good morning. ready to respond. eurozone finance ministers green light a $40 billion emergency aid package for greece. winning streak. stocks strive for their seventh straight weekly gain. and going for green. phil mickelson claiming his third masters jacket. master phil, they're saying, as "squawk box" begins right now. good morning, everybody, and welcome to "squawk box" here on cnbc. i'm becky quick along with bill kernen. carl is on assignment today. eurozone finance ministers approving a $40 billion

emergency aid package for greece. the plan would allow the debt-laden nation to borrow from eurozone governments and from the imf at significantly below market rates. but so far, athens has not requested the plan be activated. the imf is holding talks with greek, eu and european central bank officials in brussels today. but because of all this, it has calmed the markets a little. the euro rising to the highest levels in nearly a month on the news. the third day in a row that the euro is up against the dollar. we'll be heading to brussels and to athens for live reports. >> and earnings season officially opens today. kind of. dow component alcoa said to report after the bell. intel, google, general electric and jpmorgan chase. thompson reuter s predicts that combined profit for s&p 500 companies will rise 38.6 percent first from a year ago. preannouncements indicate more positive outlook than average and fewer negative ones. we've had big moves in the averages and people say you get two straight months up, as much

as we've been up, that there is some good news. >> -- figures? can you guys roll earnings central again? it's a fancy new -- look. look at that. >> whoa. >> and did you see what's behind your shoulder? >> no. >> a brand-new set for earnings central. this big blue thing that's back there. >> who is manning that? >> i think we are. >> some very confident -- >> we're not. are we? again? >> i think we are. i don't know. nobody's -- we've both been out for a week. >> if carl is not part of it. >> he's on assignment. >> he's on assignment. because it's not a team. >> that's a fancy new set. good to see you. you were out last week. >> good to see you. it's kind of weird to come back after being out for a week. >> a little bit weird. >> it's good to try and get back into things. >> the market waited to go over 11,000. >> till right before our imminent return. it pulled back just in anticipation. >> bond yields were up at 4%. >> on monday.

>> for awhile. did you see over the weekend the different forecasts that these experts are making for bonds? >> yes. >> 3.25%. >> and the other from morgan stanley. >> 5.5%. that's amazing. >> how do you look at this as being such completely opposite? >> depends on what you think about the economy. >> and how muchdy mand there's going to be for still buying u.s. -- >> someone's going to be really wrong. >> right. >> which is what we like. you know -- >> you can declare a winner. >> i respect them for making those. but i don't know what i think. what do you think? 3.25%, 5.5%? >> probably 5.5%. maybe 4.5%. rates are going higher, i think. >> i think is it possible for the economy to be stronger than people think, and for rates to stay at 3.25%? >> i don't think so. i think the rates are going higher for two reasons. but the economy stronger is the main argument. >> right, the economy being stronger. i do, too. but i still think that everybody, the consensus is that rates are going to 5%.

>> yes. >> because of the -- did you see the article that quoted bill gross of "the new york times" i think on saturday, that said that the era of cheap credit is over. >> right. and for 30 years -- for 30 years we've been living our lives expecting the credit prices would continue to come down. >> right. >> and now there's only one place to go is up. which means that they'll probably go down. >> well -- >> see i'm looking for the opposite of consensus on both. stronger than expected economy, bond yields stay low. but i don't know. >> i don't know. we'll see what happens. there will be a winner and a loser, at least it's very clear. also swiss banking giant ubs posting its highest pre-tax profits since the start of the credit crisis. results were most likely driven by exceptionally high fixed income revenue. the company said money withdrawals by rich clients shrunk to a third of the previous quarter as the bank rebuilds its image. >> and the government's bailout for the financial system, looking not too bad. expected to cost just $89

billion. that's much lower than earlier projections. "the wall street journal" citing treasury officials. the figure doesn't include losses at fannie mae and freddie mac. well -- >> i thought it includes some of the injections that we put into it, though. >> but it's projected to be $$that's $370 billion through $320. officials forecast a profit of $8 billion from the treasury's investment of $245 billion in banks. and last april the cbo estimated the net taxpayer cost for the government's rescue program would be $356 billion. >> this is not just for the bailout of wall street companies and for the auto companies, it includes t.a.r.p. i mean, this is a pretty significant one. it included a lot of the money that was given to homeowners that went through it. so a much smaller price tag than we thought just a year ago. >> amazing. although we've got a lot of other things on the horizon. we save a little here. >> if rates go higher. >> we still have to worry. >> citigroup's ceo vikram pandit is aiming to cut the bank's assets by 40% from the peak.

he's talking today and he said the citi strategy is solely banking focused. he's also calling for more derivatives, trades transparency and arguing shadow banking has to be regulated. these are comments he's just making this morning overseas. he says the entire return to the supermarket approach, that is not going to happen anymore. you have to wonder if he is positioning himself for what we're hearing right now about financial regulatory reform, taking place on the capitol, where in some cases some of the liberal democrats say they'd like to really assert themselves, and put very strong limits, including the volcker rule and stronger on what banks can actually do. aig's derivatives unit has reportedly unwound most of the soured mortgage trades of goldman sachs left over after it was bailed out by the government in 2008. the "journal" says the parties tore up $3 billion and credit the contracts at market prices. goldman kept $1.5 billion in cash collateral. aig realized that amount as a loss just last year.

>> i don't have time to read this. i've got lots of computerisms. who sits here and who does this things? >> i think andrew was here. >> sorkin? >> yeah, andrew sorkin was here. >> i can't find anything. okay, let's check on the markets this morning. fred, i need news here, dude. news. news on reuters. news. news. all right. here's the futures. up 1.20. on the s&p. versus down one. going to be another positive session to start out. 20 points will put us above 11,000 and all will be right in the world. we come back and we go up. a lot of people have made the point that we went through up above 10,000, below 10,000, that many, many times. 10,000, but 11,000. once we got through that, it was really significant. so 11,000 will be more important than 10,000 and we're very close. so if we open up as the futures are indicating and we're going to get a lot of data from the,

we told you from things like intel, google, alcoa, general electric on friday. >> we also get some economic data this week. >> you do? >> international trade data. retail sales, industrial production. >> give me that thing, sarah palin written all over your -- it's written on your cheat sheets. >> they're not on my hand. >> in oil. oil was, i watched that, disturbed by some of that trading last week. >> yeah. >> up to 87, back to 85. okay here's the ten-year we were talking about. which will it be, 3.25 or 5.5? it's at 3.9 this morning. the dollar, a lot of people have been surprised by also surprised, china coming around on their -- why? why they being nice now? >> i don't know. they don't want to get pushed. so the obama administration is trying very hard to not make it look like they're pushing them but they're all meeting today for this nuclear treaty. >> they're going to hu? >> yes. >> who are they going to talk to? president hu? >> they're going to talk to the

president. geithner is going to be stopping in, the treasury secretary >> when? >> 2:30 this afternoon. >> they're not talking to when, they're talking to hu. >> we have who's on first, what's on second, i don't know is on third. >> the point guy named wen and a guy named hu. >> why? >> did we look at gold? >> no. >> do you want to? >> sure. gold up by just $1.30. but sitting at 1,163.20 an ounce. right now let's get to our monday morning strategy session. joining us this morning is allen gale of ridgeworth capital management and robert stein of first trust advisers. gentlemen, if i could have you weigh in, first of all, where do you think treasury rates are going to be a year from now? are we talking above 5%? talking closer to 3.25%? allen, why don't i start off with you? >> good morning, thank you for having me on. i would say over the course of the next 12 months we do expect yields to break out to the upside after being range bound

for a fairly extended period. so by this time next year we are looking for rates on the ten-year to be at least in the 4.5% to 5% range. >> and rob, would you agree with that? i realize this isn't necessarily the only thing you guys are following but it is something that works into everyone's strategies, and where they think the markets are headed. >> becky, i hate to be boring, alan and i didn't talk about this before, but i think rates on the ten-year will be about 50 to 100 basis points above where they are now. so i hate to come out with complete agreement, but that's -- >> i agree with you, too. joe and i were just talking. i don't know if you heard that conversation. we were talking about the debate that's being struck by some people on the street who have very different numbers. morgan stanley on one hand, and goldman on the other. is there some way that you could imagine rates might actually go lower, though? what would it take to keep rates at this level even with the stronger economy? let's say the unemployment rate continues to be above 9%, would

that change your mind, ron? >> well, if the unemployment -- if it's what we expect, 4%, 4.5% this year, maybe a little acceleration next year, then even if the unemployment rate were to stay up, number one that would be unlikely, even if it were i would say yields would be likely to go up, as productivity goes up. that's the only way you can have fast growth at a high unemployment rate. and in that case, the demand for credit goes off so the yields go up, too. so i really don't see the case for it other than that where gdp comes in well below what we expect and even the consensus expects. >> alan, "the new york times" has a story about how a group of economists who declare recessions and when those recessions are over, is expected to announce today that it will say the recession is not over yet, that this is going to be a very tricky one to call. do you think it's that complicated? >> well, i think that it has been a recovery that has been

evolving very slowly and very sporadically. if you look, what we've seen so far is that businesses, after slashing very aggressively, are coming back very strong, and that's tying in to what we're thinking will be some decent first quarter earnings. >> right. >> but the consumer has been slow to participate. and if you're looking at the overall momentum in the economy, until the consumer starts to participate in a meaningful way and we start to get good job growth, then i can understand why they're delaying that call. >> alan, you expect that we'll see better than expected earnings numbers coming out? the general consensus is that we'll see double digit revenue growth for the first time in a couple of years. >> well, it is. and we're looking for some good numbers in -- for the first quarter. i think what's important, though, is that investors are looking at -- at basically the end of the easy comps. and so forward guidance from companies is going to be really, really critical. a lot of the estimates on the

numbers coming out this week, the whisper estimates have been going up. a lot of focus on sales and sales expectation. so there's a lot of optimism build in to the markets at a time whr we're reaching some fairly critical thresholds on the indexes. >> robert, last week we saw some better than expected numbers when it came to things like industrial production. also, same-store sales were better than expected. this week we'll get the government's retail numbers and we'll also get the international trade numbers and industrial production. of those numbers, you expect that we will continue to see better than expected news like we saw last week? >> that's right. we're expecting some blowout numbers this week. and that will help clarify alan's views on the consumer. we think retail sales will be up 2% in march. we think that housing starts are going to really recover strongly from the february dip that was weather related. we think industrial production will be up 1%. now part of this is weather related. part of it is easter.

part of it is gas prices going up contributing to retail sales. the biggest factor is the underlying v-shaped recovery we're experiencing right now. >> rob, alan, gentlemen, thank you very much for your time. it's good to talk to you. >> okay where are we going? washington. okay. congress returns to work following a holiday recess. meantime this weekend thousands of conservatives gathered in new orleans for the southern republican leadership conference that's widely considered to be the unofficial kickoff to the 2012 presidential race. john harwood is our chief washington correspondent. john, i saw romney won a straw poll, barely. >> by one vote of more than 1800 cast. >> and ron paul is still in there. that's a little bit bizarre. supreme court, they -- it's amazing how we know so much already. they're just ready. i guess people wait. they knew stevens was old so they got these lists already ready, john? is that it? i mean they rolled them out immediately. >> not only is he old. he's been signaling for some

time that he was planning to do this. so yes, they are ready. they went through it for sotomayor and i don't know how quickly the president's going to name his choice. but i think he wants to get this going fairly rapidly. if he follows something like the time line for sotomayor, he could hope to have confirmation sometime in late august, early september, and that would clear the decks for the start of the court term, and then you, of course, have the midterm elections. they don't want to be fighting about this in the middle of that. >> would you say that he's going to be pushed from different sides of his party to -- the progressives that feel emboldened by health care are going to want him to really put someone in who's way left of center. and then maybe others will say, listen, you don't need to do that, let's pick a mainstream one and not add to the partisan bickering? >> yes. although i think it's shades of gray.

you're talking about somebody who fundamentally is going to be a liberal who the president places on the court to replace -- >> which is fair, because he's replacing the most liberal member of the court. >> right. now, some of the names that have been floated are on the moderate side of the liberal spectrum. probably the most liberal, the one who would attract the most heat from conservatives is diane wood. but merit garland, alana kagan. the solicitor general. merit garland is on the appeals court now. both of those would be relatively well received by conservatives. but i do think, joe, we're going to have a fight no matter who this is. and the only question is how intense and pitched that fight becomes. >> would you see the president not nominating garland just because he, you know, orrin hatch, he's close to some conservatives? would that mean that the president would just, i'm not going to do that? i'm not going to give conservatives anyone they could potentially like? >> no, i don't think so. i mean he's got to weigh a whole

bunch of stuff. he's got a heavy legislative agenda in washington. you want minimal friction while being true to yourself, and true to, you know, what your vision of the court is. and this is a president who, of course, used to teach law himself. is an expert on constitutional law, and so he's got a pretty well-formulated idea in his head of the qualities that he wants in you ajustice. he keeps reiterating the fact that he wants somebody who has feet on the ground, who understands the struggles of ordinary families. >> that was another shot at least for his party that unpopular decision that the supreme court handed down a couple of months ago. that's another swipe at those guys for -- have >> yes. >> for corporate pourer versus family power. that's sort of the backdrop of that point. >> john, we have journalists on, we have dana milbank on. when he's on, i'm told, that the president's popularity has

surged. soared since health care passage. but then i don't know. is that true? isn't the latest gallup was a new low, wasn't it? >> he was at 45 in the three-day average of gallup last week. look, he has not moved up appreciably. he got an immediate blip in a day or two after health care passed. but that has not been sustained. it was interesting. i was talking with a column i wrote in "the new york times" today with a guy who studies polling at the university of texas, who said, there's so much information out there right now, that once a politician is measured by the electorate, as barack obama has been since he's been president for a year, and almost a year and a half, their approval rating isn't going to bounce around that much. so i don't think barack obama can expect to have a big surge in his popularity. he's got to kind of fight through the situation they're in. >> what should we read into that about the efforts to sell health care to the people?

now that it's passed. if he's not going up in approval, can you say that the reception of this health care legislation is going up? or is that stuck, too, down at more people not liking it than like it? >> i think it's more likely to be stuck. now, ultimately, the hope for democrats, and for the president, is that the actual experience with the legislation. forget the sales job, but once elements of that kick in, especially the more popular ones, letting kids stay on their parents' insurance policies until they're 26, and preventing insurance companies from kicking people off when they hit a lifetime max, those kinds of things, they hope, will make -- fuel acceptance of this legislation. >> that's one of the more popular aspects, though, john, kids can stay on until they're 26? >> absolutely. >> that one drives me crazy. i understand pre-existing conditions. but staying on until you are 26

on your parents' -- >> judge does it drive you crazy? >> because i think at some point you need to take responsibility for yourself. at what point does the kid become responsible? at 26 i can't imagine that, look, i canunder stand if you need some help from your parents from time to time. but you're still considered a child at age 26? you could be -- >> it's not that you're still considered a child. it's a back-door way of expanding coverage for a lot of young adults who, unlike you and me, don't have good health insurance at the places where they work. and it's simply another means f of -- i don't think they're pretending that anybody is a child when they're 26. >> when i've asked politicians about this, they say it's because there are some kids who are not able to get their own insurance because of pre-existing conditions. but this legislation takes care of pre-existing conditions. >> yes. >> would seem to cancel out that argument. >> but it doesn't cost a lot either, john. it's not that expensive. >> no, because 25-year-olds generally speaking are fairly healthy, and inexpensive patients. but the key, again, is to get from the viewpoint of people who

structured this reform, is to get more people in the system, especially young healthy people, then you have real risk sharing that makes the insurance market work properly. >> i'm in favor of having younger people in it. i'm in favor of them paying for their own -- >> i understand. >> what did you make of stupak, john? >> you know, i think the guy's kind of worn out. he's taken a beating, and he's been in congress -- >> from both sides. >> i remember when he came to congress in 1992, he was part of that class that was elected with bill clinton. he's always been a bit of an odd duck in his party because he's socially conservative. and there aren't that many social conservatives in the party. health care was one of the things. very interesting, guys, you forgot because you were probably both in college at this time, but -- >> i'm older than you. >> when bart stupak ran for congress in 1992, democrats had just had what they thought was a breakthrough election in a

special election in pennsylvania, where their theme was if criminal defendants have a right to a lawyer, anybody has a right to a doctor. bart stupak ran on that theme. bill clinton ran on that theme. and now that stupak has achieved health care reform, at tremendous cost psychically and in terms of getting beat up, i think he's decided he had enough. >> to not really let people -- i don't know. i wanted him -- i wanted to see what happened in november to him. i really did. it just seems like that you're sort of going to miss out on a comeuppance there. >> oh, you wanted to stick it to him? you're disappointed? >> oh, yeah, oh, yeah. i wanted the people to. not me. >> get a few punches in? >> not me. i just wanted to see what would happen. i mean to leave and not even get -- >> he's just taking it from both sides. >> good. >> all right. >> well, look, there are plenty of punching bapgs out there. >> yeah, yeah, yeah. there will be plenty to watch in november.

all right. thank you. >> you got it. >> coming up, could be the biggest kood natured bailout ever. we'll head to athens and brussels for the latest on the global attempt to rescue greece. first a look at last week's winners and losers.

welcome back, everyone. u.s. equity futures this morning are indicated higher. right now those dow futures higher by just over 20 points above fair value. remember on friday the dow touched above 11,000 but then closed back just below 11,000 at 10,997. so this morning, if things stay on track like this, you will see the market open above 11,000. in our headlines this morning a new survey predicting the economic recovery will remain sluggish into 2011. the associated press polled leading economists and the findings indicate that jobs and home values will still stay very shaky into the next year. three quarters of those questioned say that the fed will be forced to keep interest rates near zero until at least the final quarter of this year. >> what the neck is this? >> i think we're supposed to be going here. >> all right. our developing story today, eurozone finance ministers

approving a $40 billion emergency aid package for greece. so far, though, athens hasn't requested the plan to be activated. guy johnson is supposedly in greece. can't tell from that shot. could be anywhere. but i would position myself in front of some old crumbling structures. how can you -- guy, you can't find the parthenon? anyway, first to carolina cimenti in brussels with the latest from the eu. carolina, good morning. >> good morning, joe. now, basically the idea that is planned is 30 billion euros for $40 billion coming from the eurozone countries to greece. there will also be participation by the imf but the european commission building just behind me and the european central bank and the greek government are negotiating right now with the imf to find out what their participation in this deal is going to be. could be something around 10 billion euros.

but it's still to be confirmed. now an interesting point in this deal is the interest rates. the eurozone countries are going to be using a 5% interest rate for the lower they're going to give to greece. this is much lower than what the market is giving to greece when they're buying the greek debt around 7, 7.5% interest rates in the markets. although it's much higher than what the international monetary fund is giving to its loans. and much higher than what other european countries have paid for their loans when they took imf loans last year. i'm talking about hungary and latvia for example. why is that happening? because greece is part of the eurozone. to convince germany, the largest economy in europe to participate in this rescue package, they had to go ahead with the conditions germany has put on the table, that was not giving subsidies to the loans that were going to be offered to greece. now we can argue for a long time if 5% of subsidized loans, i say

yes? because the markets are offering more than 7%. they say no, because it's higher than what the imf would offer them. as i told you, they are negotiating with the imf. how much they are going to be participating with, and greek didn't request for this package yet, they are all waiting to see what's going to happen tomorrow when greece goes back to the market to see if the spread of the greek bonds are going to go down or not, and therefore they will decide to activate this mechanism or not. just a final detail. not to hurt the no bailout clause in the european treaties, the european have decided to give bilateral loans to greece. it's going to be coordinated by the european central bank and the european commission. but the loans are going to be bilateral not to hurt the european treaty. take a look at what is the response from athens with guy johnson. >> thanks very much, indeed, carolina. i'll come on to mr. kernen and his crumbling ruins in just a

moment. let's deal with what we know. what we know is we have an aid package in place. how does that aid package get activated? well as carolina said tomorrow we've got this tch-bill auction. if that goes well it probably won't be activated. however there's a number of sticking points. first of all, germany is saying we're going to have to have a full eu summit to activate this deal. it is not automatic when greece asks for it. that is a big, big caveat. the second caveat is that the imf as carolina said is negotiating with greece today. dominique strauss-kahn, who is the head of the imf, says that greece needs to have a multiyear depression to put its fiscal house in order. the hint therefore is that the imf is going to demand even more austerity than the greeks have so far put in place. maybe the greeks don't have the stomach for that. so maybe they won't activate the plan either. either way, default is not off the table. it's off the table probably in the short-term. it's not off the table in the long-term. greece, has a huge deficit that it's got to deal with. it's got to cut its primary

deficit. we're going to see a lot of austerity. a lot of pain. and whether or not they have the chops for that, we're going to have to wait and see. a lot of people are questioning that story here today. the market reaction has been the obvious reaction. front end of the curve's gone -- >> looks like we just lost our shot with guy, who again is standing by in athens. but as he was mentioning, there are some more details, and the devil may be in the details when it comes to the deal with europe. we was just talking about the market reaction today. and the market reaction has been exactly what you would expect. stronger movement both for the financial markets and for the euro, which is up right now about its highest level in a month because of this news. as guy mentioned there are quite a few details that could get in the way. take a look at the euro/dollar chart. again, seeing the euro trading higher for three days. it did have the significant move when this news first came out. anything could happen because that package has not actually been activated. right now let's get to the new u.s. trading week ahead. brian battle of performance trust capital partners is

standing by at the cme. what's the big issue you're going to be following this week? we've got a lot of economic data coming out. you've also got earnings season kicking off. >> there's three big parts. first is what's going on in europe, because that directly impacts us. you're right the economic numbers. mostly there are so many. some of them with housing. the jobless claim number is the one that matters. >> that was surprisingly weak last week. >> yeah, you know there's a lot of noise in the numbers because of -- right because of the weather and the ken us is hiring. so it's really hard to tease it out. we've got to watch the trend over a long determine. there's no inflation so you can ignore the cpi numbers. take the number on the housing numbers. there's going to be no recovery there. the third part is earnings season. i think we're sort of set up for disappointment. everything couldn't be better for stocks. we have really sloping yield curve. we're comparing ourselves to old data when it was terrible. and everybody, you know, we fired just about everybody we could. so all the growth is going to go right to profits. so we should have easy numbers

to compare to. i think the times over the weekend had a great graph with prices going higher and volumes getting smaller. so we just seem to be inching higher. you know you could see it in the rallies, up 30, up 40, up 60, just inching our way higher. that might persist. because the goldilocks economic environment is good with low rates and easy comparisons. i'd like to go back to greece. that is a really, really big story and a great comparison for the u.s. what we have an economic reality facing political will. and it looks like the politicians in europe blinked. so far we're going to find out how it turns out. the same scenario could happen here in the states if you have a major state like nevada or arizona, say oh, wow we spent all our money, we're out of money, we can't pay. there's going to be a lot of political will to save them. just like it is in europe. so the lesson that's learned over there might be transferred to us. the greeks have behaved badly. they lied about their finances. they really have spent more

money than they have, and they're going to get a bailout it looks like. >> but they're probably not going to get off scot free. the rates being offered are below market rates but higher than the normal imf funds out there. it will come with some austerity move or i guess they're not going to get it, correct? >> right, exactly. any time you take money from the imf they demand that you shrink your economy. the imf tends to have it -- makes it really hard to take the money. you have to take it because you're desperate. the greeks are going to force the eu to lend them money. i think germany and france are trying to protect german and french financial institutions. that's what they're trying to do. i really don't know how much they're worked up about greece. i contend maybe that the greek -- the germans and the french should just give that $60 billion to the french banks and tell the germans -- or tell the greeks they're on their own. >> break up the eu the way it stands? it's just not you got to be good to get in? you've got to be good to stay in? >> it's in the charter. you're not supposed to have a certain amount of debt to gdp.

you're supposed to run balanced budgets. you're supposed to behave like everyone else. it's like herding cats. the eu federation is a difficult thing to keep together. i don't know if it's going to survive our lifetime. it seems difficult to do. politically, economically, lowers barriers to trade. tries to normalize taxation, makes it easier to do business in europe, but exactly the problem expected, once you have a bad actor, what do you do with them? and they're completely and utterly bending the rules to try to save the greeks from themselves. and it's going to do long-term damage. short-term it will solve the problem, kick the can down the hill. the bond markets overseas were penal identifying the greeks. the bond markets were charging 7% to lend money to greece and now they're going to get a 5% loan. that is a subsidized loan, i don't care how you cut it. if the markets were allowed to affect what they do, which is charge greece higher and higher rates for their behavior we would have had a different resolution. the political will is going to trump the economic reality in the short-term.

and that's where the measurement tends to be in the short-term. >> we've seen an awful lot of that over the past couple of years around the years. back to the low volatility. why do you think there is such low volatility right now, such low volume? and what do you think would change that? >> a lot of the volume number is because there's a lot of professional money out. we've had a lot of leverage in the system, a lot of money gambling on stocks -- betting the stocks are going to go higher. a lot of that volume was professional and leverage. leverage is has been sucked out of the system. has leverage has been sucked out of the system that's going to take some of the volume out. i'm afraid that with the smaller vom umass there's a chunk at every card game, if you don't know who it is it might be you. i'm afraid the music might end here and we're going to have a correction. seems like we're overdue. but that's a longer-term answer. you know, earnings season is going to be good. we could chop higher. we're definitely going to go over 11,000. longer-term we're all going to say okay, then what?

i think we've got a little correction coming and volumes speak to that. it just might set us up for another leg up. we definitely have a correction coming here. probably not in the next two weeks because financials are going to do well and technology is going to do well. >> this morning it looks like the dow will open above 11,000 if the futures stay where they are right now. great talking to you. >> thank you. >> we will have more this morning's top storiestories. and then why phil mickelson's masters win means $1 million in free drivers for some of this fans. the details from the ceo of golf smith in the next half hour. stick around, "squawk box" will be right back.

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busy week ahead on the economic front today. the treasury releases its monthly statement on the federal budget. tomorrow the trade deficit and import/export prices. wednesday, watch for the cpi, and retail sales. also the fed's beige book. thursday, jobless claims. and friday, the commerce department reports on housing starts, and building permits. >> also, china's imports outpacing its exports last month. that is the first time that that has happened in six years. trade deficit could help china make its currency case as the country is facing some global pressure to revalue the yuan, because again facing that trade deficit for the first time in six years gives them a little bit of an argument for their case. >> right. in other global news, standard & poor's is warning that violent protests in bangkok during the weekend could fuel further political instability in thailand. fitch ratings and thailand's central bank governor also expressing worry that the country's sovereign debt, the rating there, could be at risk

from the growing political turmoil. >> all right. if you've got any comments or questions about anything we've talked about here this morning on "squawk," e-mail us, we'd love to hear from you our address is squawk@cnbc.com. >> love, strong. >> anyway, coming up, president obama prepares to hold the largest gathering of world leaders in washington since 1945. when the united nations was formed. plus, phil mickelson won the masters. plenty of golf fans also looking to be big winners this morning, though, too. the $1 million details straight ahead. 

time now for a check on the

news outside the world of business, i'm monica novotny over at msnbc. later today, president obama will lead the largest gathering of world leaders in washington since the conference that forred the united nations back in 1945. today's focus, removing the threat of a nuclear attack by terrorists, and making sure countries secure their nuclear material. investigators say mechanical problems did not cause the crash that left polish president lech kaczynski and dozens of top political and military leaders dead in western russia. now, there will be an inquiry as to why the pilot did not heed the advice of air traffic controllers who told him not to attempt a landing in dense fog. finally, tina fey wasn't just making news at the box office this weekend, she stayed true to her tv roots appearing on "snl" as sarah palin. fey, who nails the impersonation hosted the sarah palin network, with shows like dateline: to catch a lee very johnson.

okay. we're in the chairs. so, matt made you watch the masters? >> i did watch the masters. >> ratings, we don't know yet, but already on thursday and friday -- >> phenomenal. >> given that what happened yesterday, i have a little bit of a problem with the "journal," which says phil holds on to win the masters. he started the day a stroke a s

behind and as far as i could tell at 18 he was still extending his lead. >> at the end -- like let's say the back half, okay. there were a couple of times where you thought, oh, my gosh, this is fantastic, it's over. then the last couple of holes, maybe he has a chance. westwood has a chance. >> i think the "usa today" had it, "he seized the day." on 12 when he hit the -- that might have been even more important. >> how about 13? >> 13 was great but on 12 when he hit that. he even referenced when he sunk that putt on 12 that's where he thought he picked it up. billy payne, chairman of it. you know it's been less than two months since i've played -- >> with him. >> three rounds with phil. and he -- just like you would think. nicest guy. but as i said, this man, he's an animal. he's about 6'3". you can't tell how big he is. but he did -- actually, we both did things that the other person

thought was not humanly possible within the ropes. >> in golf. >> he did things that were good that were not -- like 240-yard iron shots out of deep, wet rough at spyglass that he put this far from the -- i did things where he actually commented he had never seen things on a golf course -- >> that bad? >> bad is a nasty word. just things he had never seen people do things like -- he said, i might not have done it that way. that's a little different. >> he's such a nice guy. it must be really stinging even words like that coming from him. >> he's very sass car particurc. >> of all the story lines that played out -- i heard somebody talking about it. so many story lines from tiger's return to this entire situation to lee westwood -- tom watson at the beginning showing very strong leading the first day afterwards. this is the story line -- >> freddie couples.

>> this is the one people wanted to see. >> i have one of the belly putters like preddee and my stroke -- his worse stroke is my best stroke. nobody played better than couples at 50. he was right around the hole. and then you had the whole narrative of the -- you see "the post" or "the daily news" tomcat tiger loses to family man, good guy phil. the only thing is a little bit almost too pat. >> good to watch and to actually see them tearing up. there are a lot of business people who had a lot riding on this. >> mickelson's masters win means golf smith will now be giving away thousands of drivers for free. the company's ceo joins us from florida this morning. good morning. tell us about this, marty. what are you doing? >> we're giving away about a million dollars in free drivers between people that purchased

callaway drivers and those that signed up for a free giveaway. had over 15,000 participate with our win with phil so we're excited about it. >> it was based on -- it was built around phil and callaway? >> yeah. callaway partnered with us at goth smith and decided if you purchased wichb the three drivers or signed off you'll get one free because it was a sweepstakes after all you would win a free driver. the win yesterday cemented it. we're giving away a million dollars in free drivers. >> we hear deals like this once in a while. it's not too often that you actually have to pay off for something like this. sometimes like in the red sox if you hit a tiny spot in the middle of the outfield, if the ball hits there, that's what they would pay off on. what were the odds of mickelson actually pulling this off? >> when we signed up to do this, phil was the odds-on favorite. that was pre-tiger. he was favored. the odds went up as tiger

entered the fray. phil prevailed. we bought insurance to cover our risk as you always do. so the kings of risk and number of units purchased leads you to your cost and callaway is a great partner with us in this. we're very excited they were of a mind to do so and now we're giving away a million bucks in free drivers. we're very excited for our people, our customers. >> phil hadn't been playing that well, marty. >> no, he hadn't. yeah. >> this is kind of a shocker for him to win going away, too. and he shot three 7s on that course which is out of control. you saw what happened on saturday. that was the weirdest three holes i've ever seen where he almost hit three straight eagles. >> absolutely. but yesterday on 13 i think characterized it all -- >> didn't even take a practice swing. i know. and i've seen the dynamic between bones and phil.

and bones, he only pushes so hard to tell phil not to do something, because phil is the guy that ultimately is responsible for what he does. so i think he was trying to say, are you sure? he said i'm doing it and didn't even take a practice swing. unbelievable, marty. >> hey, marty, where did you buy the insurance? >> i don't know the third party we used. >> aig? >> no, it wasn't aig. >> that's some kind of -- that would be a weird derivative. we appreciate it, marty. congratulations. and you got insurance so it's all good, i think. >> it's all good. thank you. >> with what we've heard about insurers lately, let's stick it to them. they're a bunch of profit mongers anyway. >> more of this morning's top stories and former fed governor mark olson joins us as our guest host.

a twond remember. >> unbelievable. >> he hits it. >> win it after all. >> now traders get back to the game of making money as earnings season kicks off. guest host mark olson and market strategist barry knapp will tell you how to keep your portfolios from doing this. >> greece is the word again. euro zone leaders offering the debt plagued country a bailout and reassuring investors. >> and when it comes to flying, which airline comes out on top? >> i feel the need for speed.

>> the latest results from the national airline quality ratings are set to be released. we have data that could have you changing your flight plans as the second hour of "squawk box" begins right now. >> it's a win for the family. ♪ i'm all right ♪ nobody worry about me ♪ why you gotta give me a fight ♪ ♪ can't you just let it be >> good morning. welcome to "squawk box." back to "squawk box." i know you've been here since 6:00 as you're expected to be. joe kernan and becky quick. guest host mark olson former fed governor now co-chairman of corporate risk advisers. can't wait to talk to him about all the stuff that happened last week from the stories over the

weekend like the one in "the times" that says it's over. over for easy credit. only one way to go and that's up. coming up quality in the sky. phil lebeau with numbers from the national airline quality rating that may have you thinking twice about which airline you feel like flying. 7 30dz eastern the ceo of the mayo clinic joins us from the world congress health summit. and since i made it back -- and i'm glad to be here -- stocks to watch is back. and even though carl isn't here so there's no reason -- no one to annoy -- >> there are plenty of people. viewers. >> all right. all right. when you put it that way, maybe there will be the -- first, though, a look at this morning's top headlines. >> first of all a look at the futures because the futures are indicated higher. remember on friday the dow just touched above 11,000 before pulling back down. right now, the dow futures are better than 14 points above fair value, so that would mean an open above 11,000 but a lot going on this week.

keep your eye on the futures. they've been moving. aiming to cut the bank's assets by 40%. he said citi's strategy is banking focussed and calling for more derivative transparency and argue that shadow banking has to be regulated. probably puts him in line with a lot of the regulatory reform measures moving through washington now. swiss banking giant ubs posting the highest profit since the start of the credit crisis. and the euro hitting nearly a one month high against the dollar and the yen after euro zone finance ministers agree to a rescue package for greece. that's not been pulled by the greeks yet but leaders agreed to a $40 billion aid package. it's unclear if greece will activate it but we'll go live to

athens shortly for more on this story. our guest host today. before a top consultant to the financial service agency he helped mold economic policies as fed reserve governor. our guest for the next two hours mark olson, governor 2001 to 2006. great to have you here today. >> pleasure to be here. >> this is an important time in the economy and feels like an inflection point. you can see the story from floyd norris on the front of "the new york times" saying this is it, better times are here but then stories like today where the economists who are responsible for calling a recession say it's too early to say that this thing is over. where do you think we stand? >> we'reclearly in a recovery. all the evidence that i hear and all the people that i talk to say we're in a recovery but the economy is still soft and it will take some time but there's more evidence pointing toward a recovery than in the other direction but it will be slow. there's a lot of slack in the economy, so it will take some time. >> the idea that this recovery is under way and well under way

is part of the reason we've watched the bond market pushing yields higher and higher. 4% for a while last week. is that the direction you think they should be headed? >> i think so. the ten-year "t" is right about the 4%, 5%. that's more like a normal yield curve. more like what you'd expect to see. i think it's going to be some time before the fed starts to tighten because we're still not seeing much inflationary pressure. at least depending who you talk to. there's a camp that said if you look behind the numbers we're starting to see inflationary pressure in segments other than housing but another camp says if you look more deeply there's still no wage inflation that they can feel yet. so the key will -- the first key to watch is when the fed removes the language that says exceptionally low for an extended period. i don't know when nthat will occur. >> do you think it will happen this year? >> it will happen this year but i doubt in the next meeting or

two. >> just this idea, again, though, it's the inflationary pressures we'll be watching. it's also unemployment rate. >> it will be employment and we're starting to see pickup although it's very slow. if you think about employment in this context, we add about a million or 1.5 million to our workforce -- people who are eligible for the workforce every year. so we have to gain somewhere between 100,000 and 150,000 jobs a month just to stay even. so the 160,000 jobs that was announced last month is good. it's very good. but it just holds us even. so it's going to take a long time to get below a 9%. >> where will we be on a ten-year at the end. year? 5.5 or 3.75? >> that was the range. i would say somewhere in the middle. i would say probably above 4.0, closer to 5.0 but i doubt we'll be at 5.0.

>> does the fed have anything to do with where we are at the end. year? >> i think so. >> what if they stand pat? >> if the fed stands pat then i think the yield curve flattens out. >> really? >> right. >> because that would be a heck of a -- if the fed stood pat and we went to 5.5, that would be a rip roaring recovery. it would be anticipating that, right? >> do you remember the opposite when we started raising rates in middecade and the long term rates went down? that was the greenspan conundrum? >> yes. i think sometimes they move independent of each other and it's hard to understand why. that was a mystery. that's why the term conundrum came about. >> what did we finally decide was the reason for that? >> it was the absence -- i think it was the absence of inflationary expectation. and that took a long time to flush out of the system. >> because we were heading into the worse recession since the '30s. >> that would have taken a lot

to figure that out. >> markets are impression, right? >> to an extent. >> you probably weren't forecasting. >> i don't think so. but there were those enormous liquidity pools and enormous amount of money that, for example, the u.s. treasury and government instruments were very popular. the demand in that was keeping the price down also. because the capital markets were not as attractive, the equity markets were not as attractive that was moving people -- >> securitizing everything and taking fees and aig insuring it. a lot of things going on. >> private debt market as opposed to the private equity market. what was happening at that point you may recall is that the 50 basis point difference that you could get for some of what -- some of the mbos was enormously attractive and the pricing of risk absolutely disappeared during that time. tragic when you look back at it. >> we have got knapp coming up here. let's look at the trading week

ahead. had he had of u.s. portfolio strategies at barclays and joins us from new york. barry, if you could pick stocks like bob diamond picks people to sponsor, you'd be doing pretty well. can you get a -- is he happy about this? this is the cover of the "wall street journal." all i see on phil is barclays. a huge barclays right there and it's always there. i always notice it. not too shabby. pretty good weekend for you guys, i guess. >> yeah. you got to -- you have to imagine. i mean, i can't think of anyone who wasn't supporting phil this weekend. for a myriad of reasons. >> lee westwood might not have been supporting him. anthony kim. anyway, you've heard this discussion. what do you make, barry? 3.75 or 5.5? >> the risk is definitely on the up side. and a couple of things occurred to me as you guys were discussing that. one is that inflation break-evens widened a fair bit

last week even as rates came off. there was some level of concern about the greek tragedy, if you will. and that caused a little bit of a rally. the ten-year went well. the break-evens are working well. if you look at asia and how hot the data is there and what the results is in terms of commodity prices, crude oil, copper, all of these things there's definitely inflationary pressures building. i agree you're not going to see it on the wage front or housing costs but my favorite stat in the last couple of weeks was house prices hit their peak in june of 2006. the cpi shelter cost hit its peak in june of 2009. so if we're calibrating policy based upon the core heavily influenced by the shelter cost we're so far in the rearview mirror, we're three years in the rearview mirrors. you have to look at leading indicators and break-evens and

commodity costs. that's where the pressures are going to come from. my view is the fed is one good month away from having to make a significant change. even in the minutes last week they tried to change the definition of extended period from some time-related concept -- which i'm pretty sure extended means -- to being contingent upon economic activity. so that to me sounds like an alteration of the language. >> do you remember your scenario for this year was a lousy first half, good second half, right? >> correct. >> that's not playing out so far? >> welel we had a lousy january, february and then a rally back. >> february is good. february and march and april were all good. >> so far, absolutely. we think there will be another connection in the second quarter probably of similar magnitude of the one we got in late january, early february and this will be driven by monetary policy. policy tightening in asia again as well as some move on the

policy-tightening front in the u.s. it's not going to be rate hikes obviously, but it will be the beginning of the liquid iterating. the fed will stumble with the communication around trying to define some of these measures like the term deposit facility as purely technical, not monetary policy. and that should cause a pretty good sell-off in the front end of the treasury market. that we think is likely to be a trigger. additionally we're not all that sanguine about the outlook for earnings season. not that earnings won't go up. they certainly will. we do think there will be top line revenue growth but there's three big issues around earnings for this quarter. one is the forward expectations. and we like to look at the number of analysts raising estimates less those decreasing them. very much like an ism type of an index. that's been falling all year. then we're losing favorable comparisons around labor costs and commodity costs. the sg&a and cost and goods sold

line, both of those are turning higher and implies you won't get the margin expansion further. there's probably room for disappointment around earnings season over the next couple of weeks. >> do you have any comments? >> it's interesting. i think that the change in the discount rate i think did confuse people and for understandable reasons. but the drop in the discount rate was done as part of the liquidity facility and when they dropped all of the liquidity facilities they also changed the definition or the rate that connected with the discount rate. so i think we're back now to a more normal situation but because the discount rate and the fed funds targeted always moved in concert that clearly was something that the markets would have trouble understanding. >> well, there's a couple of issues around that. one is you needed to raise the discount rate to a significant enough premium over fed fund so that you could start the term

deposit facility and large scale reverse repos. you're not going to get banks to give you a bunch of cash at fed funds plus two basis points. so you need to widen that spread out. that was a precursor to be able to start these next programs. there's clearly a school of thought that draining liquidity from the system will have no impact. but that was a school of thought in japan in 2006 as well when they started draining liquidity from the system and it did have impact. the jgp market sold off. nikkei rally sold off and the yen went up 7% or so. i think when they get to the liquidity draining it will cause a reaction in the capital markets. again, it's not going to be catastrophic and the underlying theme is that growth is not moderate. the fed described consumer spending as moderate and we had the biggest chain store sales number in ten years even correcting for the easter effect last week.

so it looks not moderate at all. it looks strong. >> are you going to see bob diamond today in. >> i don't know. i'll wander around this floor. his office is right behind him. >> give him a high five on -- he's close to phil. and i know he's got to be thrilled -- we're thrilled. give him a high five for me, will you? >> i'll do it, joe. if you have any comments or questions about anything you see here on "sqawk" e-mail at quauk@cnbc.com. buckle your seat belts. up next the airline quality ratings are released. who comes out on top? the answer right after this. later phil mickelson wins at augusta. it actually didn't happen later. it happened yesterday. we're going to talk about his third masters win, tiger's perform answer and throw in a little baseball as well. time now for today's aflac trivia question. what u.s. senator physically

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now the answer to today's aflac trivia question. what u.s. senator physically beat charles sumner with a cane on the floor of the senate in 1856? the answer, senator preston brooks. the national airline quality ratings being released this morning. the annual report shows carriers did a better job handling baggage, not bumping passengers and on-time arrivals. cnbc's phil lebeau joins us with more. i saw this guy who has made thousands of dollars booking himself where he knows he's going to get bumped and -- >> seriously? >> yeah. it's harder and harder to do it, though, now, because they're getting it together. >> it is. i love this report because it flies in the face of all those people who say airline service has never been worse. fact of the matter is, it really bottomed out a couple of years

ago and continues to improve although there are still a lot of people not happy with what they're seeing in the air. according to the airline quality report. this is based on reports government data. this is not subjective. mishandled bags the reports are down, complaints are down and on-time performance up. on-time performance, for example for example has improved because of fewer flights. they have taken planes out of the sky. meaning they add more time on. they have a little more wiggle room and why they have fewer flights arriving late. as for bags and how they're being handled, the baggage complaints dropped because fewer bags are checked. they now charge you to check one or two bags. people say i'm not going to take luggage and because there are fewer bags checked there will be fewer problems about mishandled baggage. as for how people are served on the plane, yes, the airlines are reportedly doing a better job in part because there's less congestion. fewer flights means fewer people flying and it's just not as

crowded. the rate of complaints is down about 50% since the year 2000. if you add all that up and look at it, the people who put the report together say it's clear we're starting to see some improvement in the sky. >> if people look, i think they will find that the system as taxing as it may be to their emotions and their nerves is probably getting better and doing better for them. >> but all is not well because, yes, the number of people being bumped on planes, that percentage is up 8.2%. part of this is because the airlines have tighter schedules. as they've stripped out flights, you have essentially the same number of people having to get on fewer flights and, as a result, when the airlines are overbooking those flights -- and i've been on a few in the last year -- it's frustrating. there isn't really a remedy there. they will continue to overbook the flights. it's part of the industry. but 3 out of 4 being better than

they were last year is a clear sign that the airlines are doing a slightly better job in terms of getting from us point "a" to point "b." >> people need to take a trip like -- if you go newark to l.a., try to drive. drive newark to l.a. and then see if you complain about your flight. i mean it's unbelievable how far that is, phil, in a car especially with kids. >> and i think there is a romanticized notion that whenever we're on a plane we're wined and dined and taken care of. it's a mode of transportation. >> that romanticized notion, i don't think it exists anymore. >> i think it does. i have people who complain about the simplest things. i didn't get my little can of coke because i was going between sri lanka and detroit and there wasn't enough time. >> one is going to start charging for using the toilet, phil. >> what do you want me to say to

that? >> i want to know what if you don't have any cash, didn't bring any credit cards? will they say, tough. >> if i'm sitting next to you and you're short on cash i'll float you a couple of bucks. >> all right. i don't know how much -- i don't know what -- i mean, is it -- >> two bucks or -- >> what is it? how much time you spend? is it what you're doing there? yeah, exactly. >> where is this conversation going? >> you can't follow this? you're a reporter. is it really that difficult? >> i don't want to follow it. >> go right in the toilet which is where it went. see you later. still to come this morning, the euro zone offering assistance to greece but will the country accept it. live to athens next. boss:hey, glad i caught you. i was on my way to present ideas

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euro zone finance ministers approving a $40 billion emergency aid for debt plagued greece. guy johnson is in athens and joins us with more. guy. >> reporter: becky, thank you very much indeed. yes, last week was obviously

very extremely tumultuous. we reached a crescendo on monday. on friday we got the rescue package and got details and how much money we were talking about and at 5%. but come monday morning there are even more questions that now need to be asked. germany is saying, we need to have some sort of an eu summit to agreement on aid, when that aid is allowable, under what terms it's going to be allowable. so that still isn't exactly clarified. greece has yet to ask for the money. tomorrow a t-bill auction. if it doesn't go well then maybe greece will ask for that money. and we still don't know what the imf involvement is going to be and under what terms. the boss of the fund has indicated he sees greece having a multiyear depression, i-e. even more prosperity coming down the road. while they have we have a deal, we don't have all the details yet and there's still a long way

to go for greece until it gets fiscal balance back into kilter. before we wrap it up i know what joe kernan is going to say. what on earth are you doing standing in front of the parliament when you could stand in front of the parthenon. the powers that be say i have to stay here but i'm on the ground. i'm going to get it fixed. tomorrow in front of the acropolis in front of you. >> the building you're standing in front of looks like it's in fine shape. the doric columns look like they have a fine roof. that doesn't look like greece. that could be anywhere. that building is totally intact. why should we believe that that's greece? >> reporter: you probably should believe it's greece because of the doric columns. i'm seriously impressed you know that's what it is. but tomorrow we'll produce many types of columns and give au history lesson of exactly what happened here a couple thousand years ago.

em pyrrhically it's not -- >> the third column not doric or ionic would be -- i want you to phrase this in the form of a question. >> corinthian. >> what is -- >> that's the flowery one. >> what is corinthian? i'm not asking you. you need to put it in the form of a question for alex trebek or else he will scold you. but thank you -- i don't know whether you have "jeopardy!" over in london. but i'm going to send you a tape. thank you, guy. thanks for playing along as well. all right. comments, questions about anything you see here on "squawk" -- street music, greek wedding music, right? i know a lot. i know some really good curse words, too, that i cannot -- e-mail at squawk@cnbc.com. leaders of the leading health organizations gathering in washington to discuss the future of health care. the ceo of the mayo clinic our

special guest next plus steve liesman deficit reduction strategy. i'm sure it means raising taxes to 100%. (announcer) we're in the energy business. but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business.

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welcome back to "squawk box." the futures this morning indicating a higher opening. still are at ten points now. apparently this guy preston brooks, we got a couple of e-mails about preston brooks. he was a congressman who beat up a u.s. senator. one was a really nasty -- from some guy who is really kind of a sad case. hopes that because we made that mistake that we get canceled as a network but there are other nicer people writing in that in fact preston brooks was a congressman -- >> who went over -- >> makes more sense. >> the congressman are -- >> they got the two-year thing, always running for re-election. and they kind of -- they seem a lot more emotional in the house. >> alexander hamilton -- >> the congressman beat up the senator although -- >> it was when tensions were running at the highest level. it was when tensions were

running high. you think there's a lot of partisanship today. it could be worse. >> then there's south korea. you watch the parliamentary, they hit each other. i'm supposed to say that i'm going to check in with you now for the headlines. >> let's actually talk about the economy because that's the top headline of the day. the latest jobs data out of way and it is tax week. how robust is the economy and how much are projections for growth changed over the last week? our senior economics reporter steve liesman is here. he joins us with the secret plan to try and reduce the deficit. i like that. >> we're not going to talk about that today, though. that was supposed to be -- we're going to talk about that tomorrow for technical reasons. but it's nice when i have to bring you all of the bad news over a period of a couple of years now to finally be able to bring you good news. last week's retail numbers and the recent jobs report have some economists marking up their forecast for the recently completed first and the current second quarter now. animal spirits spur higher growth forecasts uks in the

weekend report raise sth growth forecast by half pint for the first quarter. morgan stanley say incoming data continuing to be somewhat stronger than expected and checking forecasts for the first quarter up half a point. at morrissey's new green shoots of spring. and he points out the data is clear that january and february were badly affected by the weather. we added the outlook for seven well known economists. ear are the results pf an a 5.6% first quarter capped a 3.9% second hatch of growth. economists expect 2.9 in the first quarter with a slight acceleration in this quarter to 3.4%. ubs says its upgrade is largely because of rising ceo confidence reflecting better than expected earnings leading to more capital spending and hiring. one of the biggest surprises for economists has been the consumer. goldman sachs wrote this weekend that, quote, real consumer spending continues to outrun our

projections. they think consumers should save more the projections say but their findings say people are treating home renovations as the equivalent of savings and that's a big part of why the projections end up being wrong. the economy not without challenges, oil prices mentioned ago somebody that could cap the rebound but not at current prices. they include slower spending at the state level and unemployment rate that will be slow to come down. most economists believe the recession ended this summer but the committee reluctant to declare it over. i would say there's two different things going on. wall street tries to project for the future where the nbr is very careful about date sth past and history because those dates will go into all of the academic research ultimately. >> that's absolutely right and think it points out the fundamental difference in that wall street -- the economists look at the fundamental underlying economy. wall street looks at the markets and they're not the same. so i think that point -- that's

another reaffirmation of that point. plus, it's very important for the economists to make sure they have the datings absolutely right on the beginning and ending -- the inflection points as you defined them earlier. >> one of the things significant about this forecast this weekend is the idea of a double dip becomes more remote ppt idea that the economy could slip back in. in fact, what i was interested in is they're hitting that 3% level in the first quarter and accelerating the three-four in the second quarter. it's like it's not all about inventory in the second quarter. looks like we'll get consumer spending. the idea the consumer despite lower credit seems to be spending more which i believe jpmorgan pointed out is pretty much normal for the beginning of expansion. >> even the nbr says several economists on that panel say a double dip is not very likely. even though they're not willing to call an end to the recession, they don't think the double ditch scenario --

>> pretty clear reading in "the wall street journal" that nbr doesn't want to be wrong. if you read any of the academic research which i don't recommend you do but if you have to read it you have to see they're very hyperabout extension wishing between expansion and contraction. that's a large part. recessions are precious in the economic history because there aren't that many so they need to be careful about where they are. as for investment advice, the question that i have -- and i don't know the answer and never will -- which is all of this baked into the cake here? all the data we've seen the reason the market has made that slow but steady move to 11,000 and is there another leg up here if the economy improves? >> thank you, steve. got to go quickly here. leaders from across the medical industry have gathered in washington this week for the world health care congress where they'll ask the $940 billion question, what comes next. we're going to get to this. joining us is dr. dennis cortez,

president and ceo of the mayo clinic. great to see you. >> good morning. during the whole debate that we had, the year long debate, the mayo clinic, cleveland clinic held up in high regard for some of the steps you've already taken for trying to reform this system. we almost look at you as coming down from on high to tell us how to do things. you agree that reform was necessary. did we accomplish what we were trying to do? >> no. that's a really good question you're raising about what really would happen next. we've taken a step. in my view it's real tifl small step. as a physician, i think the key issue we will now have to deal with as we go forward is how do we change the delivery of care. how do we get better outcomes, better safety, better service. how to get better results at lower cost? that's what i call really true

health care reform. that will be the next issue that comes up, no matter what happens with the current legislation, which is a step in the direction of trying to do health insurance reform. but still that won't get everybody insured, regardless, though, of what happens with the current legislation. the next step we will have to come to grips with is getting what we pay for -- better outcomes, better safety, better service and lower costs over time. >> i think you concede that the positive of what we've done is there's going to be more insured americans and that's good for business. but i read your criticism of the bill and it doesn't sound good. number one, the two biggest problems, it doesn't address getting better care at a lower cost. that would seem to be something that maybe should have been addressed in the bill. and it's not funded with real dollars. there's too many steps dependent on future congresss. both of those things seem like pretty big issues. should we be patting ourselves on the back that we got this far? >> i think -- no, we should not

be patting ourselves on the back. i think we should take a breath and realize the magnitude of this problem. we have accomplished something. we've certainly gotten the attention of everyone in the country. but the fact -- you listed all the facts we have to come to grips with. that is we need to very much concentrate on improving the delivery of care and improving health for all of the citizens. it's only with that concentrated effort that we're going to get the better outcomes and better safety, better service, better results at lower cost over time. and we should be making sure that we pay for that. in other words, we should be identifying those organizations that can produce those better results at lower cost and make sure they stay in business for the next ten years because we're going to need them. >> are you optimistic -- because the -- what you just painted. adding 30, 40 million people and not addressing any of the way we're going to pay for this with doctors, the way you're going to

reimburse doctors, it sounds like there's only so much health care to go around. is the quality going to go down based on what we just did? >> what we have today, if we just continue on this cost with no better outcomes and lower costs, then we will have to sacrifice something. we'll get better 5:00. there will be more people insured but perhaps there will be more difficulty getting in to see physicians or the quality goes down. we have to come to grips with the next step in health care reform which is very much delivery system improvement and delivery system reform. >> well, then it's not surprising if 85% of the people already have insurance and they're going to be asked not only to pay for covering all of the new people but also to have their quality of care go down, it's no surprise that maybe this wasn't the most popular bill? >> well, i think there's some truth to that. the issue, though, is are we

willing as a country to look for innovative ways to care for people and recognize them as legitimate and we actually will pay for it? for instance, in some of the regulations at the federal level, it makes it very difficult for providers to optimize the use of nurse practitioners in giving care, because in certain areas like in medicaid, they are prohibited from actually recognizing nurse practitioners as a refundable expense. i think that's the way they term that. we have to come to grips with a number of things that will allow innovation, allow new ways to practice for patients and to improve the care and seek that out as a routine way of us doing business as health care providers. >> are you optimistic that -- i mean, it sounds like you have some pretty good ideas at mayo. do you feel like you were heard in -- when this bill was put together? did they come to you and ask what should we do, dr. cortees?

>> yes, they did. many groups asked for that but it was clear last year after the president's speech when everyone came back from the recess that it was pretty clear that the congress was going to focus on health insurance reform. and at that point, we sort of pulled back a bit to say let all the dust settle, let this occur, whatever was going to happen. it has happened now. we now know the tools in the toolbox. now we have to turn our attention to making use of those tools as best we can but to now focus on the real health system reform, which is delivery reform. i'm very optimistic we can make this happen, provided that the government regulations do not block us from accomplishing it. there are lots of initiatives under way in the country. there are a lot of practices that are doing very well. we just haven't recognized them in the past year. we've pretended that they are all exceptions -- that we can't reproduce these things, we can't spread it around the country. we can produce the results. we can produce the outcomes and

we can reproduce the safety records as well as the cost. we don't have to reproduce the way it's done but we have to reproduce the outcomes the exact same way. if we measure them, we will be able to find a system that organizes itself to produce those. >> all right. you should be the czar or something. we have a czar for everything else. we have about 4,000 czars. i don't know why you're not a czar. i'm nominating you as a czar for this. >> thank you very much, i think. >> if called upon, will you serve? appreciate your time this morning. thank pup. >> you're welcome. coming up, it is opening day at wrigley field in chicago. cubs haven't won a championship in more than a century but darren rovell says it's been very profitable for the cubs to be loveable losers. national car rental? that's my choice.

because with national, i roll past the counter... and choose any car in the aisle. choosing your own car? now, that's a good call. go national. go like a pro. .

thanks to over a century of two tilt but extremely loyal fan base the chicago cubs earned the nickname loveable losers. darren rovell is there where under new ownership they play

the first game of the 2010 season. he joins us with more. >> reporter: it's been exactly 102 years since the cubs won. that drought hasn't hurt business especially the last 20 years. at 41,000 seats they're the second smallest park in the majors and also the second oldest park in the majors. but fans continue to fill the stadium to the brim despite the futile record. how about this fact. remember they play many home games during the day. more cause of optimism. the owner sold the cubs late last season for $845 million and managing partner tom rickets doesn't believe in a billy goat curse and is sure one of these days it is going to happen. winning is important right away. case in point how about a $146 million payroll that features three players in the top 20 highest paid including $19

million left-fielder alfonso soriano. $18.8 million for carlos zambrano and $17 million for third baseman arammis ramirez. it's not just on the field that counts. for the 95th homeowner an upgraded wrigley. new bathrooms and don't worry the trough is still there and spanking new corporate club sponsored by pnc bank with all the amenities. there's a little bit of a battle with the rooftop owners. they actually give 18% of the money to the cubs, but the cubs wanted to put up this toyota sign, this big toyota sign and the rooftop owners wouldn't have anything to do with it. of course i have to have some props this morning. that includes the little nachos in a big helmet. the cubs doing their part to promote obesity in this country. right here you have the full nachos in here in the real helmet and the bison -- don't know if they're going to take it but the bison hot dog for $5.50 by tom rickets' ranch, the new

owner of the cubs in wyoming. let me take a quick bite because it's required. okay. very lean like bison. it has more omega 3s than salmon and the leanest of the meats. >> does it taste like a hot dog? >> reporter: yeah, it does. they've done a really nice job. and it does taste very lean and good. throughout the day we'll be here and have the new owner of the cubs tom rickets. do i have mustard on me? tom rickets on squawk on the street. he'll talk about the whole business and how the $845 million business -- that bet will pay off. >> did i hear you correctly? you said they've redone the bathrooms but the trough is still there? >> reporter: yes. there is an updated trough. so, you know -- >> what is that? >> reporter: you have to go in there like a man -- a trough is not individual urinals. >> what do you think it is a

vomiterium trough? it's not ancient rome. >> reporter: you go like a man. nug there like a man. that's what you do. >> you're talking baseball. are you just going to totally pass over yesterday and the -- i mean, that seems a little bit strange. >> reporter: no. the masters was amazing. what i want to know on that golf smith promotion is how many people saved their receipts. if someone bought one of those clubs on march 20th, i'm sure you've got to give your receipt in. i don't know about that. but phil was unbelievable. and i agree with you, joe. he didn't just save it. i mean, he closed that thing out. >> holds on to win masters. that's such b.s. it's really irritating. >> reporter: yeah, that's not the way -- "usa today" had it right. holds on is not the way to do it and barclays gets their advertising. >> a british editor. >> oh, it's a british editor. >> that's the conspiracy theory.

>> that might make sense. but you look at 12, that putt on 12, i mean, that was solid. >> reporter: through the trees. how about the shot through the trees -- >> 13 the day before on 13, 14 and 15 unbelievable. he's an animal. >> reporter: he just had joe. he had so much confidence even in his voice. he like almost knew he was going to win the thing. >> yeah. thank you, darren. >> guys, quickly, i want to tell you about the nbbr, that dmitee of economists likely to say today it's too early to call the end of the recession. that's the case now ppt statement is coming out on the wires. they say that the cycle dating committee say it's premature to call the end of the session. indicators quite preliminary at this time. >> when did we talk about it? >> we just talked about it with steve and in the 6:00 this morning. i said it before. you weren't listening to me

either? >> yeah, i was listening. still to come black rock's asset report. its investment team will join us. stay light. this is exclusive information.

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yeah. i don't know what -- i did not -- that's not my musical selection. but the -- widespread panic. let's start with some stuff to watch. mirant and rri energy combining in a stock swap deal. renaming the company and creating a utility powerhouse it says here that will become one of the largest independent power producers. there's the bid and the ask on rri. archer daniels was removed from the top picks list at citi although the rating remains a buy. texas instruments upgraded from outperform to neutral and price target raised from 32 to 24. noting lean distribution inventories and robust demands. st. jude medical upgraded,

upgraded to buy from hold at jeff jefferies. carnival cruise upgraded to outperform -- bernstein target at 45. and california pizza kitchen is halted for news enpending and you saw "the wall street journal" that the company is putting itself up for sell with private he can quit groups. coming up with a squawk dynamic duo. doll and arledge unveiling an exclusive report. if you are not a blackrock client this is the only place you'll see it right here on "squawk."

a "squawk" exclusive. money management giant blackrock unveiling its second quarter asset allocation report. unless you're a client, you'll see it here first. blackrock chief equity strategist bob doll and ceo of fixed income bob arledge our special guests. it's back to work on capitol hill. financial regulation reform is on the top of the agenda. banking committee member senator judd gregg will tell us where this bill is headed next. "squawk box" begins right now.

you're on. >> welcome back to "squawk box" on cnbc, first in business worldwide. i'm joe kernan along with becky quick. carl is -- i thought he was back friday. >> maybe at the end of the week. is that right? friday he's back? he's on assignment. he's doing something very important. >> yes, extremely important. our guest host mark olson who served as fed governor from 2001 to 2006. he's currently co-chairman of corporate risk advisers. be with him in a second. let's check out the market. futures have been indicating a little bit -- keeps coming back -- 12 points now based on the dow, which would put us over 11,000. that's -- the market waited for

us to get back before hitting that milestone hopefully. >> touched on it briefly friday but closed back down in anticipation. >> luis ahmada, pretty well known said even though there's no real trouble signs -- previous sick labls and secular bears ended without anything notable happening but so far she says keep one foot out the door but this should keep going. >> i think we'll get more opinions on that in a moment. meantime tstories. approving a $40 billion emergency aid package for greece to allow the debt plagued nation to borrow from eurozone governments and the imf at significantly below market rates but higher rates than the imf would usually give to a nation in trouble. so far, though, athens has not requested the plan be activated. the imf is holding talks with greek, eu and european officials today.

citigroup ceo pan dit is aiming to cut bank's assets from 40% at the paeng and is solely banking focused and calls for more derivatives trade transparency and argues shadow banking must be regulated. ubs posting the highest profits since the start of the credit crisis driven in part by exceptionally high fixed asset interview. blackrock is out this morning with its second quarter asset allocation report. unless you are on the client list, "squawk box" is the only place to get these numbers. joining us in a cnbc exclusive blackrock chairman and chief asset strategist bob doll and fixed income and managing director curtis arledge. great to have you both back here. break this down for people trying to get a feel of what to expect out of both the equity markets and bond markets over this next quarter. bob, you say that we're going to continue to push higher in the

equity markets. >> our broad strategy has been overweight risk assets meaning equities and credit-related fixed income and underweight safe assets meaning cash and treasury bonds. that's largely the way we still feel. the economy continues to be two steps forward. occasionally one step back. but our view is that having that risk position is still the right way to go and equities are a clear part. >> curtis, why don't you lay out the bond strategy for this quarter, too. this is the place where people have been so focused especially the last several weeks. the ten-year actually touching above 4% last week briefly. where are we headed? how is the economy holding snup. >> at the end of the year the ten-year 3.84. we're literally a handful of basis points above that. yield curve very steep. the treasury market received a lot of attention because of all the supply that's coming. the economic data has been more favorable and i think a lot of what we saw in the sell-off from lower yields in the first quarter was really more about

the strength in the economy which we do think as bob said is taking two steps forward. the structural head winds are an issue. people are focused on them but we think growth is what investors should focus on. >> bob, you back that up. you think that we are looking at an economy that's really turned around. >> absolutely. inventories have gotten in gear. jobs -- one good month doesn't make a string but i think we'll get a string. all lead indicators point to that. earnings are clearly doing better. sentiment is improving and still a lot of cash on the sidelines. >> still like u.s. stocks, overseas exposure? >> in developed markets that's the case. europe had its problems. it had a slower recovery so far. we think that continues. japan all times of secular problems. among the developed markets the u.s. if not by default i think also for good reasons is the place to overweight. >> curtis, one of the discussions around the table with mark olson, a former federal board governor, is about

what's happening with the federal reserve and when they will raise rates. what's your bet? >> i've for the past several months thought they would be on hold longer. i think the financial system is still repairing. a lot of banks still dealing with ledger sheet problems. the unemployment problem is allowing them to remain on hold. i would say the economic data we've seen recently has moved up in my mind the time they'll start -- >> you thought it would be later than the fed fund futures were betting? >> gentlemen. i think they'll be on hold the balance of the year but the possibility of a november move has increased. >> the point i keep making is we start at zero. we're not at one or two to start. we're at zero. that connotes an emergency and the emergency has passed. and i think that calls for something other than zero at some point sooner rather than later. >> even more than zero, we start out with a description saying we're going to be exceptionally

low for an extended period. that's the first move that has to happen is that they have to remove that language. i think once you see that -- and i think in each meeting you'll see the pressure build and by the minutes that discussion was already under way but will continue to go. how about -- do you have a large cap versus small cap or mid cap preference at this point? >> fairly neutral on that believing that we're still in economic acceleration. small tends to do better so we lean in that direction. but there will come a transition point when the structural headwinds curtis referred to get in the way. not a strong view one size. >> she asked about the international. i'm very conscious of the government issues. the u.s. competitiveness versus competitiveness outside the u.s. is that still an argument that you hear with respect to equities? >> absolutely. and i think lots of developments going forward around tax policy, trade policy, as you correctly point out, have to be watched

very carefully. i think so many businesses have a choice where to do their business, where to make their product. and i think that we in the united states have to be really careful that we remain/get competitive. >> i hear tax is a big part of this? >> hear, hear. >> an article in the "wall street journal" today lays out where we're going to be getting revenue. revenue raised through taxes or spending cuts? if we're talking about the extreme end of tax increases, what's that going to mean for the economy down the road and how does that factor in? >> part of the structural headwinds curtis referred to. we all know taxes are going up. the market knows too. we don't know exactly which ones or how much but can make some pretty educated guesses. my guess is that is a headwind for 2011. >> a lot of the consumption is coming from the group focused on taxes potentially going up. so i think it's going to have a dampening impact. >> do you think we're -- this is a new normal? i mean, is it going to be

different? >> i think we're going to be in a period where the credit system -- the whole credit financial system is retooled and rebuilt. you had this -- we talked about it before the shadow banking system. pandit talking today needs to be regulated. it will make credit at the margin -- >> looking at your competitor. >> obviously you are. >> i don't know, you both manage a lot of money and jockeying for -- >> that language started a year ago. what's happened in the last year? >> it's done really well. >> not just the markets. but the economy as well. >> you would throw down the gauntlet and say they've been really wrong so far, incredibly wrong. >> having said that. >> stupidly, totally misinformed and wrong is what you're saying. >> that he your words. >> right, curtis? >> i think that, look, the forces they talk about that they're worried about, we're worried about them, too. but this economic recovery has

been more normal than i think anybody wants to give it credit for. all of us try to protest and say it's different this time, it's going to be slower and the structural headwinds and they're all there. but so far, so good. jobs are just getting started almost on cue. so i'm not so sure how new normal it is. >> oh, boy. devastating. devastating, bob. wow, that was ouch. all right. i'm not trying to get anything started here. >> never. you would never do that, right, stir the pot. curtis another one of the headwinds is what's happening with state and local governments. that had a huge impact on the municipals market. where do you think that's headed? >> we've talked about all year it is more of an expenditure problem than credit default/risk problem certainly at the state level. they're cutting back on expenses. >> so that's good news. >> i think it is from a bond holder perspective. one of those dampening impacts on how strong the economic

recovery can be. as the economy improves one thing that hasn't received is tax receipts will bottom and start to rise again. that will help. everything from reduction in potential treasury supply to the problems that municipalities have in being forced to reduce expenditures. so i think that generally the economic recovery is a good thing in so many ways. it relieves debt burdens and allows some of the state and local governments to deal with issues. >> do you think any of the state and local governments could wind up in a situation like greece? >> i think at the state level, no. i think we have -- we look at their balance sheets, they are dealing with issues that's more of cutting back on expenses than not being able to fund. >> i hear the question phrased a slightly different way. what's the difference between california and greece? i guess the fundamental question, is there a different governance peck nmechanism in te

u.s.? >> california is part of the united states so it's saying -- we're talking about an integral part of the overall economy. >> but it's a single currency and a government mechanism that have to do with the relative financials structure there too. >> i think what's happened in greece is you have a bunch of countries trying to deal with some of them having real issues being able to fund. and so they have never really come together and figured out how to work on that. this is sort of a new test of the eu and i think they're trying to deal with it in a way that respects the sovereignty of what that he trying to accomplish. >> you say that opportunities in the stock market, a lot of them will come from the lower quality names? >> i think you have to have a mix in your portfolio. we clearly want some higher quality to the extent new normal might be the case, joe. therefore, we want companies that have strong balance sheets, good free cash flow, can gain market share. but on the other hand if we're in global a cycleable recovery

you have to have some of those too. we want a mix. >> thank you both very much for coming in. coming up, why preventing the next financial crisis may not be better than the cure ppt former chairman of president george w. bush's council of economics advisers, harvard professor, will tell us why. (announcer) we're in the energy business. but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business.

and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business. chevron. ppt . the

welcome back to "squawk box," everyone. the futures right now are indicated slightly higher. dow futures up by about 12 points above fair value after flirting with 11,000 on friday. actually, touched above it very briefly. closed just below it at 10,997. but this morning, if this holds, you will see the futures at this point 157 points above. that means they will open above 11,000 for the dow. the government bail youst financial system expected to cost $89 billion. "the wall street journal" is citing treasury officials the figure does not include loss s.

at freddie mac and fannie mae projected to be $370 billion through 2020 but officials forecast a profit of $8 billion from the investment of $245 billion in banks. last april the cbo estimated the net taxpayer cost for the government's rescue program to be about $356 billion. so it's looking a lot better than that. our next guest says instead of focusing on preventing the next financial crisis having better clean-up tools might be a wiser choice. joining us the former chairman of president george w. bush's council of economic advisers harvard professor greg mankiw. great to see you. >> nice to be with you. >> it's been a while. like so many people, if we could have wound down citigroup or wound down -- if we had resolution authority it would have made it a lot better. even lehman, right? >> for sure. we need mechanisms in place so the next crisis happens we have better ways to clean it up. i think there are new ideas like

resolution authority, better wills perhaps for these institutions. my favorite idea is something called contingent debt which is requiring these financial institutions to issue some debt that can be converted into equity when some regulator deems them insufficiently capitalized. >> are you making the case that the next crisis we can't anticipate -- people are so smart on wall street -- smart is one word. devious might be another one. that it's almost impossible to write regulations to prevent the next crisis. >> i think we should try to prevent the next crisis but be very humble about our ability to do that. the number of people trying to circumvent the regulations is going to be far greater than the people trying tone force them and better paid than the regulators. they always are. i think we should be humble about what we think the regulators can do in the future and ready for failure. >> never stops us, though, does it? and a lot of times it actually -- the stuff we come up with is self-defeating rather

than helpful. >> that's right. a few years ago, there were a lot of people talking about how fannie mae was going to be a problem and freddie mac. i talked about that when i was in washington. alan greenspan talked about it for years. i know there are economists in the clinton administration who talked about it. but the political reality was there wasn't political support for it. so i think looking ahead, the idea we're going to prevent these things in the future is a little too optimistic. >> greg, it's mark olson. good to see you. >> hi, mark. nice to see you. >> you mentioned fannie and freddie. they're pretty obvious. would you have guessed bear stearns would have been too big to fail? i think my point is that there's another dynamic here and another metric. and that's the tolerance for volatility. we don't seem to have in our system a great deal of tolerance for volatility. therefore, we will go in and we will rescue increasingly smaller, i think, companies. and i think that's -- and it's very difficult to predict when the next one will come about. >> i think that's exactly right.

one of the fears about expanding the government's regulatory role is people will start viewing all of the institutions to big to fail once the government has a seal of approval. everything is a government enterprise and the fear is to bail them out any time anything happens. i think we have tools when something happens we have tools to clean up the mess without putting a lot of taxpayer money at risk. >> do you think we're out of the recession as of the sum officer we can't get the nber to say that. >> we're in a recovery. nber is lagging indicator. they've never even tried to do this in real time. they have an historical function looking back at recessions. >> kind of useless or -- >> no, they're not useless. they're academics and academics are very -- >> i hear what you're saying. i'm reading behind the lines. you're an academic now. >> i am. nothing wrong with that. >> but a slow gdp growth which

will make it unemployment stay tough? >> i think that's exactly right and a couple of reasons for that. one is that the -- they have to admit the financial crises recovery tends to be slow. there is a book about this that documented this for many financial crises. secondly, the policy tools we have now are limited. fiscal policies running flat out. monetary policy can't do much out. we don't have a lot of ways to go. fiscal policy will probably be a drag looking ahead in the sense that tax rates are going up over the next decade for sure i think given that president obama is more interested in expanding government than contracting it and those higher tax rates will be a drag on economic growth. >> greg, you just led into something that i think we haven't talked much about and that's critical and that's fiscal responsibility. we've talked for years and i remember you talking about the growing problems with, among other things, medicare and medicaid and social security. when are we going to start feeling the bite particularly on

social security? >> i think we're already starting to feel it. if you look at president obama's budget, he projects under his proposed policies is the ratio of debt to gdp rises in each the next ten years. the path is unsustainable for sure and something different than what he's proposing has to happen. i think he knows that and why he proposed this fiscal commission which probably won't have a lot of teeth politically. but he acknowledges he hasn't really put a plan in place to try to deal with the long term fiscal problem which is really quite severe. >> what do you think some of the suggestions of that panel might be? >>. >> i have my own personal preferences. i'd love to raise the age of eligibility for medicare and social security. >> to what? >> gradually over time and see a big increase. raise it by a month every year and keep raising it as life expectancy rises. we should be working longer. but i don't see that is going to happen politically. i think more likely a

value-added tax like in europe. if you have a big government you have to a sufficient tax system. the taxes we have is not efficient. income tax is not a good way to raise revenue. >> what about dropping some of the loopholes? >> that would be fine, too. expanding the base i think is a good time. eliminating deductibility to state and local taxes. reducing the cap on mortgage reductions. those aren't politically easy either. none of these will be. especially because president obama said he's not going to raise taxes for anybody making $250,000. it's not sustainable. at some point he has to say he'll break it and presumably only after he gets reelected. >> greg, good to see you this morning. hope it's not so long next time before we see you again. >> thank you very much. >> see you later. one of the good ones, academics. >> very much so. >> you were an academic. >> no, i never was. >> yes. >> no, no, no. dealing with markets adding

key economic data and the crisis in greece and getting a deal together on financial reform. we have senator judd gregg joining us.

ng nges. take a look at the dow. still six points above fair value now four points above. so, yeah, we're watching it.

it will be very close. we could open above 11,000 but anything could happen in the next few minutes. keep an eye on it. up next we're going to get ready for a new trading week. a full week of economic data. the dow is back on the verge of going p back above 11,000. plus how the markets are reacting to the situation in greece. we'll head to the trading floorings of chicago after this.

welcome back to "squawk box" here on cnbc, first in business worldwide. we're one hour away from the opening bell. here's a rundown. we'll see how chicago traders reacting to dow 11,000 and the ten-year near 4%. then it's back to business for capitol hill. senator judd gregg tells us about the battle over financial regulatory reform that continues to play out. and we have the stock of the day eventually. which is a huge highlight for -- >> and you've been thinking about all morning long. let's get to our headlines this morning. there's a bailout plan in place for greece. the aid package would make 30 billion in euro available with the imf ready to contribute

another 10 billion euros. however the greek government would have to ask for the money for the plan to be activated. that's something not done yet. gasoline prices on the rise again. lundberg survey say average pump prices rose by 4 cents the last three weeks to $2.85 a gallon. more than 80 cents higher than a year ago. solid opening for the box office for the new comedy "date night." it earned more than $27 million during its opening weekend. that put it in a virtual tie with last weekend's box office champ "clash of the titans." the futures indicating a gain of somewhere under 20 points all morning. let's take a closer look with rick santelli. looks like now up only six points. let's get a closer look with santelli and mf globls jessica hoverson and former maryland top strategist rich bernstein. i guess i'll start with you on

the left, rick. what's your call 3.25 at the end of the year or 5.5? >> reporter: neither. i think we'll be somewhere around the 4.35 to 4.5 extreme at some point between now and year end and that will be the high yield but i don't think we'll close right at the high yield. >> and quhal push us up there? worries about everything that we've done or a strong economy? >> reporter: i don't -- i think it's pretty clear, at least my opinion. debt and deficit and size of auctions. and i know that there's some talk out there that maybe we'll be able to auction less. even if we do auction less, it's still a very large historic amount and think over time as conditions around the globe change, it will take a larger toll, meaning you have to pay more if you're going to issue more. >> yeah. jessica, a lot was written recently about the era of cheap credit over for good.

did you see those pieces? weigh in on that. >> i do believe we are moving in an era where policy is going to become more normal and thus obviously interest rates are going to edge higher. i think while right now the factors are supporter for risk appetite long term credit will be more expensive. >> rich, do you care? >> do i care? >> do you care about 3.25 to 5.5? would you change allocations -- >> no, i would not. my point is that treasury is about the only diversifying asset class. correlations among every alternative asset class and commodity you could name between s&p 500 are still very high. if you want diversification the only thing to hold is treasuries. we're at the point in the cycle where interest rate should be going up. if the economy is gaining traction and heating up, which i believe it was. we should see long term interest rates go up and shouldn't surprise people that that would

happen. >> talk about 11,000. do you care? is that a number you care about? >> 11,000. it's kind of fun. >> you have to go through it on the way to 12 and 13. >> better than 10,000. so, no. i think -- >> is it a reason to think, wow, it's moved far enough? >> no, i don't think that's right. i think if you look at where the economy is relatively to nominal gdp and past cycles you will find this is exciting and bigger than some of the ones in the past but normal. >> jessica, will redo it? and will that be it or should we start talking about maybe getting to farewe12,000? >> i think the underlying factors for equities are supported. low inflation and low interest rates and profit outlook for the second quarter is quite good but there are still a lot of macro headwinds. i still believe the problems in europe are prolific. while we did get this ballot over the weekend i don't think

it fixes the problems. one of the highlights is ireland is contributing $450 million to this bailout. it's a struggling nation. what happens when it bails out? does that mean greece has to lend money to ireland? what about spain and portugal and italy? i don't think this bailout fifrms any of the problem and highlights the structural inadequacies that are apparent in europe. and sets up the market for possible problems later. >> rick, i wasn't hear last week when that claims number came out. but if i could really dig deep down into your view, do you think a year from now we're still going to be talking about a stubborn unemployment rate, rick? >> reporter: years from now, way more than just one year in my opinion. i think that "the wall street journal" art can today kind of touches what i and many believe. that is a lot of the jobs lost aren't coming back and a lot of the unemployment has to do with things like education and skills that aren't fixed overnight. and when you talk about interest rates, listen, i'm going to keep

it simple. you asked me where i thought it would be. i think it's a two-tier issue. i'm assuming the economy will be mediocre for many years, three to five, meaning 2% to 3% growth is going to be good. if it gets better than that, i think interest rates will rush up much more aggressively in 2011. >> that's a pretty horrific picture you're painting because taxes are going to go up. you're talking about an anemic recovery in the first place with a lot of jobs gone for good -- >> reporter: which the supply will put rates up. if you want to throw in money supply actually coming off the banks' balance sheets where you can get textbook type inflation or the type of economic activity traditionally associated with higher rates, those are all ups and extras. >> that sounds horrible. >> it sounds horrible? >> i think, first of all, we have to take the secular from the cycleable. the market will respond based on

the marginal improvement in the economy. the last cycle we saw a tepid employment for a long time and we'll see that here. that is because if the united states tries to compete with other countries purely on the price of labor, the cost of labor, we cannot compete. what has to happen is our cost of capital here in the united states has to come down to try and offset our higher cost of labor. i don't think washington has realized that yet. still what's going on in the financial sector is we're seeing a lot of risk taking but not in the united states. so right now our cost of labor and cost of capital is high. if washington were smart i think they should worry about the cost of capital here in the united states. >> and by that, you're saying that higher taxes just increase the cost of capital, don't they? >> not so much higher taxes. small businesses can't borrow here, right? it's not the financial center isn't taking any risk. they're taking plenty of risk. it's not here in the united states. i think what washington has to focus on is is that flow of funds and providing incentive so

we get -- >> borrowers can borrow here but it's a two-way street. number one, you have to have a sense of economic prosperity so that ceos as we said earlier in the program will be willing to invest. and we haven't seen much appetite there. but i think the banks are designed to lend and the banks want to lend money. and so i think they're looking for good loans. >> they want to lend but do they want to lend here? i think if you look even in "the wall street journal" today it talks about a major financial institution opening more asian offices and expanding in asia. it's fine but doesn't help us here. >> that's rare. 8,000 banks in the country. there are probably only ten that are truly international banks. >> true. but i'm saying if we're just going to talk overall and the flow of funds and what helps the u.s. economy we have to focus that much more here in the united states. i think as a policymaker in washington it has to be your prime consideration now. not whether the banks are healthy in lending. whether they're healthy and

lending in the united states. >> your cost of capital worries don't include higher taxes? >> no, no. >> isn't that one of the primary -- >> in the 1990s we had higher taxes -- ot as high as this. not as high as we're going now. >> if i said to you we were here in 1991 and had the financial crisis in '89-'90 at that time and i said by 2000 we'll have a budget surplus, you would have thought i was insane. >> if i had known there would be an internet bubble the size of the universe. >> i'm just saying if we sat here in '91 and sad government finances would be healthy in five years you would have thought i was insane. i'm not saying we'll replay that now but the point is i think that negativity is built into the market. >> we have a senator waiting. rick, did you have -- no, we got to go. jessica, thank you. appreciate it.

rick, thanks. rich bernstein. see you later. and mark will be with us until the end of the show. i got to do this too? i just did that whole -- >> i know, you've been working so hard. lawmakers are getting back to work in financial regulatory reform on top of the agenda. senator judd gregg will tell us if republicans and democrats are going to reach a deal that both sides can live with. the stock of the day is on the way. is it in your portfolio? find out in just a few moments right here on "squawk box." [ clinking of plates ]

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welcome back, everybody. financial reform is at the forefront this week as congress heads back into session. joining us right now from his home state of new hampshire is republican senator judd gregg. he is the budget committee ranking member. he's also a member of the senate banking committee. of course our guest host today mark olson, former federal reserve board governors joining us as well. senator gregg, thanks for being here. the way politico laid it out this morning is you're going to have some liberal members of the senate who are going to really push their agenda when it comes to financial regulatory reform. do you think that's the case? and if that's the case is there bipartisan support? >> the problem we have this populist fervor saying that all banks are bad and the financial

system is evil and as a result we must do things which will basically reduce our competitiveness as a nation, pushing our banking activity and our financial services industry offshore and undermine our job growth and ability to create capital and credit if we do that. we have to try to avoid this call to the populist banner that's going on in this country especially in the congress. and we see a little built of that tone from the administration. look at this in a realistic way and take the issues which are problems and try to solve them but recognize we can't put in place a system that will be counter productive for the ability to perform credit by overregulating an area of the economy which is very mobile and can move offshore. >> although, senator, we probably can do things better than in the past. >> obviously. >> one of the issues coming to derivatives. do you think they should be more closely followed and monitored and have to show a lot more

transparency? >> you need transparency and margin and liquidity in the derivatives market. you need to get as many derivatives as you can on to a clearing platform so that you have the ability to basically know what's going on and there's actually something behind the insurance product, the aig being the classic example where there was nothing behind the insurance product. and of course in doing that you have to make sure that these clearing houses are also strong enough to be able to handle the amount of volume that is going through them and that they don't become the next too big to fail entities. and we have to address too big to fail. the market discipline disappears if you've got too big to fail as basically a culture. so we have to put an end to too big to fail. there are a lot of places where a thoughtful and comprehensive activity can occur in the area of resolution, in the area of too big to fail, in the area of derivatives. my concern is, however, that you're seeing this hue and cry

that is basically calling for a massive expansion in the size of the government's regulatory atmosphere and basically an attitude which essentially says that a lot of these products which are necessary -- i mean, derivatives are necessary for a fluid market -- are going to be chilled and forced offshore. >> on that subject, senator reid and yourself worked within the senate banking committee on a new regulation for derivatives. but we also see a parallel effort going on in the senate agriculture committee. the expectation is that they will produce something this week. will that get -- will that be included in the reg reform bill? >> yes. i hope that senator lincoln, senator chambliss can agree agreement on the commodities side. the senator reid and i have responsibility for the fcc activity. i think that will set a good template. of course the issue has come down to basically two questions.

one is end use exemption. and the second one is how much should you push on to clearing houses and on to exchanges. i have very serious reservations about pushing everybody towards an exchange. i don't happen to think that that works. i think that that will actually undermine the stability of the markets. so those are some of the real issues we have. i believe they're all resolvable. but as a practical matter, we haven't reached an agreement yet. >> senator gregg, we've also heard the volcker rule is something the democrats would like to take in maybe in a more stringent form that doesn't allow major banks to invest in private equities or hedge funds. this morning vikram pandit of citigroup said they'll focus on banking for the banking at citigroup. are some of the changes going to

take effect anyway even without the regulation? >> i think there's a lot more smoke than fire on that issue because of the fact as a practical matter depending how you draft it you're not going to impact most of your major banks' activity in a way that negatively effects their economic viability and their prosperity. but there's no question that the theory you shouldn't use insured assets, assets insured by the taxpayer respective activity makes sense. the devil is in the detail but my sense is the detail is not going to be -- is not going to create a negative atmosphere if it's done correctly and will actually be fairly positive. >> president obama will be calling people together on wednesday, some of the senators involved to try and push and tell us what he thinks should be happening with financial regulatory reform. do you have any sense as to what that message is going to be? >> well, there are two paths that can be taken here.

one is the political path where basically they just create an atmosphere that they want an issue on where they try to position their republican party as being for the big financial institutions and, therefore, basically disassembling the big financial institutions. or two, a path that says most of the issues are not partisan -- and they aren't -- most of the issues can be resolved through sitting around a table and thinking through the best approach. our goal should be two. two goals here. one, make sure we do everything we can to try to reduce the possibility of systemic risk down the road. and, two, make sure that our capital markets are the most attractive capital markets in the world for creating capital and getting credit. those should be our two goals. and they're not in -- they don't conflict. they basically can move down the road in parallel. and if do you it in a constructive way, you can make great progress here. we were doing that in the senate for quite a while. things got sort of turned off when the president decided to go

populist. i hope he'll come back to being >> all right. senator gregg, great talking to you. thank you for your time. >> thank you, becky. coming up, the stock of the day and our guest host, former fed insider mark olson gives us a few more minutes on the markets and the economy. first, though, let's check on the dollar as we head to break. "squawk box" will be right back.

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tomorrow on "squawk box," new jersey governor chris christie and his crusade to get the garden state back on track. also talk about those nice, friendly union types that had that nice little jingle about the governor. it was just despicable. anyway, i'll show you after the show. our guest host, former fed governor mark olsen. covered a lot of ground today, mark. >> we really have, and you've alluded the text, but i was

hoping we could have a chance, too, with senator gregg, because it seems to me there clearly has to be a tax bill at some point, and senator gregg is one of the people that has suggested we ought to not simply extend existing -- the existing tax structure, but actually look at some fundamental reform, and that would be nice if that could happen. some talk also about the value-added tax, but that -- i think paul volcker talked about that. >> he did. and said it made sense. he's -- anyone that saw him back when he was reagan's guy and thought of him as a big conservative, you can't put him into any box, i guess, can you? comes up with some interesting -- >> you cannot. but you can put him in a central banker box. he really liked that role and he liked that environment and he did that very well, and he continues to speak out and he doesn't -- he's a very thoughtful, very straight-forward guy. >> do you think it makes sense to bring the volcker rule in and -- >> it's very difficult. >> do you think it makes sense

to do a vat? >> a vat makes a little bit more sense. i think the volcker rule's going to be very difficult to implement. >> but you're saying this is somebody who's an adviser to financial firms at this point. i mean, why is it so difficult to put in place? >> conceptually, people like the idea of making sure that you're not taking insured deposits and using them to essentially bet the bank on things like that. and i think as the bill is being drafted right now, there are a lot of exceptions. but i think -- so, the volcker rule will be relatively narrow, at least in terms of its construct, but it's going to be a difficult thing to implement, a difficult thing even for him to truly define. but the value-added tax, i don't think there's a chance that's going to happen this year, but it's going to be something -- it seems to work well in europe. >> oh! >> and -- >> we're turning into -- we're turning -- i guess a lot of things work in europe and we're going to know here, right? >> if the alternative is the

u.s. -- >> if we get all the bad things they have, we'd better get some of the good things. >> you want the red wine? >> the red wine, food, rich, creamy sauces, the mistresses, everything -- >> august off. >> yeah, august off. >> would you rather have a higher income tax? >> i don't know. >> if we've already reached the point where we know we're going to have more tax. >> i want 4% to 5% gdp growth, not 1%. >> those are the loopholes -- >> not permanent double-digit unemployment, not, you know, a safety net that makes it impossible to hire anyone because you can't fire anyone. there's a lot -- you really want to head this way? >> i'm not heading that way. i'm just -- >> well, we are. >> all right, we're going to be right back. we've got many candidates, but there can be only one stock of the day. not really. a couple weeks ago, we picked two. anyway, "squawk box" is coming right back.