capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. >> i'm erin burnett. this is a busy morning, front and center. former ceo of amd gets twisted up in the galleon insider trading scandal. >> and pay czar feinberg -- go through life known as pay czar feinberg, testifying on the hill this morning. we have his speech ahead of time and we'll give you the czar's highlights in two minutes. >> there is something a bit ridiculous about use of the word czar. not just for him but for all these other people. they used to be scary, cruel, and now it's fill in the blank in washington, you're a czar. >> yeah. all right. charlie gasparino, he's more in the vein of the real czars. reporting the government is blowing the bear stearns case. whoa!

>> anyway. we're also waiting again. we had a bit of an earthquake here. also waiting again to lift off. mark hasn't left his seat all night. he's waiting. >> it's knocking. i really want to see this puppy go up. >> oh. >> when they launched this, we'll bring it to you live. it should happen within the next -- within the next two hours. but it didn't work out yesterday. this is the aries 1x, a model that is expected to replace the shuttle. >> 327 feet high. we can go into all the details we learned yesterday. we'll show you the flag picture in a couple of moments, see if the wind is picking up. mark, let's look at your futures. they're going to be lower. >> looks that way. >> yep. >> all right. we start off with major developments in the galleon insider trading case. advanced microdevices former ceo hector ruiz now reportedly

involved in the whole thing. bureau chief gigabyte goldman live in san jose. >> wow. that was clear your throat there, mark. yes, indeed, good morning, guys. did he profit from insider trading tips? prosecutors reportedly say no. more likely, he unwittingly shared insider information with others who then profited from it. those are tissues swirling around former advanced microdevices chairman and ceo hector ruiz identified last night as a central figure in the galleon trading case. they reported the unnamed amd executive in court papers is, in fact, ruiz who passed along confidential information about an impending billion dollar investment in amd by the abu dhabi government to the defendant in the galleon case. the amd executive said, we're going to shock the hell out of everybody. later he says the information is coming from an amd executive who, quote, had been preaching

this deal for so long. a role insiders i've spoken to says ruiz had been play for some time. stunned disbelief among so many silicon valley executives i've spoken to overnight, and almost all of them point to the difficulty this brings to the ongoing amd versus intel antitrust litigation where ruiz lobbed so many accusations of illegal and unethical behavior by his much bigger rival. they might bing to ring hollow though if it comes from somebody wrapped up in this case. he stepped down as amd's chairman and ceo last year and now runs the manufacturing joint venture between abu dhabi and amd. and there is no comment yet from the ruiz camp. >> thank you, james. gmac wants more of our money. they're in talks with treasury about a third cash influgs. financial services firm has already gotten $12 1/2 billion.

they got $5 billion in december. $7 1/2 bill more in may. the government may now to pump in anywhere between $2.8 billion and $5.6 billion. that's kind of a big range. >> going to the big board techs of -- >> i don't know what this story is of this company. meanwhile, ceo alvaro demolina got a million dollars of our money. >> what? okay. see, if he were a czar, he would just behead him. >> well, czar kenneth feinberg is testifying before the house government oversight committee on executive compensation in about two hours. our mary thompson live in washington, and she got a copy of his testimony. mary? >> mark, it is prepared remarks, feinberg says his power as a special master of executive compensation should be extended beyond the company's he pays.

writing in his testimony, the federal government should not enter the business of micromanaging compensation practices beyond these seven companies by expanding my jurisdiction or broadening my discretionary authority. of course, seven companies owe the government hundreds of billions of dollars collectively. they include bank of america, citi, aig, citi, chrysler, and finance arm of both automakers. last week feinberg cut total compensation by 136 top executives at these 7 firms in half. he says he's now working on next year's plans where he anticipates problems working out grand fathered guaranteed retention contracts for the executives. he's also working on compensation plans for the next layer of top executives at these companies. his decisions on these due 60 days after the company submit the details on what they would like to see in these pay packages. feinberg's testimony starts at 11:00. look for him to come under fire for today's report in the "wall street journal" saying despite the fact that he cut total compensation for these execs in

half for this year he raised the average base salary by 14%. congress is likely to take aim at that. back to you. >> thank you, mary. pretty amazing numbers there, no matter how you cut it on the compensation. let's hit the markets. and we are set for a lower open. off the lows of the premarket session. let's start with you, bob. >> we're approaching the end of the earnings season. everybody is wringing their hands because stock is down four days in a row, going to open down here maybe. the stock market is not responding to better earnings expectation. 4%, folks, is the average correction that we've seen since this march low. so far the last few days with 3% from the high. everybody calm down. everybody is going to be fine. they're all point s.a.p. this morning. their forecast was cut. stock is trading down here. end market demand seems to be weaker. that's true and unfortunate. look at chemical maker ashland up 14%. demand appears to be showing some signs of growth.

that's what ashland says. see international paper, modest improvement in demand. their stock is up 3% on earnings better than expected. tough couple of months for ipo. see vit anyone shoppe? priced at $17. talk more at the open about that. tradertalk.cnbc.com. mike, how are we looking at the nasdaq? >> bob, after yesterday's nearly 26 point or 1% decline here at the nasdaq, we are pointing to a slightly lower open here at the nasdaq. of course, yesterday the big drag here at the nasdaq where shares of baidue down. it looks like it's going to trade up just a smidgen today's. today it looks like apollo group will get hammered here. the company announcing it's the subject of an informal s.e.c. investigation and downgrades on that stock. probably not much to move shares of apple, up almost half a percent right now. snow white is going to take a bite of that apple. disney saying it's going to put free interactive aps on the

iphone and itouch that could eventually lead to still photos being turned into videos. now let's go over to the nymex. >> traders here are looking at potentially more downside than upside portion terrible for oil prices as they take conference after we saw a week ago oil prices hitting $82 a barrel. we're below $79 a barrel right now. there's a lot of economic data to watch for today. also, inventory data coming out from the energy department. we are anticipating to see a decline perhaps in crude supplies at the american petroleum institute reported. although, many of the analysts out there were expecting to see a rise in crude supplies. we also saw a slight decline, less than expected, in distillate fuel supplies. we'll see if that is confirmed as well. of course, that data comes out at 10:30 a.m. eastern time. i'll have it for you live. mark, back to you. >> thank you very much. in less than three minutes, we'll go inside the numbers from conoco philips.

>> i thought you were going to say in less than -- >> no. the stock is a bit higher after beating estimates. >> plus, charlie gasparino on why the government may be blowing the bear stearns case. as we go to break, a look at european and asian markets.

conoco philips reporting earnings of 1 1/2 billion dollars this morning. that would be $1 a share. that was 70% lower than a year ago. keep in mind a year ago was right after crude came off its $150 peak. still, that was better than anyone was looking for. jason gamme is in the news line with us now for his analysis. what do you see in these numbers, jason, relative to the other oil giants? >> it looks like a rhettity good clean quarter. i think that the production volumes were vor strong, up 5% on accumulative year to date basis versus 2008. that's very good result for can cophillips. i think the u.s. refining and marketing business didn't do great but was not as bad as it could have been. that's fairly consistent with what bp reported yesterday. >> what about where conoco

phillips operates? places like, let's just say, iraq or libya. what about conoco's strategy? >> they do have an operation in libya. it's a relatively small piece of their overall small business. they have really focused on keeping their production within, let's say, oucd countries or uncertain from political risk basis. it does result in higher unit operating costs but it has little more stability, again, from a political standpoint. >> so what would you do with the stock? >> i think the stock is cheap mere. i think i would be a buyer of the stock. the operational result s do endorse that their production volumes have turned a corner and are looking strong. i think the asset rationalization program that you have coming up here which could generate $10 billion and restructure the balance sheet will be a positive catalyst. >> thank you very much, jason. we appreciate it.

>> thank you. >> jason gamel. mark? nasa just informed us that they plan to launch that aries rocket at 10:30 this morning. bear in mind, they can launch it whenever the heck they want. this is just a test. but the weather looks good. and maybe they will get it off. >> it does look about as perfect as it gets. >> shoot for 10:30. >> i feel like we're a "saturday night live" skit watching this thing every day. i thought we should really take a little picture of mark, sometime when mark was sleeping and keep it up all day long. you wouldn't have to be here in person. we can just have people see you sleeping and then you burst alert when the rocket launched. >> the space program is so much fun. the first only criminal trial stemming from the -- >> see? sorry. >> -- is under way. former bear stearns hedge fund

managers accused of fraud, but is the government blowing the case? charlie gasparino thinks so. he's our on-air editor and author of the book "the sellout." >> you know, guys, instead of that rocket, just show my book for a few hours, okay? can you do that? >> well, that will be just about as interesting as watch that rocket sit there. >> thank you. thank you. endorsement for the book. >> take it where you can get it, charlie. >> well, guys, are they blowing it? it's hard to say. i broke this down to three relevant questions. number one, are they losing the court battle? and if you just buy little points, you know, they are losing the court battle. there's no doubt the government is losing the court battle. they threw out a key piece of evidence, some sort of damning gmail, e-mail the government says was obtained that matthew tannin wrote that showed some skepticism in contrast to his

public optimism with the investors. they threw that out. also, a witness kind of blew up on the stand. this was a government witness. bear stearns analyst. didn't quite make the case against both tannin and cioffi. the second question is, does it matter? is the public's mood so anti-wall street that if you aren't totally honest with an investor and there's some evidence here that they weren't, that they were kind of, at the very least, spinning the truth, will the jury -- this is a working glass jury. these are not people that necessarily like wall street so much. will they just, you know, throw you in jail? and i think that's a real possibility. the third question i have, guys, and this is something that we're going to be debating a lot, should they have been prosecuted given the fact that this is kind of mercky. and here's the other fact. you can't get around this question. every major firm made bad investments. you know, why aren't they, for example, john mack took a

major -- i showed you this in the book. john mack did a 180 on morgan stanley's business model. they were an agency model where they basically did trades for clients, they basically, you know, did brokerage deals for a small investors. they did a 180 and they embraced trading. and they bet wrong, bet so wrong that morgan stanley last year was going to be out of business. and they did that because they wanted to make money and copy goldman sachs. should john mack's e-mails subpoenaed and looked over to see if everything was kosher with that? that's where this gets me. these guys are not high on the totem pole. and the government picked the lowest-hanging fruit they could get. there is a chance that they could get convicted for the reason i laid out before. >> thank you, charlie gasparino. we are getting ready for the opening bell with the word on the street and the buzz beyond the trading floor. the futures pointing to a lower

open. >> plus, we've got a strategy session with kef writtvin ferry. this is "squawk on the street." we do have a lower open. wow, we've got a rocket.

all righty. we have closed the electronics session for the futures, so-called globe-x session. 520, which was 5 1/2 or so, below fair value, indicating a down open. that will suit mr. sourpus here

just fine. you've gn skeptical. >> cautious. i'm continuing to be cautious. i will continue to be cautious until the end of the year. i just -- >> are you doing this by the calendar? >> yeah. you know, you always want me to time something. so i'm timing it out. >> i don't want you to time anything. i just want you to tell me whether we're going up or down. >> we're going down. >> going down. >> going down. >> for how long? >> well, i don't think we're going to see a huge move on the downside. 9500 probably on the dow and s&p maybe we'll break 1,000 on the downside a little bit. but, i mean, it's not going to be a huge move. >> that sounds like a buying opportunity. >> if it gets to the points that i'm talking about, absolutely. you know what it is, we're in a corrective phase. when tend of the corrective phase happens, which should probably be sometime late november, december, maybe then start dipping the whip back in. >> yeah? >> i'm not -- there's a lot of things still coming up. earnings season was very good. look at unemployment, look at the consumer confidence is still down. you know, there's still a lot of

things hanging over the market that keep me from being that bullish, happy, yankee-loving self. >> the housing market is -- although it seems to have bottomed, no sign that it's going to be robust at any time? >> too much inventory. houses still need to be turned over and rolled back. it's going to take a while. this is not this short-term, we're not looking for short-term fix. this is going to b b a very lon recovery. very long. this could be two years, three years. >> okay. before i let you go, your prediction on the world series? >> i think the yankees will take it in seven. i think it's going to be a long series. all my friends and customers in philadelphia might not like that. but i do think the yankees will take it. it's going to be a tough, hard series. but i do think the yankees will win. >> seven games. >> seven games. >> i will have jumped off a bring by then. i want this over in four, okay? i hate them both. >> okay. >> thank you, peter costa. back up stairs to erin.

>> all right, mr. haines. let's bring your attention to an alert note that you saw on the bottom of the screen. we've been running it. this is about goldman sachs, not about the company but their forecast for economic growth in this country. they are cutting their forecast for the third quarter for growth of this country to 2.7%. as you can see below me, from 3%. by the way, everyone says technically we're out of the recession because we're going to see growth. that's an interesting cut though, especially in light of the fact that according to the latest poll by "the washington post," and i believe abc news, 82% of americans still say we are in a recession. let's get the buzz from beyond the big board. phil dow, managing director of equity strategy. phil, what do you read into that? cutting from a 3% expected growth to 2.7% is not insignificant. >> no, it isn't. it's a big swing up from the big loss we had earlier this year in gdp growth. remember, the consensus is around 3.2%, 3.3% even some 4% numbers. i can't wait for the number to come out tomorrow, cut the

suspense and get on to the next data point people want to focus on. >> and what's your view, though? if 82% of consumers say we're not out of a recession, that's the sort of thing that doesn't bode so well for the crucial spending in the holiday season that would keep us out of a recession. >> well, you know, the consumers, constrained as it is, surprising the numbers have been as good as they have. my guess is i've been in this business for 38 years and people have been predicting the demise of the future for that for the entire period from time to time, it never happened. i don't see them drawing away dramatically. >> all right. thank you very much, phil dow. appreciate you taking the time. >> thank you, erin. and we have the final count down to the opening bell just on the other side of the break. we do have a lower open. who knows what that means for the close given some of the volatility we've seen lately.

you are watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell is going to ring in two minutes.

>> and that gives us time to talk to larry levine, joining us now from the cme group. president with secrets of traders.com. what secrets can you share with us today? >> erin, it's interesting the last couple of days we've seen the pickup in the volume to the downside. definitely institutional volumes coming on the sell side which question haven't seen the better part of the last two or three months. i'm watching 1055 in the s&p futures today that is going to be where we open in the next minute or so. we stay below that 1055 level. i took to 1045, even 1040 over the next couple of days. like i said, momentum is on the downside for now. >> goldman sachs cut the forecast for gdp to 2.7% growth from their anticipated rate to 3%. the number comes out tomorrow. if we come in below consensus, let's say we come in at a 2.7%, how big of an issue will that be for stocks? >> i think it will be an issue,

especially where we are right now as far as the market. if you're higher, we have room to give up and probably see buyers coming in. was acontinue to fall alart, not fall apart, but continue to move lower, the buyers will dry up and people turning around and selling this market. >> all right. well, larry, thank you very much. we appreciate it. >> you're welcome. mark, it's interesting as larry was talking about what the market reaction might be to that, as you point out. 2.7% would still be an incredible number relative to the declines. the question is, can we sustain it from this one quarter where we get this huge pop? >> that's what people are definitely worried about. >> right. >> kind of like following the consumer confidence number, which got better, got better, got better. all of a sudden turned around and started heading lower again. >> right. >> i hope that's not a sign of the economy. hopefully it's just a one-month wiggle in the data that we will soon forget. anyway, it's time to kick off

trading here, to get this party started. here at the big board. the vitamin shoppe, ticker vsi, celebrating its ipo on the nyse. and at the nasdaq, china ritar power, ticker crtp. a manufacturer of lead acid batteries. >> that sounds delicious. >> sounds like old technology. celebrating the company's listing. >> yes. mark, one thing i should note here, melissa lee just sent me this note. talking about goldman, the gdp number comes out tomorrow. they revised their forecast from 3% to 2.7%. she's noting the last time before the payroll number came out, the day before, they revised. they revised to pretty much spot on. remember that? >> yeah. >> this is one of those things that people like to, you know. it is important. she does notice it just happened the last time there was a big number. >> they better be wrong this time or people are going to get a little suspicious.

>> that's right. better hope you're wrong. >> like i will. >> there you go. and that is courtesy melissa lee. our market reporters are standing by. we are open just down. bob pisani, you're first. >> not responding to earnings better than expected. percentage of stocks above their 10 and 30-week moving average. so predictably there's a lot of technical top today with bull top, bear confirm, doom and gloom. we're only down 3% from the recent highs. bear that in mind. the average correction in the seven months since the march bottom is 4%. so we're not even in an average correction so far. keep an eye on that. just stop worrying so much about that. s&p, they're all pointing to because the guidance was kind of poor. weaker demand in emerging markets. they were talking about that. that was a little bit of a disappointme disappointment. stock eped down 8%. ashland, chemical maker, sensitive industry. they were better on the top and bottom line.

they talk about demand appearing to show some signs of growth in in end markets. it's on the upside. if you look at international paper, not always the bellwether. they talk about modest improvement in demand in the paper market. that stock just opened up 2%. finally, ipos, it hasn't been a great couple months for ipos. look at vitamin shoppe, it did price above expectations. $14 to 16 pz, priced at $17. tonight we're going get iei. wee don't have a final number yet. that $750 million. tradertalk.cnbc.com. mike, how are we looking at the nasdaq? >> not so good after yesterday's 1% decline at the nasdaq. still under pressure. down more than half a percent out of the great. we had a chinese company ritar ring the opening bell, chinese version of google, the heaviest drag on the nasdaq. bouncing back a little bit

today. looks like apollo group, its turn in the barrel today. stock down 15% at the open. that company has things like the university of phoenix, disclose that it's got an informal s.e.c. investigation going on. analysts downgrade that stock. not a very busy morning for earnings. we do have a few carry-over earnings stories from yesterday. e trade had their ninth straight quarterly loss. its competitor td amr trade, that company beat the street and said, get, this it handled more than 410,000 trades a day in the quarter. farmersmarket.cnbc.com. sharon, at the nymex. >> the dollar is basically flat. we're looking at oil prices that are down on both sides of the atlantic. traders are waiting for more economic data to come out. that gdp report tomorrow will be key. ahead of that, they are going to watch today's inventory data

from the energy department. looking at that data, they're going to watch carefully what happens to product supplies. gasoline right now is the biggest drag on the market. but gasoline futures have been the biggest gainers in the petroleum complex so far this month, 25%. so far this month as we've seen, gasoline supplies fall by more than 7 1/2 million barrels in just two weeks' time. we're expect today to see a decline of about 1.2 million barrels according to dow jones survey of analysts. but ap i-reported yesterday a slight dereese. we will have see whether that's confirmed. we'll have that report coming out live at 10:30 a.m. eastern time. quick check on the markets for you right now. the dow as expected, down a bit. not much, really. just 22 points. a quarter of 1%. nasdaq getting hit hard here down comparative speaking. down about 0.6%. and the s&p in the middle, down about a third of 1%. your cnbc edge with cio of

global equities with federated investors and ted parrish, portfolio manager of henssler equity fund. ted, good morning. good to see you. i haven't seen you in a while. >> good morning. >> what do you think, where are we headed here in the market? >> well, i'm hoping we're heading higher. i think all the data has been pretty positive. not without negative data but mostly positive. that's a good thing. i think the most glaring positive is probably earning season. the revenue numbers have finally started to come in ahead of estimates. that's a good thing. you know, these companies are showing that, you know, the earnings rebound that most on arei ining is coming due. if we can get the employment numbers to turn the other way, we will be well on oir way of a sustainable recovery. >> what do you think? >> i agree with ned. i think it has been a positive. we had top line beats. two thirds of the companies had

top line beats this time. 80% bottom line beats. i think we had something like 55% of the analysts upgraded their earnings forecast. so i think when you come through october pretty well. there's obviously still a lot of week longs in this market. kind of guided reluctantly. and my sense they're kind of being washed out here. i wouldn't be terribly surprised if it goes as low as 1,000, maybe. but we're maintaining our overweights on equities. i don't know if we're going to go down to 1,000 or not but we're keeping our 1200 target at the end of the year. the real issue for equities in the next few weeks and months is going to be the 2010 outlook. most people are still bearish about 2010. they think this is a runoff rebound and there's not much behind it. we're 3 1/2%, 4% gdp for next year. we think as people begin to factor in a better number for 2010, equities are going to move

higher. >> ted, you say that you are looking for some upside surprise in the employment data in particular. what is upside surprise? are we going to get a plus sign in front of the jobs number this year? >> well, you know, the employment situation has been a little less bad by about 75,000 jobs each month. and isi, a group i use for research, economic research, they think that by the end of the year, those numbers will turn positive. you know, companies laid off a little too much. i think the companies laid off about 6% of their payrolls. and given that the decline in gdp,that number should be about 3 1/2%. so clearly, you know, they laid off a little too much too fast. and once we see a turn around in the economy, i think these companies are going to have to hire. that's where we're going to see some surprises, really soon. >> what do you say, steve? that's really what it comes down to. especially when they say 82% of

americans say they're in recession. >> we've been watching the nonfarm payrolls, new unemployment plus new jobs. that's been ticking down 75, 80,000 a month on average over the last six months off the $700,000 job losses. we're probably going to have a one handle for october on that number, like ted said. i think we probably go into the positive territory. we've also think that you've got to look a what goes on over seas. overseas economy is surprisingly on the upside. almost half of s&p 500 earnings in sales come from overseas markets. and, you know, we've got a very weak dollar. that's going to help us. s&p news this morning to me is an example of what's going on in europe right now. they're struggling with a strong euro. we've got a weak dollar. we think the overseas thing is also going to help upside surprises on the u.s. side. >> all right. steve auth, ted parrish, thank you for sharing your thoughts with us. with too big to fail working around washington, something new is popping up in the corridors

of power, bringing new concerns about the state of an independent fed. our senior economics reporter steve liesman is live in -- where are you? you're in hq. >> no water behind me today, mark. we'll get there. one of the potentially historic parts of this new banking reform bill is on the last page, page 253. on that page the bill from the chairman of the house financial services committee would take away a part of the fed's independence, crippling its ability to act alone in emergencies to bail out companies like it did bear stearns and aig. according to this bill, just in the house, it requires treasury secretary written approval of any individual bailouts. it also requires any individual bailout to be part of a broadly available facility. so you can't invent new instruments as the fed did. bottom line is that the language would have prohibited the fed from acting by itself to bail

out bear stearns and aig and pimco's bill gross says it injects a potentially dangerous political element into the fed. >> to the extent that some powers are taken from the fed and attributed to and given to the treasury and other policymakers, then you have a body that becomes more political as opposed to market oriented. that's the danger. >> for his part, bernanke down played the idea when asked about it generally in july. he said the fed consulted closely with the treasury during the bailouts anyway and kept congress in the loop when possible. he added the fed's authority to bailout companies should be subordinated to the government if it does adopt a broader resolution of authority, which is what this frank bill purports to do. all of this was before the specific language in the bill requiring written consent from the treasury secretary to the fed for use of powers. the question is whether they will now see this as a dangerous precedent, acceptable by

politicians, to have authority over any decision. ben barney frank found out how much the fed had to put to work $800 billion, barney frank at the time said no body should have the ability to hand over a billion dollars outside the political jurisdiction. mark? >> thank you, steve liesman. just around the bend, because you clicked. visa, one of the most searched stocks on cnbc.com, after its quarterly results beat wall street expectations. >> later, your retirement at risk. how the largest pension fund lost a third of its value in two years and what must be done about it. we are also wait for nasa to light this candle. >> is this gado in the form of a rocket? >> that rocket is due to go up at 10:30, we are told. critical of the future of the space program. this is what eventually they are planning on replacing the shuttle with. >> i think they have to get more

money and more money ol located. so they have to show they can have it lift off on time and things like that. >> yeah. that is possibly part of the equation. and a quick look at your s&p winners so far in the morning. goldman sachs obviously calling for a lower than expected gdp report out tomorrow. stocks have paired their losses. down 11. welcome to the now network, population 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. 154 are tracking shipments on a train. 33 are iming on a ferry. and 1300 are secretly checking email on a vacation. that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. right now get a free 3g/4g device for your laptop. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com

welcome back to "squawk on the street." i'm bertha coombs. we're watching wellpoint this morning, insurance giant's third quarter earnings and estimates came out ahead of expectations and boosting its fourth quarter sales outlook by $300 million. the stock traded way lower ahead of the open on a confusing forecast about its outlook. and then it turned positive premarket and it's just barely positive now, even though many insurers are lower. it's mlr dropped 140 basis points. company also sees higher utilization because of the flu. meantime mckesson beat on sales.

they're boosting the 2010 guide dance because of expected high h1n1 volume the cdc is using to distribute the flu vaccine and supplies. back to you, erin. >> all right. thank you very much. visa, mark mentioned it, one of the most clicked on stocks on cnbc.com. of course, it is the operator of the world's largest electronics payment system, which is an important way to distinguish it because they do the payment processing, not the bank side. posting a $514 million profit for the fourth quarter. that was the quarter just ended there. also, announcing a $1 billion share repurchase program that could be right, could be wrong. does indicate their own stocks is under value. shares up 50% since the march low, which underperforms the market. today our trading up 4%. let's go inside visa's numbers, because you clicked. group of specialty finance research. good to be with you, rick. we appreciate it. so what do you think is the most

important headline here. the numbers, the share repurchase, what is it? >> i think it's really two things, erin. one is the top line surprise. we were expecting a good quarter from these -- but frankly we were expecting it with a blah, in-line, top-line result and good margin expansion. they beat us soundly on the top line, more earnings, power going forward. the second metric is the $2 billion of free cash flow they're guiding to. you made the comment about the repurchases. i'm not even necessarily sure that that's a function of how they see their stock price. but simply how much capital this company is going to be forming going forward. >> so if we can -- by the way, sometimes companies think their stock prices is going up and they don't. but if you don't want to read into it that they think their stock is undervalued by that announcement in and of itself, what do you see in their future? >> look, this is one of the great global franchises. this is a business that's growing top line, 10% or 11%.

there's tremendous operating leverage for every dollar revenue that they generate, almost 90 cents goes to the operating line. it is very unique to find a company this large, with this level of global penetration, where they can continue to grow earnings the way we expect visa to. we're looking for better than 20% growth going forward. >> i just came up with a really horrible scenario, that visa's earnings are increasing because of increased -- the increased number of transactions. more and more transactions are being made even if they're for less money, the transactions are growing in number. maybe because people don't have the cash and that some time in the future, this comes back to bite them in the nether regions? i know that's not visa's problem, it will be the bank's problem, whoever issued the card. maybe this is a sign that things aren't that great. >> very interesting point, mark.

what i would observe is that actually a lot of growth for visa is coming from the debit side. you are right. they are doing more transactions. the transaction sizes are smaller, but it is, in fact, people substituting using credit for money that they already have in the bank. again, it's very consistent with what we're seeing. i think the consumer is being more conservative. >> we hope they have it in the bank. >> we hope they have it in the bank and aren't just charging it. it could be a debit, too? >> that's what i'm saying. the real growth is on the debit side at this point. there's been a very significant substitution, especially domestically, in terms of going from credit to debit transactions. >> yeah. i love the ones in line ahead of me who debit $2.50 cup of coffee. >> see, i think it goes faster when you're in line like that. >> oh, really? you know, here. here's three bucks. thank you. i'm out the door. meanwhile, someone else is swiping the card and signing the thing.

>> rick, you have hit on his number one peeve, which is a dunken doughnuts is losing business because mark has to wait for all of these people to run their cards through. >> you're a big tipper. >> i am a big tipper, yeah. i don't tip with the card. >> poor, rick, just stepped in the middle of this one. >> thanks, rick. >> thanks, guys. >> appreciate it. back in a flash with commodities corner. who is going to get called out there today? >> this is precious metals addition, i believe. >> i believe this is precious metals addition. plus, countdown to profits. when a rocket blasts off, more than just its payload gets a lift. jane wells. >> when the rocket blasts off.

it is time for commodities corner, precious metals addition. let's take a look at gold. go gold up 17%. it is amazing across the board, commodities, precious or common, you do see a surge over the past year. silver down slightly today. but so far this year up 46%. look at platinum. and, mark, indeed, it is, 41% for the year. and up just slightly today. look at that chart. copper last but not least, more

precious than any of them when it comes to common use. and its stock price or its cost is also more precious. it's more than doubled so far this year. >> the old saying is the economy lives under a copper roof, or something like that. all right. the ariesx1 rocket or aries 1x set to launch 36 minutes from now, after several delays. this rocket could be the future of the space program. it's unmanned. this is just a test. but it's these kinds of rockets that will one day replace the space shuttle. for more on profits and space, jane wells live in l.a. janie? >> well, will they replace the space shuttle? that is the question. the new launch time is scheduled in 35 minutes or so. there are too many lightning strikes in florida this morning.

again, the 327-foot tall rocket which is meant to test the first stage booster carries with it the hopes and dreams of aerospace companies in business with nasa. but even a successful launch may not make those dreams come true. now, let's show you the animation on how the rocket should work during a test. atk not only built this rocket to replace the space shuttle but plans to build a larger one as part of nasa's potentially $200 billion plan to get to the moon around 2020ish and then beyond, maybe mars. that program includes billions more for lockheed martin to build the orion spacecraft. a blue ribbon commission told the president this may be a waste of money unless nasa gets more money now, $3 bll billion more, a year. >> the united states is curre currently pursuing one that is on an unsustainable tro jekttory. too often in the space program we've tried to decide where we want to go, what's our

destination rather than why is it we want to go. >> now, the augustine commission said nasa contracted out to the private sector. next month nasa is expected to ward $50 million in federal stimulus money, bidders include boeing, orbital sciences and spacex and then those outside of na nasa. >> moon 2.0, join the revolution. and this time, we're planning to stay. >> all right. google's lunarx prize will award a total of $30 million. mostly to the first private team to get a lander on the moon, get it to move around and send back da data. the deadline to win that prize is 2012. i don't know. if anyone makes that deadline, i would be shocked. that would be monumental and a huge boost for the private sector. >> i guess so. all right. >> we'll discuss this -- >> jane wells --

>> we've got a hard break here because we've got economic newsbreaking. >> that's true. we have some thoughts. erin and i, you know, wed to see eye to eye on almost everything. but on this one -- >> sort of like one lazy eye. >> moments away, making economic news, new home sales for september. >> that's on the other side of this brief break.

welcome back to "squawk on the street." waiting for the new home sales numbers out. looking for a number of 440,000, increase from 429,000 in the prior month. let me just see. seems to have disappointed at 402,000. revised downward the prior month to 417,000. so that's a 3.6% decline for a number that really had been trending upward. 0.7% rise in the prior month. i tell you what i'll be looking for is the month supply on the market as well as the medium price. 7 1/2 is the month supply on the market, which is up from 7.3. the peak of this series was 12.4 back in january '09. it looks like for this month of september, we have a little bit

of a stall. one of the concerns we're going to have here, i'm sure diana olick is going to come in, what does it mean for the tax credit for first-time buyers is set to expire. back to you. >> thank you, steve liesman. market reaction there, dow split 32, right where we were. we're going to bring in our panel. there was something else i was going to mention. >> this is the box. >> okay. let's bring in diana. what do you think, diana, as you just interpret the headlines steve had? >> what we see is a real disappointment in the new home sales this monday. recision down from august. and you also see below expectations. we were expecting up 2.6%. the inventory is not moved. 17.5 month supposed fly. it was a 7.3 month supply last month. inventories levels have gone up price. the median price for a new home went to $204,800, that is down from september 2008, $225,200. this is all about that first-time home buyer tax

credit. we saw existing home sales up 9% in september because you could sign a contract and get in under the wire. but for new construction, you would have had to sign a contract because you got to get to closing for the tax credit. so new home buyers are out of that tax credit realm. that's why you're seeing the dip in new home sales. back to you. >> i want to know what an economist thinks. >> oh, well, lucky thing you've got one. >> bart sandy. >> i fit the description. i'm surprised. i would have thought the first-time home buyer tax credit would have lifted sales significantly in september because these are contracts and they have to close by the end of november to qualify for the credit. so if it's not going to show up in september, you know, that's surprising and a bit disconcerting. >> can i throw out an idea here? i heard from some people in the industry that the problem was they didn't have enough first-time homes, was that the inventory of homes that are out there essentially are these bigger, either mcmansions or bigger homes out there where a

lot of people are buying first homes don't really qualify and what the industry was doing was scrambling to create the product that these first-time home buyers could afford. >> that's why we talk about construction. that's exactly what i'm saying. in order to close on a fully built house, you just have a plot of land you're signing a contract on in september, it's not going to be done by november in order to sign on that closing. >> yeah, but why a decline? i don't know. i mean, these data are volatile and hard to measure. they get revised quite a bit. >> let me concede that my explanation doesn't do enough to explain. look, this is a market that 1.4 million homes back in july '05. now we're talking about 400,000. just by waking up in the morning the demographics of this nation should do 500. it may speak again to credit issues. i don't know if you saw it, diana, but the mortgage numbers have been off the mortgage applications numbers. >> jim from caterpillar expects a million starts next year. and he says the replacement

rate, as steve's point about demographics, immigration, birth, would be about the need for 1.6 million. he doesn't even think he's being that optimistic. what do you say? >> he's right. replacement demand is actually higher than 1.6. you can single, multi-families closer to 1.7, 1.75. it's going to take a long time to get back there because we have excess inventory. there's a lot of vacant homes out there for sale and rent. it's going to take, at the current level of demand, a couple or three years to work that off. >> can i ask, mark? this number, does it cause you to reduce your construction numbers and gdp and therefore reduce your gdp forecast? >> for q-3, no. >> what about q-4? >> not yet. you know, these are -- these numbers get revised quite a bit. i'm suspicious. i wouldn't be surprised if they get revised up next month. >> thanks so much to all three of you. let's get market reaction. and the stocks holding in there, down 39.

bob pisani? >> not only was the new home sales number disappointing but did you see the mortgage application numbers, erin? they were disappointing as well. the home number is lower. pulte and the big names, big names of four or five or 6% declines. there's pulte. biggest homebuilder in the country. move down there. there's also comments from other companies out today weighing on the market. look at the coal stock, weak here. massey talked about cutting coal demand, that end demand for coal remained on the weak side. massey is dragging down the coal stocks. if you look at the banks over in europe, all weak. particularly the irish banks. there's big plan over in ireland to create a bad bank plan. concerns that might be delayed. a lot happened with aig about splitting it up. concerns about might try to do that. the banks in europe are on the weak side. good year tire did talk about their expecting the markets to recover, yet they said north american operating income would be lower in the fourth quarter versus the third quarter.

that's hurt that stock. finally, a little bit of good news. vitamin shoppe, ipos have had a tough time. priced at 17. look at that. trading at 19.63. tradertalk.cnbc.com for more. mike, still having a tough time at the nasdaq? >> the nasdaq is still negative. we did see a drop a tiny bit lower when the housing number came out. trading down 19 points right now. how poetic is this? waiting for the nasa rocket to lift off? the apollo landed in hot water maybe. i'm talking about the apollo group that owns the university of phoenix. another higher education institution, if you will. down about 15% right now. the company disclosing that it is the subject of an informal s.e.c. investigation regarding revenue recognition practices. analysts are downgrading the stock as well. yesterday it was daidu's turn in the barrel.

in bio pharma, ceflon beat the street on the bottom line. missed on the top line. it said it's still going to make it on eps and stock is up 2%. sharon, i don't think the nasdaq needs a barrel but it could use a little squirt of oil. over to you. >> we're looking here at new home sales and mortgage applications and weak data on both points. influencing, believe it or not, energy prices. we are paying very close attention in this market to economic data. it has even some of those long-term bulls wavering here. oil prices look poised for downside risk here. even though we are hov verge somewhere near $79 a barrel. a week ago we were at $82 a barrel. now it looks like $75 a barrel will be support where it was resistance a week ago. keep in mind as well the downside risk to that $75 oil are the fact that we did have goldman sachs lowering the forecast for gdp growth for the third quarter. yet the uk, gdp number out there week, consumer confidence, all

of that. keep in mind as well, inventory report comes out at 10:30 and the expectation that we could see a decline in gasoline supplies, bigger than expected, that could send prices higher. mark and erin, back to you. >> thank you very much. two other big stories this morning, jim goldman following the alleged link between former amd ceo and galleon trader case. mary thompson is on capitol hill ahead of ken feinberg's testimony there. start off with you, jim. >> good morning to you. talked about an impeccable shors. hector ruiz is the unnamed amd expectative who passed along confidential information about a billion dollar investment in his company to galleon defendant danielle. prosecutors hasn't charged ruiz with anything or formally identified him in this case. the fed reportedly says he didn't profit from any of these tips. he stepped down last year unrelated to this case. no comment from ruiz.

amd says it is unaware of any illegal activity by it any of its executives. we have more next hour. now for more on the pay czar, mary thompson is on capitol hill. >> thank you, jim. in his prepared remarks feinberg tells congress that his powers shouldn't extend beyond the seven companies he overseas. last week, feinberg cut total compensation for those top executives at those firms in half. feinberg telling congress he's now working on their pay plans for next year and on pay guidelines for the next layer of top executives at those seven firms. testimony starts at 11:00. look for congress to question feinberg about today's report in the "wall street journal" that says, while he was cutting total compensations for these 136 exec tys, he actually raised their base salaries by an average of 14%. mark, back to you. >> thank you very much, mary thompson. in almost a month since bank of america's ceo ken lewis announced he's out of here.

no successor has been named yet. on air editor charlie gasgaspar has new developments on the board selection time line and the likely kaebcandidates. back for a second round of "squawk on the street" this morning. >> i love you guys. >> charles, who are the candidates? who do you think it's going to be? >> let's just go through a couple of things. sources close to b of a are telling me this. board announced to the ceo no earlier than next week. they established an unofficial two-week time frame for this selection. when i say unofficial, if it goes longer, don't blame them. they want to get this done in the next two weeks. it will be no earlier than next week. from what i understand, these are sources close to the board, even though they're looking outside, i reported on your show about a week ago that bop diamond, the head of dark case is out. larry fink doesn't want the job. they're having a hard time getting outside candidates. and from the beginning, it's always been that the internal candidates, the people that are,

you know, still at the firm, that they are the preferred candidates. and the two names i hear likely is brian monahan and brian curl, head of strategy. a couple weeks ago i had curl, if i was to bet, he would be the lead. i think it's 50/50 between either of them right now. i hear the internal candidates are the lead candidates, sally crawcheck is still very much a long shot, from what i understand. it's really between those guys. anything can happen. there is a big investor. i think the biggest investor out there in b of a stock, said he likes sally. so anything can happen. i can tell you internally the deliberation right now is -- it's internal candidates being favored. it's a time frame of the next two weeks. and it's those two gentlemen, curl and moynihan and from what i understand, it's a toss-up between them. how do you like the horse races? one of the things about this job, doing the ceo horse races.

it would be nice if they got it done as soon as possible so i can move on to the next story. >> charles, thank you very much. i know that jason, our producer harks gotten so angry with iraq he doesn't want to put it up, but i do just want to put it up to note that the reason he is angry is because it had been delayed again to 11:00 eastern which means it's going to be on "the call." there is a 20% chance of weather violation though at that time. >> a what? >> a weather violation. that would adverse weather that would cause it to -- they call that a weather violation. jason still won't put the picture up because he's so mad. up next, too big to fail? should big bank bail each other out? that's the ticket. a street fight next. and later, exclusive interview can calpers ceo. and brian shactman following the

stimulus dollars all of the way to west union, south carolina. hello, brian. >> hey, erin. no delays here. things are humming. even though this assembly line is fully automated, they added 100 jobs in the last six weeks. that has to do with the uptick in demand from the stem louse package. we'll have the company and their story later on "squawk on the street."

take a look at shares of

addus home care. it was born today. at least in terms of being a publicly traded company. it's down. it actually priced a $10 a share for the ipo. right now at $9.26. they offer services to the elderly and home-bound in the health care. obviously trying to take advantage of the focus of health care. the stock is below the offer price. let's get some other stocks on the move. by the way, market, recovering nicely. almost a straight flat line. let's check back in with bertha. >> i want to look at stocks bucking the trend and moving higher this morning. norfolk southern saying the economy has bottomed. posting third quarter results three cents ahead of estimates on in-line revenues. harris communications earnings topped. the government communication radio maker is boosting guidance on better than expected orders for tactical radios. and dreamworks animation sales higher than expected thanks to strong dvd sales of "monsters

versus aliens" and they say shrek the musical will be shutting down on broadway in january. upcoming fourth quarter release "monsters versus aliens, mu tant pumpkins from space." i don't know, i'm a purist and go tort big pumpkin and charlie brown gang. >> thank you. troubled consumer finance company gmac asking for nearly $3 billion more of our money. that's on top of the $12 billion of our money they already v. had. this as representative barney frank proposes legislation that would regulate banks that are deemed too big to fail. weighing in, keith boykin, editor of the daily voice as well as a cnbc conn contributor, former vp of the dallas federal reserve and senior fellow at the kato institute. you know something, i'm going to ask a fundamental question here before we go any farther.

what is the daily voice? >> online news site that actually tracks public opinion and different news stories. dailyvoice.com. >> do you have any ties to the communist party? >> no, none whatsoever. i'm not a economist, joe mcor think. i never thought about that. >> sounds -- anyway, jerry, why are we bailing out gmac? can't we let them go, at least? >> well, yes. i mean, of course it's pure politics. gmac is pure politics. and it's all part of the kind of corporatist drift that we're in to where the government supports big business. and that's -- it's necessary if you're going to bail out the auto industry. >> well, i don't think it's pure politics. i think it's a question of we have $12.5 billion invested in gmac. >> whose fault is that? >> it's the government's decision started in the previous

administration and continued in this administration. >> we continue to throw good money after bad? >> viability. if you think it's a viable company and viable operation, then you've got to make sure you continue to support it. if you don't, you cut off when you think it's not. obviously the administration is making that decision right now. >> yesterday, though, keith, they did better than chrysler. what was it, 40%, 44% of gm vehicles registered as average or above average on quality by consumer reports. that's pretty -- that's pretty terrible. >> well, i don't understand what the question is. >> i mean, i'm saying you're saying do you think it's a viable company and i'm saying, well, sometimes where the rubber meets the road, 40% of your cars are average, maybe we need to take a harder look. >> well, yeah, i think that's what the government did with the task force, the auto task force, designed to look at how to streamline gm's operation. again, we're not talking agent gm. we're talking agent gmac, financing arm of gm.

the government has to take a wide expansive look at these things. the larger question is about the need for financial regulation. the reason we have the issue about too big to fail is because these companies that are out there that are taking these risks, actually don't have any accountability when they make the risk. who ends up paying the price tag is the american taxpayer. >> you know, it occurs to me at this point to to at least say that i do have a bit of an interest here in that gmac holds two mortgages of mine. >> and you own gm vehicles. >> well, that's a different -- >> bought in cash. didn't finance with gmac. >> cash on the vehicles. they do have two mortgages on my primary home and my vacation home. there might be some bad feeling there. anyway, ger gry, will it really hurt the u.s. economy if gmac goes away? >> no but if gmac goes away,

it's problematic for gm because of financing. the bigger question is the tact that barney frank has taken has already been tried and fail, and that is that somehow regulators can control these wbohemoth institutions. barney frank is part of the problem and would never allow it. when you rein them in is during expansive times. can you imagine the hapless regulator who tell these companies to curtail their end willing to the subprime market a couple years ago. barney frank would have been all over their case. >> i don't understand how you say they're too complex to regulate. you're saying because we don't understand them that well we shouldn't be involved in anything to make them better? there are are some real issues here. we need to have higher capital, reer is requirements, clawback provisions so that the people in positions of authority don't take unnecessary risk. we need to actually make sure that we incentivize long-term

profit, not just short-term gain. >> the managers of these companies didn't even know what the assets were. remember the robert ruben moment when he was at citi bank and he tried to have someone explain to him what he's assets, and he couldn't understand it. it was all over at that moment, the idea that you can regulate this. >> all right. thank you, gentlemen. keith, gerry. oh, yesterday during an interview with bly masters of jpmorgan, out going chair, and one of the individuals widely kred didded with inventing credit derivatives, we characterize those instruments as, quote, weapons of financial mass destruction. which we thought was pretty catchy. but we did not mean to imply that all such securities are dru destructive and i don't think we do. or masters in any way personally

responsible for their misuse, i don't believe we did that, either. but, apparently someone got a little upset, so we're make that clear. clearer still. >> clearer than clearer. still to come, little known company in south carolina slated to be one of the biggest beneficiaries of the government's stimulus. we're going to go inside the operations of the this smart grid manufacturer. brian shactman is on the scene. and later, your retirement dollars. should a public pension fund be gambling with your financial future? calpers lost a third of the value over the past two years. why? and what's next. the cio with us, cluesively.

learning more ability where the 7 $7 billion stimulus package being spent. this week, we focus on the smart grid. hello, brian. >> hey, president obama committed $3.7 billion of smart grid technology, networks to software to these so-called smart meters made right here. basically allows houses to talk to utilities without mr. meter reader and eventually save you money. this plant, fully automated, ramping up production. they added 100 people in terms of new staffing in just the last six weeks. this is just a handle the uptick in demand after the president announced exactly where the money will be spent in this space. >> we expect to see a significant increase in demand in the next 6 to 18 months as a result of the stimulus package.

we expect that to accelerate some of our existing contract active ty. we also expect that to impact some of the potential pipeline business that we are looking atlanta this moment in time. >> so how will the money trickle down? three of itron's current clients secured $304 million stimulus money, all of which has to be matched. that could translate into millions of these grids from this plant going out the door in the next basically year and a half. now, two of these companies, dte energy and centerpoint are publicly traded as well. in terms of investment opportunity, huge range in this space. companies cisco, and parent company ge,echelon and eaten, they don't all make the meters but there's a lot of opportunity and the grid and the software as well. well, in terms of itron specifically, all you have to do is wait until after the bell. they report earnings. expecting 52 cents a share, consensus, on $400 million in revenue. and in terms of knowing more, go

to cnbc come and we have a lot more on the entire space and itron specifically. back to you. breaking energy news on the other side of the break. weekly oil inventories coming your way with sharon epperson.

i'm share epperson at the nymex. oil prices are coming off by more than a dollar here, approaching $78 a barrel. we have seen a build in crude supplies of 800,000 barrels. a build in crude supplies of $800,000 barrels. less than expected. but we did see a build in gasoline supplies, where a draw was expected. a build in gasoline supplies of 1.7 million barrels. and a decline in distillate fuel supplies of 2.1 million barrels. greater than expected decline in distillate fuel supplies of 2.1 million barrels. we are seeing oil prices come off as a result of these numbers, down about $1.25 right

now at $78.32. mark, back to you. >> sharon, don't go anywhere. stay there. we got more on the ei -- you're over here. eia number. what's next? mark hanson, what's next? >> well, mark, this is not a very good report. big build in crude supplies is not what we were expecting. still seeing gasoline demand not as robust as we need it to be. distillates is good but demand is 10% off from last year. big drop, not healthy. >> doesn't that mean that prices are going to come down? >> i think it should. >> why is that bad news? >> well, i'd like to see -- >> that's bad news. >> i'd like to see more robust. that's true. i would like to see more robust economic activity to support this. i would like prices to come off. energy space is good. we're still seeing it subdued. >> what do you make of some of the other areas, home heating oil is up 25% over the past month. obviously right in the center of this issue of impacting consumer spending. >> prices are high.

you know, we also have natural gas, another area where there's record storage, running out of storage space for gas. hopefully that will be down where we need these prices to remain low. discretionary income should not be going to energy costs at this point in time. >> i think consumers are going to be very surprise preponderance. when you look at consumer surprise and joblessness and then these higher energy costs. may not understand that a lot of it has to do with what has happened to the dollar. it doesn't have anything to do with supply/demand fundamentals for heating oil or for gasoline. now seeing consumers maying more at the pump right now than paying a year ago. >> yeah. last i looked it was around 240 a gallon in my neck of the woods. you know, i'm not buying this. i'm not buying this argument that it would be evidence of economic strength. i mean, the consumer is what drives the u.s. economy, 70%. and the consumer will spend more on other things if gas doesn't cost much.

>> that's right. but what we're also seeing is that the demand numbers for things also outside gasoline, like jet fuel demand is way off last year. other items that we're seeing big weakness in, which it would be nice to see this come back to indicate healthy travel patterns and rebound in spending that maybe would extend to -- >> that is flying all over the globe. she's doing her part. >> that's right. >> that's good. >> leaving a big old footprint. >> a lot of what's happened to oil prices in the last month is the 20% run as we've seen has been what we're talking about, predicated on the dollar and on equities as well. if we starts to focus more on what is happening on a fundamental basis, we will start to see prices come off. a lot of folks are waiting for this economic recovery to see signs of it. we're not seeing it. we're not seeing it if we do get what goldman sachs, things for gdp data tomorrow. we're not seeing it in the uk. we're not seeing with consumer confidence. we didn't see it today with new home sales. there's really no economic reason for us to think that the recovery is happening right away. we're going to see demand pick

up right away. >> one fundamentals are you talking about? >> i'm talking about the fact that supplies right now of gasoline, heating oil, crude supplies, they're all well above where they were a year ago and there's not the demand for it. >> why are prices up? it gets to that point. >> i guess it's a dollar. >> it is the dollar. >> it is the dollar. it is the stock stock market recovery, also. but, you know, it's largely the dollar. >> the dollar is a big one. the recovery and asset markets, major commodities, industrial metals as well, largely a part to the dollar. it's a huge part of the equation for oil because it is priced in dollars and the bulk of level demand is here in the united states. when it's priced that way, it will be a adjustment as the dollar falls. >> all righty. thank you very much. appreciate it. >> don't expect ni help. >> i guess i'm being selfish and short sighted. i want lower energy prices. >> yeah. who doesn't? it's okay. >> well, some people are sitting here -- i won't say who -- telling me that it's bad for the

economy. let's take a look at the markets and their internals. the dow right now is down 0.1%. s&p is getting hit more than half of 1%. big board internally, wow, that's almost 3-1 negative. let me check the volume. yeah, volume's 3 1/2-1 negative. and on the nasdaq, about more than 2-1 negative. >> the rocket. >> oh, the rocket. listen. >> okay, listen. oh, here it is. >> just stay tuned. this rocket will launch. >> will it, mark? >> i promise. i promise. >> yes. >> don't go anywhere. just stay right here. >> just hold your breath. >> staring at that rocket. nasa now says the rocket will go up at 11:00 a.m. >> i see some clouds in the sky. >> their credibility is not that

great with us. >> it was a weather violation. >> it looks like it has become cloudy. now, an hour or so ago it was a bright blue sky behind them. >> but there is something to consider on a weather violation, because of how the rocket goes up, right? 28 miles. >> weather violation? goes through a cloud, that's a weather violation? >> that might be, yeah. so there were too many of those, perhaps. but because it goes up 28 miles, you see you have to hit the curvature of the earth. it's not necessarily whether it's sunny there. it's the orbit path, right? see what i'm saying? it could be cloudy somewhere else pretty far away. >> you mean we're going to wait for it to not be cloudy anywhere near florida? >> maybe so. >> in october or november? >> maybe so. >> it's not going to happen. >> might be a lot of violations. >> all right. anyway, we promise that when that rocket goes up, we'll be there. >> okay. mark promises that. >> okay. in the meantime, guys, i want to bring to your attention to a few stock tons move this morning.

education enrollment is up during the recession. a lot of community colleges. true for apollo group. shares were cut at morgan stanley after the online educator took a third quarter charge for litigation and says the s.e.c. launched formal inquiry into the revenue practices. goodyear tire,third quarter results topped expectation but warning that it's going to see lower north american operating income in the fourth quarter compared to the third quarter. although it does see better business in 2010. telecom is the best performing sector this morning. qwest is higher. the company now says it expects the profits to be at the higher end of guidance. closer to $4.4 millions a it continues to cut costs. also says it's seeing quicker decision making by businesses. so maybe a little bit of a bottom there. back to you, mark. >> thank you. coming up, gambling with your retirement dollars. how calpers, america's largest pension fund, lost more than a third of its value in two years.

we're going to look at risk taking gone wrong. wnd ahave an exclusive interview with calpers chief investment officer to see what he's doing to right the ship. >> i think a lot of funds found 30% over the past two years. i will say that. plus, the galleon insider trading case spills into one of the best known tech companies in the world. we the tails straight ahead. triple play coming your way on "power lunch."

we're back. new questions today about links between former advanced microdevices ceo hector ruiz and alleged insider trading scheme. "wall street journal" reporting ruiz is the unnamed amd executive in a criminal case filed by the manhattan u.s. attorney. the executive is accused of sharing confidential information about the company with a defendant in the galleon case.

here with more on what we might expect as this case unfolds is tom, securities lawyer, managing partner. tom, ruiz is not a defendant. what is his connection here? why is he suddenly in the news? >> well, he was not named by name but in the criminal complaints against the galleon people and tirks bm guy and the others, there was an unnamed person who was passing along information from amd. so what the journal is breaking today is a story that he may have been the unnamed person passing along this inside information. >> why does he not then become a defendant? >> boy, mark, he seems like the guy who should be the defendant. he is the kind of guy -- assuming this is all true, of course. we don't know. >> right. >> but assuming this is true, this is the kind of guy that the insider trading laws are designed to stop and to prevent from sharing, you know, confidential information that he obviously has access to.

>> well, i'm sorry, back up. only a lawyer would ask this question, but i have to ask this question. he passes along information, but does not himself profit. what is he doing wrong? >> do you know that for sure, that he hasn't profited from it? >> no. i'm just saying. suppose. >> what if. >> he passed along info but didn't profit? >> well, look, let's assume he hasn't. we don't know if he has or hasn't. we don't know who the investors in galleon are. i think that would be very interesting information to know, who has got their money over there. there might be people who have incentive to pass information along to galleon. let's say he doesn't have any financial gain through something like that. he owes a fiduciary duty, he owes a duty of confidence to the company, that's very well-settled law. just alone, he has breached his duty to the company. >> what is the potential punishment? let's say he didn't profit personally but leaked the information, violated his

fiduciary duty, does he go to jail or is that just a -- >> civil, wouldn't it? >> right. is there no punishment? >> both. he could be prosecuted civilly, he can be prosecuted criminally. now, let me just say this. the fact that he hasn't been named so far -- i don't want to go too far out because we don't know what his involvement is -- doesn't necessarily tell you anything. think of all the criminal prosecutions out there. they usually start from the bottom and work their way up. keep that in mind. going to enron and worldcom, they take people lower level, get the evidence on them. present it to them and their lawyer. show them that their probably going to go to jail for a long time and get them to cough up their information and they work their way up. that's a possible scenario. >> all right. tom, thank you very much. just to know, tom has not been hired by anyone connected to this case and, as he pointed out, much of our discussion here has been along the lines of what if, not reflective of any knowledge that we have or that he has. >> it is interesting that you

can say this is such a severe and wrong thing to do and yet there really isn't necessarily significant punishment. >> it occurred to me to ask, what if you leaked the information but you haven't profited. you violated a fiduciary duty to the company but what's the penalty for that? >> sounded like it could be but might not be. it's unclear. the other thing is this stuff goes on all the time. let's just be honest. all right. getting pictures of the bay bridge in san francisco. obviously this spans the bay to and from oakland. what is -- why is this shaking? >> i'm assuming because it's a really long shot. >> i'm just hoping that's the case because you're looking at a picture of san francisco. no earthquake. >> this is not an earthquake. that's just a really, really long telephoto shot and the camera can't be held steady. >> the bridge is closed indefinitely. a metal rod brace fell on the

bridge's westbound lanes. a few cars did collide with it. hundreds of cars were stuck. there were no fatalities, thank goodness. the bridge is closed indefinitely. and just in case you're just looking here, shaking not because of earthquake. >> i used to hate going across that bridge. >> it is so beautiful. now i don't want to go across it because of the -- i don't like that bridge. straight ahead, is the nation's biggest pension fund in deep trouble? exclusive interview with the chief investment officer of calpers out of california, we'll also be speaking with the editor of reuters behind a series of the pension fund that was very critical. but first, oh, trish. >> good morning, guys. good to see you. coming up a at the top of the hour, a packed show for you. you've got ken feinberg, pay czar, testifying on capitol hill. we're going to go there live. we will have that for you. plus, yahoo! holding the first analyst meeting in three years. we will be there live. we will have the latest on that for you. wyndham worldwide out with earnings this morning.

we will talk with the company's ceo and get his take on the economy and the company. we've got lots ahead coming up at the top of the hour. but first, "squawk on the street" is back right after this break.

just about everyone has been hit hard by the downturn, no matter what mutual fund, pension fund endowment we're talking about. this morning we're turning our attention to calpers specifically, largest pension fund in the united states. we're going to speak exclusively with the chief investment officer of calpers.

but first, we want to bring in claudia parkers from reuters. they've been reporting on calpers. one thing that has stuck tout to me from the reporting, according to your reporting, claudia, they have been increasing their allocation to some of the increasing their allocation to venture capital and private equity even during the crisis. is that different than other funds? >> well, calpers has always led the way in pioneering new investments. for the last seven, eight years, they have earlier than anybody else, gone into hedge funds. what is different is that in the crisis last year when a -- everybody suffered, it's true. but then a lot of questions were raised about well, is it right for a pension fund, which is more conservative than a hedge fund. should they really be taking

these kind of rhisks because th difference is that they have huge liableties. they have to pay the pension at the end of the day and the question is whether there are reasons they've been seeking higher risks because they needed the higher returns to pay those liableties and whether or not because they are also going to be bailed out by the california taxpayers if it goes wrong, there's a moral hazard there. they are too big to fail. there is so much in downside if they lose the money. we need to assess what is the right level of risk for a pension fund like this to be taking. >> so, the california taxpayer would make them owe? that's kind of a moral hazard, isn't it? >> it looks like it. under california law, there are these large liableties. there are 1.6 million people in this pension fund, nearly

500,000 of them are already getting pensions. people get a percentage of their final salary and that can vary depending on how long they've worked there. these are large and they're growing with people living longer. >> okay. >> they work for public sectors, so california's going to pay them out at the end of the day. people like the state treasurer said the system needs reform. he said if they don't reform the pension system, california is going to go bankrupt. >> all right. let's get to calpers side of the story. we want to bring in the chief investment officer joe deere. thank you very much for being with us. there's concern out there, that's a big loss although everybody's lost money. how do you respond to the reuters report? >> these are interesting questions. one of the things that's really important for calpers and people who watch us to understand is

that we're a long time investor. that gives us the comfort of knowing that we can ride the downturns. the question is whether or not in recent decisions, we increase the risk of the portfolio because we need to ensure the system. that characterization of our strategy is wrong. what did we do after the crisis? our boards looked at the allocation, made adjustments and affirmed our belief in the long-term returns we can expect. >> so you were not pressing your bets to try and make it back in a hurry? >> no. one of the questions is how much private equity should a portfolio like calpers has. we had an allocation of 10% before the change in june this year. but our actual commitment was

almost 13%. the increase looks gigantic, but in concrete terms of where the portfolio was, it's a relatively modest increase. this helps us avoid having to seld private equity discounts. it's an important component of our program because we believe over the long-term, we'll get 3% more than we get from investing in public equities. we need to assure that we need a return target. >> one thing that claudia was mentioning, calpers is not backed by the pension guarantee

system in this country because it's not public. that is if you have problems meeting obligations to those people you cover, the california taxpayer would have to fill the holes. does that make it different for you and perhaps give some fairness to that argument about moral hazard? >> well, all pension funds for the public sector have the nature of a public taxpayer back-up for what we do. again, if you have a long horizon and you have a reasonable return target and a globally diversified portfolio, you'll be able to make, in our case, the return we need. about 75 cents of every retirement dollar comes from investment earnings. does the ultimate taxpayer guarantee mean we take excessive risk? no. our track record shows it's not the case. we've been around for 77 years. we've been through good markets. we've been through tough markets and over the past 20 years, our return is in excess of the target. there's no reason to believe that capital markets won't afford us that kind of return going forward. >> joe dear, thank you so much. >> happy to be here. what we're watching for the rest to have trading day on the other side of the commercial

break. >> that means we're about 90 minutes into the trading session and about 90 seconds away from six in 60 seconds. we'll be back.

time for your six in 60. you get there, i get three. all god's children get three. top gainer on the s&p. fostering a third quarter profit

in reverse split. by the way, boy, do they work. dreamworks animation, seriously. bmo capital upgrading to outperform, posting a 48% decline, but beating the street. monsters versus aliens dvd starring me and steve liesman. amr saying it will cut up to 700 maintenance and engineering jobs. vitamin shop opening at 1940. addus home care, this is the bad one. it opened at 10. not so hot. harris corp. hitting a new high. mark, i've got bad news. the s&p 500 haspp