risk that loose floor mats could cause the accelerator to become stuck. the government said it received reports of 100 incidents, including 17 crashes and five

fatal i fatalities involving toyota vehicles. toyota and u.s. safety regulators are telling owners to remove all driver's side floor mats from eight toyota and lexus models manufactured in the last six years and sold in the united states. stocks are poised to turn in a pretty impressive quarter today. at the end of the day. since the start of the third quarter, dow, s&p and nasdaq are up each more than 15%. best performing sectors for the quarter financials are followed up by industrials and materials. as for september, the dow subpoena by nearly 3%. the s&p is up by 4% and nasdaq adding almost 6%. the russell taking on 7% just for the month. s&p is on track for seven straight months of gain, up 44% during the period. in fact, at this pace, s&p would record its best seven-month period that we've seen since all the way back to 1938. any comments or questions

you see here on squgs squawk" e-mail us at squawk@cnbc.com. swine flu and you, releasing findings of an h1n1 survey. $$$

welcome back to "squawk box," everybody. futures have been well above fair value this morning. in fact, right now, futures are up by about 24, 25 points above fair value. we're talking about the s&p futures higher by about three points above fair value. mortgage applications fell by 2.8% last week, despite the lowest loan rates in four months. mortgage bankers association says the average 30-year mortgage rate is now at 4.94%, down from 4.97% last week. health care reform appears set to proceed without that

so-called public option, finance committee rejected that option in two votes yesterday. chairman balk us says the votes simply aren't there for the public option favored by president obama. >> he would know, because he voted against it, twice. also five other democrats, 13-8 and then next one was 10-3. >> right. breaking news story just in. ameriprise financial is buying a long-term asset management service of bank of america unit, columbia management, price about $1 billion, all-cash acquisition that includes $165 billion in long-term assets. we'll have the ceo join iing ust 8:00 eastern to talk about what the deal means for ameriprise, which would have been tough to buy in july.

>> along with many other stocks in the market. >> i'm going to keep reading. are you okay? >> yeah. >> flu season survey, john castellani, great to see you. >> good morning. >> how are you? listen, we don't want to overhype swine flu. obviously, any business that ignores it does so at its own peril. is corporate america ready? >> we are. in fact, we surveyed our members to see what the status of the readiness was and found 95% of our members already have in place contingency plans. so, the bottom line, at least

from our member company perspectives, companies are planning for this contingency and are ready. >> would this be different than the normal flu season or are you -- are these leaders preparing for something different than a seasonal flu? >> they're planning for something different than the seasonal flu. seasonal flu is something we deal with every year. but this is dealing with something that is global in its impact and potentially very significant in its impact domestically. so, we need to know how we're going to deal to keep our employees safe, to help them understand what they need to do to prevent the spread of it, what happens if schools close, if there is widespread h1n1 in a community, how we keep the business goesing, how we keep them safe and how we keep it from spreading. >> what do we need to do? >> when we ask our members, 35% of them say we need more information. we need more information from the government about the availability of the vaccine,

where can it be gotten for our employees? who is going to be coordinating if, indeed, there is a substantial outbreak in a geographical area? what's the federal role, state role and the government's role at the local level? who do we turn to for information about whether or not schools are going to be opened or transportation is going to be affected. and then what do these terms mean? there are a lot of term that is come from the world health organization, the cdc, department of homeland security. they all mean different things. we need to know what it means for us, business, our employees and their families. >> john, from gathering all this data, is there any reason to believe that the symptoms would be worse than, equal to or less than seasonal flu? >> well, we don't know. the threat, of course, is that this would be wide sxred. and that's the contingency we're preparing for, it would affect a

substantial portion of our workforce and workforce families as opposed to those who get the seasonal flu. can we deal with this in a large number of people, large percentage of the population, how it affects our business continuity, how it affects our employees. >> are you going to get people masks? >> no. >> around here now, everywhere i look, there's one of those things -- squeeze thing. >> hand san advertiser. >> isn't that about it? what else -- >> we're using our internal communication systems to talk about what you can do for preferentia prevengs, which is good hygiene. where you can find the vaccine, what happens if there's an outbreak. it's an information transfer process so the people have the best preventive information as well as where to find the vaccine and what they should do if, indeed, it gets into their community. >> any estimate on what it could cost american business at this point?

it could have been a lot worse last year. if it was a much nastier bug on top of what we're going through anyway, it could have been really bad. >> no, we haven't estimated what it would cost. what we're trying to do is minimize the cost and the impact on our workers, their families and on our customers. >> okay. >> john, i guess you really want people to stay home when they're sick this year? >> companies are, you know, reiterating what their telecommuting follows and sick policies are. the key is don't spread it around the workplace anymore. >> great. great, becky. she reached for a kleenex as the camera went on you. >> cough into your elbow, becky. >> you're helping. you came in. >> carl's out. >> she's here and she's -- >> i'm better. i'm not contagious anymore, i don't think. >> in direct rebuttal of what you just advised. anyway, thanks, john. we appreciate your time this morning. >> you're welcome. thanks for having me on.

there are tons of masks being produced this october. we were just talking about this. we're not talking about the normal halloween masks, though i'm wondering who the most popular halloween mask would be this year. polanski would be a good one. >> that would be a creepy one. >> creepy, but he'll be trick-or-treating this year. 3m stepped up production of their n-95 swine flu grade medical masks. when we run -- if we want to run swine flu, we run people walking around with masks. that's all we've got. that's the only way you can tell, right? >> reporter: it's interesting. it's true. remember with sars, we saw people with surgical masks. those don't cut it. n-95 respirators are able to sort out 95%, filter 95% of particles that are smaller than

the virus. these are what health professionals use. companies like here in salt lake city, a small manufacturer, they saw orders jump 200% in the second quarter with the first wave of the h1n1 outbreak. they have now gone 24/7 and they're not alone. 3m is also operating around the clock. and for a lot of them, sars was a bit of a dress rehearsal on all this. 3m said since sars, they've already boosted their capacity, and they're now investing another $20 million. even as they boost capacity at places like 3m and here at alpha pro tech, they have to worry approximate their workers, since they're working 24 hours or long shifts, they also worry about, as we get into the flu season, which starts next sunday, they're going to be monitoring their temperatures and maybing sure that they're healthy. one of the contingency plan force them is what to do if there's an outbreak. like every other company, they

say they'll urge workers to stay home if they're sick. >> there's nothing you can do about it, should people go down, other than you must not let them work if they are infected or that would wipe out your entire building. so, that is one part of it that we're going to monitor very closely. >> reporter: for them, again, prevention is the key. they'll be using those infrared temperature detectors and if someone has a temperature, they'll be sent home. one thing that's different from the sars epidemic, they did ramp up then, but that was short lived. they had trubl finding workers to staff the line. now it's much easier and they're finding much better worker, in fact, and if they need to, they can ramp up manufacturing because there's more personnel out there. >> are you wearing that thing the way you're supposed to,

bertha? >> i haven't. it's supposed to fit closely around -- >> no, i meant your hat. >> the hat? >> everybody else is wearing it where it covers their hair completely. you've got the tv wear, where you still look cute, it doesn't look ridiculous, but i saw another guy, the guy who owns the company, and he looked ridiculous, because it was all the way over his hair. you have the tv look going where you don't want to look totally ridiculous. right? am i right? or am i right? your hair is still falling all over everything. >> it's just my bangs, you know. i have a very wide forehead and i don't think the world should be subjected to that. >> i was right. i'm sorry to point that out. are we still on camera? i meant to do that on break. >> reporter: i knew. >> bertha, i would do the same thing. >> i meant to do this on break. i'm sorry. sorry, bertha. anyways, are we done? thank you. see you later. >> i'm with her. that's hard to do those things. >> i agree. well, you saw the president. that's not a good -- john kerry,

if he runs again, remember that -- he was in that thing? >> yes. >> that's why he lost. coming up, we'll check in with starwood hotels, the company getting ready to open up its first w branded hotel in puerto rico. how the company is faring in these tough economic times. frits, good to see you. take a look at the price of oil this morning.

all right. welcome back, everybody. starwood hotel sincere unveiling its latest initiative, rebranding of its brand with $6 billion in renovations. here now with a first on cnbc with more on this is frits van paasen. thanks for being here. >> great to be here. thank you. >> $6 billion is a lot to spend. >> brand recognition is above 90%, right up there with coca cola. what we did over the last three years is invest $6 billion in the brand to renovate about 100 hotels, to open about 67 and to

move out of a few we didn't think would get up to our standards. we feel we really repositioned the brand that it's time for people to come and see. >> where are the one that is you've redone? major metropolitan areas mostly? >> mostly major metropolitan areas. places like phoenix, seattle, denver, dallas, boston. really across -- excuse me, across the country. >> what needed to be done? what had happened with some of these hotels and what specifically have you done in terms of upgrade? >> it's really important for any hotel at a certain point in time to get renovated and rejuvenated. for sheraton, we, in effect, reinvented the lobby, a cyber cafe, people can go, hang out, log on, get something to eat, socialize. and what we found is that over 50% of our guests actually go to the link, the cyber cafe we put

in, more people than go to breakfast, the gym or go to the bar. in effect, i think the only thing people are doing more than going to the link right now is going to the bed. we put in 100,000 new beds also. >> what's been the response so far from customers since you started rolling this out? >> so far, very good. we track satisfaction, looked at what that was before and after we've done this renovation and put in the link and we've seen a considerable jump. we're going to run a proems in the month of october through sheraton.com to get people to come out and see the new sheraton. >> it's a difficult time to try to do this. business travel has been hit so hard. what do you see overall in terms of business travelers, how often they're going and how much they're willing to spend? >> it's an interesting time right now. we saw the leisure traveler come back in august. and so we're hoping that that reflects the demise of the staycation. >> at what percentage? >> occupancy levels in august as an industry that were close to

precrisis level. rates are still very low, but that's typical. usually occupancy comes back and then you see rate go up. what we don't know yet is what september and october are going to play out like, with the various holidays, shift in labor day. september is a tough month be to read from the business traveler. october will probably give us a better handle on the momentum of the business traveler. >> what kind of discounted rates are we talking about? >> rates are down a little bit more than elsewhere. industry, revenue per available room is off by about 20%. we're now coming into the fourth quarter, a very tough quarter for us last year. those comparisons will suddenly get a lot easier. you may see positive revpar numbers in 2010. >> you can't live on leisures. >> b2b is 75% of our business.

that's right. >> founder and ceo is in the news, doing different things. we talk about commercial real estate. and problem with mortgages that aren't worth what they were a couple years ago, and all have to be rolled over. he did something with -- recently. it was refinancing. off camera, you said that maybe there will be -- how did you characterize it, distressed sellers, but that the buyers are going to be there? >> i think there will be. more and more, money is lining up on the sidelines, looking for deals. there will absolutely be owners that will come in and will have to sell. i don't think the prices will be distressed because there will be enough money on the sidelines coming in, bidding up some of those properties. >> that's a pretty recent change, right? >> absolutely. i think it reflects the fact that the capital markets are changing by the week right now. things are much better today than they were a couple months ago, certainly better than we expected and april/may, they were much better than we thought

in april and march. we want to manage corporate brand. >> you wouldn't even buy new brands? >> we would buy a new brand. >> distressed that -- >> hard to say. what we did with la meridian five years ago, we bought the brand and found another entity to buy the real estate for those hotels. and that would be a perfect deal for us to do. >> who is new on the block? >> no one today. there's a lot of people with a lot of debt much no one today that we're expressly interested in. there's a lot of debt in our sector, beth among brands and among property owners. i think things may get interesting in the next 18 monthses. >> what happens with the real high ends, the five-star hotels at a time like this? do you have to cut back on service when the knees get cut out from underneath the traveler at this point? >> we've been careful to be

selective in reducing our cost soes we don't compromise our guests' experiences. guest satisfaction scores for all of our brands are up right now. we think we've been able to find that fine line between reducing costs and still maintaining service. >> like we're okay with maybe not quite as many people servicing us, but sitting in a pool that's not crowded anyway? >> or there's a monday restaurant that the hours could be a lot shorter because nobody is going in and people aren't really having a problem with that. what we expect, though, is that just as we've seen in other times when prosperity comes back, luxury will come back. in effect, you have, since luxury is so far down now, there's a real bounce back opportunity. >> this is not a new normal that people are not going to travel, businesses are not going to send their employees around? >> i think we're seeing the begin i beginnings of a slow, bumpy recovery after a pretty big dropoff. but with occupancy coming back, if this were a typical recovery, usually rates start to bounce back a couple of quarters after

occupancy bounces back. so, whether there is a typical recovery or not is what i think we'll all find out. >> frits, thank you so much for coming in today. >> great to be here. >> great to see you. a lot more to come on "squawk box," adp employment report, final report on second quarter gdp and three ideas that investors can use right now. you're watching "squawk box" on cnbc, first in business worldwide. stick with us on "squawk box." stocks to watch are coming up next. over health care reform, aarp has chosen a side-- yours. we're fighting to guarantee that you'll never be denied coverage because of your health or age. to prevent anyone from coming between you and your doctor. and to make sure patients don't take a backseat to insurance companies. because at aarp, we believe your health is worth fighting for. learn more at aarp.org.

i didn't -- i don't control this, although i like it. that's what we decided to start with something, and then fade into the superior sound of the animal arc extra. let's look at stocks to watch. darden restaurants, ahead of expectations, revenue a little bit below. key things here -- we had clarence otis on. clarence darden. >> doing what i did.

>> yeah. full year earnings will be at the low end of previous expectations. this is just the fiscal first they reported. we asked clarence and he said, yeah, it was bad enough in the first quarter for us to at least get a little more cautious about full year earnings and full year same-store sales, which are now seeing down three. first quarter that ended. lot of time left. we made the ranges wide. >> he also said they're not going to be offering discounts. they don't want to discount the brand. >> hesitant to do that. it will be down today. that was a $13 stock not too long ago. they've taken market share a little better than their peers, but indicated the overall environment has affected darden and caused them to be more cautious. nike, $1.04 versus 79 cents slightly below expectations, gross margin for nike was above. and nike -- i guess we don't

have -- we're stuck on darden. that happens. >> freezes up sometimes. >> a nice mover today. the company purchased about -- almost 300 million shares at a cost of 15 million. it was upgraded to buy from neutral at goldman sachs. price started now at 75, goldman citing relative vaulation of nike to its peers and shows signs of stabilization. finally jay bell, high-tech company, reporting 16 cents, double expectations. revenue was also above. that's going to be a winner today. you know why it's called jabil, right? >> why? >> i thought it was like a guy from india, smart engineering that comes over, jabil. no. guy named jay and a guy named bill. i'm not kidding. >> all right. i like it. >> jabil. >> seriously? >> i'm not kidding.

i wouldn't -- can you make this up? >> you? >> jay and bill were the founder. >> okay. >> jabil. not jabil. >> i thought the same thing. >> i know. but it's not. coming up at the top of the hour, ameriprise ceo will join us. he will be talking about acquiring long-term assets of bank of america unit. toyota announcing its largest recall in history. floor mats causing a deadly crash. disturbing details after this. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy,

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should october spook investors? three investing ideas you can

use right now to chase those portfolio ghosts and goblins away. "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. it's not even october, but we're going to do the halloween thing. we could do it every day. >> we're in the mood already. aren't you already buying pumpkins at your house? >> favorite holiday. isn't it? i'm joe kernen along with becky quick. next hour, jason trener, chief investment strategist, managing partner at strategas research. we are waiting for breaking news this morning, adp employment report for september will be

released 8:15 eastern. expected to show private sector payrolls dropped by 240,000 this month. also a final read on second quarter gdp at 8:30. chicago purchasing manager's report at 9:45 and weekly oil inventories at 10:30. ahead of the adp report, fewers have been trading higher, up -- we lost about 50 points yesterday, getting back half of that or so this morning at the open. >> to more of today's top stories. a 7.9 magnitude earthquake hitting indonesia's suma it. ra region earlier this morning. we are waiting for the first pictures from the ground. darden restaurants rolling out quarterly ruls. owner of the olive garden and red lobster chain posting revenues roughly in line with expectations. clarence otis spoke to us earlier about the challenges that are facing the company. >> given the weakness that we had in the beginning of the

summer -- and it was significantly weaker than we thought -- that the prudent thing is really to establish for people the full year, if you take that into account, would be a touch lower than what we projected back in june. >> again, that was the ceo speaking with us a short while ago on "squawk box." that stock will be under pressure. bid is 33.91. ask is 34.05 after they closed yesterday at 36.15. toyota announcing its biggest ever recall. 3.8 million vehicles in the united states. floor mats are suspected of causing accelerators to get stuck, leading to crashes and, in one case, even several deaths. cnbc's phil lebeau joins us with those disturbing details. >> reporter: safety alert. the suspicion here is that the floor mats are a problem, need to be removed from the vehicle. here are the details regarding the floor mat recall from toyota.

3.8 million vehicles, whole range of vehicles, seven lines in all between 2004 and 2010. camry, avalon, approximate. rius, five others, two toyota models and lexus models. 100 incidents have been reported relating to the floor mats getting stuck, 17 related to crashes, including five fatalities. that includes a horrific crash in california. this is scenes of what's left after the accident. it's suspected of calling this deadly crash. 911 call from someone within the car as it is accelerating. listen to this car leading up to the crash. it's chilling what you hear on this call. >> our accelerator's stuck. we're on 125. >> heading northbound 125. what are you passing? >> we are passing -- what are we passing? we're going 120, mission gorge. we're in trouble. we can't -- there's no brake. >> okay.

>> end of freeway half mile. >> you don't have the ability to turn the vehicle off or anything? >> no. we're now approaching the intersection. we're approaching the intersection. hold on. >> brace, brace. pray. oh, shoot. >> hello? >> the end of the call is when their accident took place. take a look at shares of toyota. this stock was indicating lower after the recall announcement that came after the close of the business or toward the close of the day yesterday. we'll see the impact on the stock today. for more of this recall and impact of toyota, which enjoyed a sterling reputation and lack of recalls. check out the blog behindthewheel.cnbc.com. >> awful, no doub. thank you. let's get on to ameriprise, buying columbia management from

bank of america. the deal is worth about $1 billion. we're joined by the ceo of ameriprise. are you getting a good deal because bank of america was a motivated seller here? >> we think that it's an appropriate deal for us, because it really enhances our business strategically and financially. we think the price was appropriate for the assets that we're buying. >> how do you -- what are the metrics that you would use, your number crunchers went in. what are you getting, how much, $165 billion and you're paying $1 billion? is that it? >> yes, yes. that is it. >> how do you figure -- there you are. what do you use to try to figure out what $165 billion of assets under management is worth? >> i think what's really important is extra teenliccally, what does the business do for you first and financially, can you generate the appropriate

returns? we look at that both from a perspective of the future earnings power and what we're paying for that earnings power, paid roughly seven times for that business. importantly, for us to generate a good return, we need to generate good synergies. best of breed of columbia have really come up with a much stronger global asset manager, international thread needle operations. we'll be managing about $400 billion of total assets now, the eighth largest fund manager in the united states. and so we feel that it really transforms our asset management business and really integrates it further into the earnings power of ameriprise. >> not quite doubling your size, but close. and are there some things that you can -- some overlap, some synergies you can find -- there must be. >> yes. >> it's the same business you're running here, right?

>> yes. first of all, the deal actually helps us strengthen our distribution capabilities. it gives us a good long-term agreement with bank of america and their affiliates to distribute product through their channels, enhances financial institution operations, full range of product capabilities for both equity and fixed income for both the retail as well as high net worth investor. and from a perspective of the company, it really will continue to strengthen our product line, good performance as well as the investment talent in both fixed income equities as well as from a perspective of having a broad base of distribution capabilities now. >> jim, jason trennert from strategas research. it's a tricky issue when it comes to asset management companies. assets go up and down the elevator every day, as they say. what are you doing to make sure you hold on to that talent that

you're purchasing, really, by purchasing columbia? >> what we really like is what bank of america created here. columbia asset management group has a very good, strong culture. it fits nicely with the ameriprise culture. we really do believe in the way they manage assets is consistent with the way we manage assets to have a good risk management process. we feel that the combination of the talent -- and we'll look at that to ensure we keep the best talent of both entities -- and so we feel that we can set this up in a way that really positively reinforces to come out with a better outcome. >> you had the cash to do this, too, right? >> yes. we kept the company strong through this market meltdown. in fact, our balance sheet, capital position is quite strong. our liquidity position is quite strong. we actually went out in a proactive way to raise money in case the markets didn't recover, because we thought there would be good opportunities to take advantage of.

clearly, even our investment portfolio today is turned into a net unrealized gain position rather than a loss position that many others are still facing. >> when will this be acretive to amp? >> in the first quarter. >> integration costs, you're factoring those out, but after that it will be immediately? >> yes. >> all right. how much, at this point, is fixed income versus equity and after the acquisition, what will the percentages be? >> well, we're purchasing roughly about 70 some odd billion of fixed income product from the columbia deal. we already have a very strong fixed income group of assets here in the united states. so, it sort of doubles our fixed income base as well as really strengthens our equity base. >> all right. >> excludeing thread needle and

the international arena. >> all right, jim. give me your target for the s&p in 12 months, and the ten year, since you've got all this money. >> well, i can't predict the markets. i wouldn't try. what we feel is that there is a stabilization occurring, but this is going to be a long road. and what we really do in managing our company is really focus on the core strengths through this downturn, we still have invested in our business, maintain a strong conservative posture. this deal actually gives us enhanced flexibility, still maintaining a strong capital position over a billion dollars of excess capital after this deal. i wouldn't predict the marks. what i do is try to control our own -- what we can control here at ameriprise. >> you're not selling so hopefully there will be a financial system to invest n you're at least making that prediction. >> i think the meltdown is over. however, i think we're on a longer road to recovery.

>> all right. thanks. jim cracchiolo, ceo of ameriprise. do you know any of these -- >> i do. in full disclosure, those guys are clients of ours, have excellent people there. that's why i asked the question. that's what they're buying. >> all right. we want to keep you updated on a developing story this morning. there was a 7.6 magnitude earthquake hitting indonesia's sumtatra region this morning. this is something that created tremors that could be felt as far away as singapore and malaysia. we will keep you updated. early reports show that there were houses destroyed, bridges down, water pipes that have been broken, flooding in the streets. there was a tsunami warning earlier for the entire region. that has since been recalled. we'll keep you up-to-date as we hear more on that story. up next, adp and employment report. numbers and instant reaction

after this very quick break. "squawk box" will be right back. .

let's get to steve liesman, who has the numbers for us right now. steve? >> thank you, becky. the government will show a loss in the private sector of 254,000 jobs for the month of september. they revised upward, which means less negative, the august number to 277,000. now, economists surveyed by dow jones are estimating that government and the private sector for the month of september will decline by 200,000. so, pretty much in line. you used to be able to say that the government would add 20,000

or 30,000 jobs. that would have made it close. we just don't know what government is adding these days. it's been minus 18, really has been a negative number. you don't really know. in general, adp number over the past three months has been running about, say, 85,000 to 100,000 more pessimistic, count morgue job losses than the government has been. joining me now to talk about all of this, economic adviser chairman, the ones who put this together for adp. joel, good morning. what is this telling us about the jobs market? >> the job market is slowly on the mend. today's number marks the end of the third quarter of the adp, national employment report. if you look at the archls over the year, first quarter, second and third quarter, you can see a steady improvement. if continued through the end of the year, it would place the bottom some time around the turn of the year.

>> it's the smallest decline since july 2008, but it's still pretty hefty in terms of losing 250,000 jobs. what is this telling you about when you might get positive payroll growth? >> it is still a significant loss, and a particular -- losses are still large in both manufacturing and in construction. service estimates have been improving the last few months. if the recent trend of improvement continues, we would expect to see it bottom out toward the end of the year. >> the pace of improvement seems to be quickening a little bit, mi minus 300 to minus 250. what about the government? we're not getting any help from there. we used to say you could count on plus 20rks plus 30. that's not true anymore. >> two different forces at work there at the federal level. soon the federal government will be hiring people to conduct the next census. at the state and local level where deficits are burgeoning and states are forced to make cuts in all manner of spending,

you're seeing downward pressure on employment in that sector. as you pointed out at the top, you have to make an adjustment to compare the adp number, difference being government employment. you can no longer assume government employment as a positive in this economic environment. >> as i look, for example, job losses by business type, i don't see any particular trend there is. small, medium, large. both seem to be shedding, though large a little less. i think that was true last month. is there any story of a trend i'm missing? >> there is an interesting story. early on in the recession, job losses were centered in medium and large size firms with small firms hanging on to their employees as long as they could. last fall after the lehman demise, and it would be clear that the holiday season would not bail out prospects of small businesses, there was a sort of catharsis, if you will, among small businesses who began shedding employment very rapidly, in essence catching up with the larger firms.

now the last couple of months you see that the small -- medium and large size firms are showing smaller job losses than the small firms. there's a bit of a lag there in terms of the size of the companies that are doing the hiring and firing. >> joel, could you put dissidents together for viewers? i thought we were going to have registered growth in the third quarter of plus three, maybe even 4%. i don't know what your number is tracking right now. how is it that we've lost, what, close to three-quarters of a million jobs? >> first of all, i do agree with you we'll see growth in the third quarter between 2.5% and 3%, and in the fourth quarter probably between 3% and 3.5%. remember, employment consistently lags behind gdp growth. gdp growth recently in the second quarter was modestly negative. even with the turnaround and economic growth in the second half of the year, it would be quite natural to expect employment to keep declining following the turnaround and the

unemployment to rise for many months into the early part of the recovery. >> guys, stick around for a minute. let's bring in bill rogers for another voice reaction. former labor department chief economists and rutger's university professor right now. you listen to numbers like this, down 254, not far off from what the street was expecting. it is the lowest number of job losses we've seen since july 2008, but still not necessarily getting back to a position where we can start to feel good about what's happening with employment. correct? >> that's correct. you also have to remind ourselves that each month population is growing by 150,000 per month, which again -- would make it back to zero in terms of no job losses, no job gains. but still there's that added kind of -- you need to have more to be moved beyond just treading water. you know, this is quite a good

series. it has a correlation around .94, which is extremely strong, extremely high. so, it's -- >> with the jobs report? >> yes, excuse me. so it's a quality number. the other piece that's going to come out of this, though, will be on friday. again, we're back to our initial point, 200,000 job losses. and we're going to continue to see unemployment rise, between people looking for work, people reentering work, high school grads. we're still looking for jobs, college grads are looking for jobs too. >> bill? >> yes, steve? >> can you talk about this study coming out of rutger's today? i don't want to put you on the spot. i don't know if you know about it. it's the one that says we don't get back to full employment until 2017 or something like that. >> i'm not aware of that one, steve. >> there's something coming out of rutger's that's going to say before we get back to the 2007 level, i think it's something like ten years before we put all the people who are out of work, plus what you said, which was

the growth in population back to work that is going to be many, many years. >> yeah. i mean, i said i'm unaware of it. it's a sensible result. earlier, i talked with you and others on this show about whether or not we're moving to a jobless recovery that was 12 to 14 months after 1991, '92 recession or the 29-month jobless recovery that came after the 2001 recession. and i would like to be optimistic, shorter, because we have an incredible amount of stimulus out there. there are a lot of other headwinds that could be consistent with a much longer time. >> i was wonder fg you would talk about the dynamic between small business and large business in terms of hiring. small business generally are the net providers of jbs. that's also, though, because home equity lines of credit are usually the basis for capital formation. i guess the question i'm asking,

is it realistic to expect big job gains if housing prices continue to go down, given this relationship that we've seen in the past? >> yeah. i think that's a very valid question, very important question. particularly it comes back to consumer confidence and 70% of gdp. how consumer confidence was down. people are still very concerned about the future, but also the continued expectations -- not continued expectations, but continued fear of where we are today. so, going forward, you see some slower growth in housing, but it will translate into weaker consumption, yeah. >> joel, thank you very much for your time today. steve, we'll see you back here in a few minutes to talk about what's coming out at 8:30. bill, if you could stay with us as well, we'll get your reaction to what's coming up with gdp as well. another developing story we've been telling you about

this morning. 7.6 magnitude earthquake, striking indonesia, sumatra island this morning, a regional tsunami warning had been issued. it has now been lifted. we are waiting to get some of those pictures from the area. there are widespread reports of damage. >> we're not done with the breaking economic news. final report on second quarter gdp will be released at 8:30 am eastern time.

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all right. more breaking economic news. final report on second quarter gdp. steve liesman is in washington this morning and bill rogers is with us in studio. what are the numbers? >> gdp, no change from before. right on the expectation. come in at 2, right where it was reported. consumption number is a tenth better. we're looking for down one. it's down nine-tenths. >> kevin, knowing traders as you do, is there anything they would take off here that raised an eyebrow with you?

>> they're already moving on to the next one. this is all about how much -- obviously, i think, traders thought this could print positively. the zero number is a little less than what traders were looking for, but they'll be looking for this to balance out in the fourth quarter. the trade is all about the fourth already. >> it is. >> he has it wrong. >> let's get more reaction from who we have with us. steve liesman, rutger's university professor and jason trennert of strategas. steve, anything that caught your eye there? >> the top line is catching my eye. double-check me on this, joe. i got minus 0.7. quite a bit better than original. >> .7 on the top line, that's right. >> so, it's better -- >> about four-tenths better than the street. >> better than expected. so the expectation was better, i

think it's quite a bit better. i'm trying to see where it came from. i believe the consumption numbers were a little bit better and maybe we didn't pick up the inventory draw down that had been expected. i think we need to do a little work on this right now. the top line number is better than expected, mines 0.7 when economists were looking for minus .12. >> that would account, steve and kevin, for the equities, a friendly number for the stock market, i guess. right? >> that's right, joe. i mean, you know, we were looking at the bottom. that's right. steve is right on the top. so -- but it's not going to change people's focus now on going forward. once the earning season, what's the fourth quarter going to be, better or worse? at that time least it's a marker a buck higher than we were looking at. >> question for steve. do you know what the number on government consumption expenditures and growth investment stayed at 6.4%

increase? >> government consumption expenditures were hotter, bill, 6.7 with the federal government being 11.4%. so, i think that was a little bit more than expected, which may mean they got, i don't know, either a little more spending or stimulus spending. i found it curious, bill, why the government can't count its own spending. that's a story for another day. >> i agree with the comment earlier, that the market, main street, people are looking towards friday. this is a great number to confirm what we had seen beginning to slow down, edging toward recovery in the second quarter, moving on. >> jason, do you think that this is another little information for the half full crowd to keep buying stocks at these levels? >> the valuation, the hard part

right now, joe, i'm convinced by the end of the year, you'll see a headline that says the obama economic miracle. by the end of the year, only a third of the stimulus will have been spent, two-thirds of it will be spent next year in 2010 and gdp growth will be in the 3% to 5% range the second half of this year. i'm dancing around your question. a lot of that has been discounted in the stock market but at the same token, people won't know it's real, driven by government spending or the start of a new cycle. my own particular feeling is that a lot of this, what you'll see, is driven by government spending, it isn't a typical cycle drin by demand for durables. i wouldn't stand in front of the stock market now, but start to get very nervous in the start of the new year. >> real quick -- >> make it fast. >> watch the kurcurrency market joe. dollar was getting beat up this

morning. there's been quick adjustments about halfway back before the numbers. watch the level of the dollar the rest of the session. >> we were at 89 yesterday. >> quick thing on the fed stuff. we had the hawk speak, right? plosser, fisher, moderate hawk. watch for more dubbish talk, lockhart and coo ne, which is why i'm here, for the shout out market open meeting. we may get a reversal, the way the mark was leaning with what the fed was saying, may come back with a redirect with the statement that came out last week. >> thank you, everyone. appreciate that, steve, kevin and bill. you'll be with us, jason. we want to update you on a story we've been following. powerful earthquake, magnitude 7.6, has struck off indonesia's sumatra island. unclear if there were casualties at this point. high rise buildings in

singapore, about 275 miles to the northeast, were shaking. office buildings also shook in the malaysian capital. hundreds of homes and buildings have been damaged. we're monitoring the situation. we will be updating you on this -- it sounds like we're talking about yesterday but it's another earthquake in a different part of the world, not american samoa this time. >> still trying to get to the bottom of what caused the financial crisis. chairman of the oversight committee will hold a hearing today on the role that credit ratings agencies played in the meltdown. before that, he's talking to us. squawk box will be right back.

news on cit. what do you think, david? the latest is that rescue they were talking about yesterday, is that -- >> we're back sort of at that moment of drama with cit in the next couple of days. >> yeah. >> steering committee, bond holders has been actively negotiating with the company in terms of trying to determine how much they will accept in equity, so to speak, in the new company, what they'll accept on their bonds in a massive exchange offer. we'll see. you know, you want to eliminate

the free rider problem in these things, where some bondholders don't go along, but then ultimately benefit. that is actively going on. i am being told by people close to the situation that you might have something approved by the board or at least get something to the board as soon as thursday night or friday morning, pending board approval, that being some sort of an agreement or, again, this is the story the wall street journal broke. or potentially, once again, cit facing a potential bankruptcy. which would, in a way, mimic the same kind of plan that they are trying to work with their bondholders, only it would be in bankruptcy court. no word on any details that the point. obviously we'll be working on that as this day goes along. cit got the approval that gave it a bridge financing for a certain amount of time, trying to put itself on firmer

financial footing, by erasing a lot of its debt. if it's unable to, however, it faces that same problem it did a few months ago, mainly that it's simply unable to -- its model currently in terms of borrowing in the capital markets is not going to work. >> the worry wees had -- you would have to think that the competitors of cit have come in, factoring worries that small businesses weren't going to be able to have access to credit. would you think others have stepped up to the plate so that this isn't something that could be a systemic -- >> you imagine the time that's gone by and the fact that many people would have been aware of this as a possibility. again, we will see what happens over this next couple of days, that there would be -- it would be a lot more progress on that front. >> do creditors have the ability to say no, we're not going to go along with -- >> sure. >> really? that wouldn't be cutting off -- >> ultimately they would think

there would abe bankruptcy proceeding of some kind. certainly not possible you won't get everybody aligned. we'll see. regulat regulators are fully apprised of everything that's going on. >> they said no apparently? >> they own a bank. they could have gotten the same kind of terms some other companies similar to this that own a bank, they got access to some. >> the fdic, the key was they weren't allowed to move a lot of assets to the bank. >> right. >> so there's no movement, no new news from the administration in terms of their willingness or -- >> apparently not. again, what i'm hearing is that they've been actively talking and regulators are fully aware of what is going on. as far as i'm aware at this point, there's been nothing new on that front in terms of the fdic saying we'll let you do it. ultimately they were worried these assets would have to be -- would not work out. >> would be in worse shape than some of the other ones. >> exactly. >> thanks, david. we'll be watching you on "squawk

on the street." >> you're not coming on? >> no, not today. sorry. bigger fish to fry. hearing on what role the ratings agencies and inaccurate ratings played in the financial crisis from democratic representative ed towns from new york, chairman of the committee on oversight and government reform. great to see you, congressman. thanks for joining us. >> thank you. delighted to be here. >> you can go back, and see what happened long ago. we had a gentleman that i think you're going to have on today saying that not a whole lot has changed. what are you going to focus on, what happened or what is still happening? >> we're looking at the overall picture of the financial meltdown. and we're now discovered that the rating agencies also played a part approximain it and also certain information went to the sec and they never responded on it. two whistle blowers, mr.

mccloskey. they're saying they indicated the fact that there were some problems in the rating system. at that point, nobody did anything. nobody said anything. we're recognizing that people have lost a lot of money based on these ratings. when we look at aig and lehman brothers, they were rated aaa. look what happened. >> we had mr. kotinski on. we're trying to figure out how to take the financial incentive away from the ratings agencies to get too cozy with the companies that they rate. is that going to be part of the equation today? >> we will definitely look at that. because if you're being paid to rate someone, you know, it's an incentive, i think, to give them a good rating. because, after all, they're paying you. this system has to be reviewed. we need to make certain that, as we look at the whole financial meltdown that we have to look at

every aspect of it to try to make certain that this never, never happens again. we have to look at the sec in terms of its role. we have to look, of course, at the rating agencies in terms of its role. we have to look at the banks. we have to look across the board to make certain that people, who now have lost a lot of money, we look at the fact that people who had their pension fund, 401(k) and now they're losing it because of the fact that the rating was high and, of course, that was not the case. people are now suffering. so, if we're going to reform the financial system, we have to look at every aspect of it. and this is what this committee is doing. we want to see if we can get information to be able to strengthen the system to prevent this from ever, ever occurring again. >> i think the whistle blowers are alleging that some of the things that are happening today, the way that some of these structure products are still being rated that maybe moody's or s&p -- can't remember which

one he was talking about -- aren't necessarily following their own guidelines on ratings today. >> that's correct. we have these whistleblowers that come in to talk about what's really going on. we want to get a handle on this. because people are really, really hurt about what occurred. so, we have a hearing today to sort of look to see what information we can collect and what we can do to turn this around. to me, you have to look at the structure itself, the fact that they're being paid to make a decision and to do -- give a rating. of course, they're being paid by the people that they're rating. that, to me, is something that ne needs to be reviewed. >> congressman towns, it seems to be emblematic of all the things that are going on now, public versus private, and trying to square the two. some sort of public trust along with the benefits of private enterprise. who else are you talking to today? give us some idea of who you will be calling to provide some

testimony to try to figure this out. >> well, we brought in a former senator, al damato, who has been very involved in these issues when he was a senator here in washington, d.c. we will be talking to him as well. so, we're looking to talk to people who have had some experience in these kinds of issues, to be able to help us along the way. we want to collect as much information as we possibly can. this is what this is all about. we want to look at the fact that why the sec did not respond, the fact that information was sent over to them, memo that, they received the memo in march and took no action on it. these are questions we need to know. at the same time, when we look to see in terms of what's going on in the area, we need to make certain that we look and talk to everybody that has any kind of information that's going to help us get out of this meltdown. >> all right. congressman, then you have the other problem, you know.

if only companies that need companies evaluated start paying then, they'll keep it to thmsz, it will be proprietor and it won't be transparent for everyone to see the rating. there's not a perfect way to do it. >> not at this point. there must be a better way than what we have now. that's what we'll be doing, looking at that. >> good luck. we'll be watching you. thank you, congressman. >> thank you. >> congressman ed towns. a developing story this morning. 7.6 magnitude earthquake striking sumatra island in indonesia. the quake was felt around the region. we're talking about it, that it was felt as far away as singapore. our colleague, christine cann is on the phone. >> reporter: according to reports so far, it struck around 6:15 in the evening singapore time. it's said to struck some 85k

ilometers under the surface of the water. pretty shallow. tsunami warning has been issued but since has been dropped. buildings have been damaged, houses destroyed in the city closest to the city of padang, closest to the quake, bringing down bridges, starting fires, electricity in the city of padang has been cut off. phone lines are down in the city. there are some injuries, no word yet on casualties. i understand rescue teams are trying to reach the area where sumatra. apparently the quake, as you said, was felt as far as singapore, high rise buildings have been shook. friends say they felt buildings moved, some offices evacuated of staff. the region is nervous simply because the tsunami, you remember, that struck in 2004, that came from the same region as this one, killing about 230,000 people. adding to that, typhoon across southeast asia is happening right now, leading to flooding, not to mention the tsunami in

the south pacific killing 300. you can understand why the region is nervous. we're still waiting for detailed information. >> bring it to us if you get anything, christine. thank you. appreciate the update. christine tan in singapore. dow suffered biggest point plunge ever a year ago. now it's about to wrap up its best quarterly performance in ten years. our ideas heading into the fourth quarter. $$$$$$$$$

opening on wall street this morning as investors interpret all economic data. the adp report shows the smallest number of private sector job losses in over a year, but was none the less more than economists were expecting. we also saw better than expected gdp number showing the u.s. economy contracted at an annual rate of 0.7%. now they've come back down. we'll see. next, three investing ideas which our guest host jason

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our guest host is jason trener, chief investment strategist and management partner at isi. three actionable ideas. but let's do it. >> first one would be -- seems hopeful but the short treasuries. so there's an etf called tbt. i think i have a chart here. but the punch line basically is that it's hard for the government to dissave by $2 trillion a year. this shows you basically -- essentially the government is adopting a bear stearns and lehman brothers type of funding model. it has enormous long-term liabilities and yet we continue to fund it short. china's holdings of our debt is 25% of them. so this is not sustainable, in my view. and just looking at simple simeon economics, it's hard to

increase anything and supply anything by six times and not see the price go down. the first thing would be to go short treasury. second thing would be, we think two of the most sustainable, competitive advantages in the world moving forward are going to be limited need to access the credit markets and having broad exposure to farm markets. that's where i think coca-cola comes in. coca-cola obviously is a global brand. brands are very hard to replicate. generates enormous amount of cash and pays a dividend that i think is going to be very, very important in an environment in which equity returns will be somewhat lower. >> the percent, although we may tax sugary drinks. >> exactly. and you've got the bush tax cuts expiring at the end of next year. >> exactly. >> i do think these are, again, tremendous cash flow and also enor