s.e.c. complaint. nonetheless, let's not forget goldman sachs did report first quarter numbers. they were better than anticipated and as you pointed out, although that bid/ask was wacky, the stock looks to be up a bit. still not regaining all the ground that it lost on friday. there is a look at the earnings per share number versus the estimate, well above as you see. and as has typically been the case for goldman, much of the strength coming in trading in principle investments, revenues were $10.25 billion. there is, again, a look overall with net income for the company. breaking it down, investment banking, after, of course, mentioning principle investme investments, we'll come back to that, that was down 28 from first quarter. there weren't that many mergers. you know that if you've been watching me that's one area where goldman makes money, advising on those. underwriting of equities was strength for it. $10.3 billion or $10.25 billion in revenues, 43% higher than

first quarter of '09. 60% higher than the fourth quarter of 2009. finally, fixed income currency and commodities comes in at $7.4 billion, a strong quarter on that front. props stronger than had been anticipated by some of the analysts that follow goldman sachs. we used to follow goldman sachs on the controversy front about how much it pays its people, and what good compensation practices are. as you may remember, in the fourth quarter of last year, they didn't accrue at all, ended up with a 35% compensation ratio in terms of compensation -- in terms of what they were paying their people, ratio to revenues. this quarter it comes in at 43%. interesting to note because that is lower than what has typically been a 49.5%, 50% average acruel for first quarter when it comes to compensation and benefits. and david viniar saying this will continue to be the case

given what he calls, quote, the environment that we're in and, of course, their good strong revenue numbers. but compensation and benefits, 43%. that trend lower that we saw last year, well, it does appear to be continuing. of course, as our viewers know, you can't ever tell what the whole story is until the end of the year because you can accrue at different rates in different quarters. as for goldman's balance sheet, take a look. $881 billion in total assets. that's up 4%. actually been going down prior to that. they have reduced level three assets, continued to, very small percentage of total aet total a you see. as i mentioned, of course, so much up much of the call is being div t diverted to the complaint on friday. michelle, any number of questions there, what were some of the highlights? >> david, just as you sergeatar your report, one of the best

questions i had on the whole call, very specifically to the general counsel, look, a synthetic cdo, you get in one, you have to know there is a short. that's how it works. did aca know that paulson was the short? and the general counsel said, i have no idea. and david trone, i'm summarizing here, he said you have no idea or goldman sachs has no idea, who are you speaking? he said i am speaking on behalf of the firm, how could you not have any idea, you brought the two parties together. what happened? and this is a quote, we have no basis for knowing why aca concluded what it concluded, i assume presuming -- referring to this suggestion in the complaint bit s.e.c. that aca was led to believe or somehow believed that paulson was going to be investing in an equity tranche. that has happened in the last two minutes. that's interesting. can i add a little color to what you were talking about with compensation? i had a full screen brought up

with the compensation ratio being lowest that it has ever been. the revenues are great. the earnings are great overall. but when you look at it from the point of view of the individual shareholder, 559 per share this quarter, right? i'm going to multiply by four to get an annualized number. you can quibble with that methodology, seasonality, blah, blah, blah, that gets you to $22.36 for the year, higher than what the consensus is, but if you go back to 2007, that number was $24.73 per share. there has been incredible delusion. so it may be that, remember there were complaints from individual shareholders that said why are you paying these people so much money because we, as the shareholder, have still not been made whole because of all of the dilution that happened. >> interesting when we talk about this case, over the last

few days, a lot of it may come down and michelle was mentioning as well to the simple idea of materiality. the general counsel saying we don't believe the law required it and that it was material. what is he talking about when he says that? he's talking about specifically whether in that prospectus for the abacus synthetic cdo there should have been a line that simply said the counterparty, in this case, paulson, was involved in choosing some of the portfolio. that, to me, would seem to be the central part of what a jury is going to ultimately decide. should that be in there and was its exclusion a material event that was not disclosed and therefore is it fraud? back to you guys. >> thanks very much to you, david. the white house getting a first chance to react to the big numbers from goldman now. the company reported earnings after the fraud charges were filed on friday, about this time, a little later on friday. as the president prepares to talk about all the issues here in new york on thursday on financial reform, we're talking

with austin ghoulsbee. so, austin, initial reaction to a blowout quarter from goldman sachs? >> you know, congratulations to them, i guess. when you look at this, i think, i'm not -- i haven't gone through their earnings report. i think it is clear that it has been a very successful financial year for financial institutions. and a lot of that is because the u.s. government stepped up and prevented them all from falling off the cliff, guaranteeing their -- >> just a second, austin. this is the space shuttle "discovery" landing in florida. this is their second attempt, by the way. the mission control waved off the first landing attempt but now they're home, as you can see. >> landing gear touchdown. >> clearing, running on day break.

>> all right. >> i just love it, the balloon on the back. >> after a mission to the space station. >> you know, i -- i have often heard people say, as i'm speaking, call me when the shuttle lands. but the shuttle actually landed while i'm speaking. >> it finally happened. your life is complete. is there any -- >> i'm going to miss the space program, by the way. tell your boss that. >> we have a whole new space program, didn't you see the -- >> it doesn't look like -- >> man on mars, mark. it is better than the moon. >> all right. >> that's the 20th century version. this is the 21st century version. >> 20th century version got us pretty far. let's talk about -- what were you going to say? >> goldman sachs. >> right, goldman sachs. what were you going to ask? >> i was going to say do you think there is anything inherently wrong or there should be any admission by the companies and a lot of the profits are coming because of the federal government. are you fine with the way the announcements have come? >> look, i -- there should be some admission of that.

and before they all pat themselves on the back for the great job they did and get a big bonus based on their profits, somebody ought to recognize a great deal of that profit came from interventions from the government saving their bae the >> let's talk about too big to fail. that's a bone of contention. we had kay bailey hutchison on yesterday talking about it. i was under the impression -- by the way, i am an a-political kind of animal. i was always under the impression that too big to fail was more of an economic condition or situation than a government policy. if you're big enough to cause a problem with the system, then you are, by definition, too big to fail. and don't we need some mechanism, no matter -- >> to end that? absolutely. absolutely. >> unless you want to step in and just prevent people from

getting that big, which is not usually what we do except the case of at&t long ago. we need some way to deal with the problem. >> yes, yes. we absolutely do. and, look, the -- i'd say if you look at this bill, it is coming at that from two sides and it is totally misleading for the republicans or mitch mcconnell to be get up and saying this is a perpetual bailout bill. it is neither taxpayer funded, as you know whatever monies are there come from fees on banks and it outlaws bailouts. it requires, if they get in trouble, either liquidation or breaking them up and selling them off in pieces. shareholders wiped out, management fired. that's required in the bill. so on one hand, it is ending the process of bailouts while also trying to limit the damage that these institutions can do to their neighbors through bringing

the derivatives out into the open and putting in some oversight, running through clearing houses by trying to put a consumer protection agency to prevent, you know, some of the excesses and consumer lending, by having higher capital requirements and liquidity requireme requirements, that's to keep them from getting into too much and at the same time, warn them there is no propping you up, there is not going to be an aig again or a citi again. you die. all we have is money for your funeral expenses. >> i was going to say, the money is only about $50 billion, right? that's not going to take care of much. >> it is not to take care of them. it is funded by banks and it is for breaking them up and selling them off. >> understood, but that can be a lengthy process. >> yeah. >> and in the meantime, what's going to happen to the system? i mean, for example, beforehand, would you have defined lehman as too big to fail? >> but hold on. the republican alternative, if you want to call it that --

>> i don't care about the republican alternative. >> they're saying there shouldn't be any resolution mechanism. we should just go through bankruptcy. that's what doesn't work. that's what happened with lehman. they're still over there in england trying to figure out how to get the stuff out of bankruptcy. that takes months. >> isn't your administration also saying to us, hey, it worked, we're making money on the t.a.r.p. the way the system worked it worked. >> we ought to go into that as a business model. this thing has been terrible. we never should have got to this point. i wish we never had been to that point. i'm happy that through good management we have gotten the losses -- it is not going to cost us $700 billion. it is down to whatever, $85 billion. that's $85 billion too much and the financial institutions ought to pay for the $85 billion. we'll shut that down and get out of it. that, you can't look at this and say that's what we want the plan to do in the future is go through another t.a.r.p., that's the whole point to have

resolution. is that if we had it, we would not have had to -- if we had the bill in place, when aig steps forward and says we're about to go under, if derivatives were regulated, and out in the open, and there wasn't any counterparty risk, it has been a tough year for you guys, too bad you're about to go under, and they wouldn't be too big to fail because they wouldn't be connected to all -- >> they were too interconnected. >> they were too interconnected to fail. >> we wish we could talk much longer. >> sure do. >> great to see you guys. >> thank you very much. austan goolsbee. a shareholders meeting this hour. where does the company and investors stand a day after citi posted its big numbers? plus, we'll hit the floor. >> hit the floor? >> i thought it said flour. see what else is moving, we're back in two minutes.

welcome back to "squawk on the street." i'm mary thompson outside the hilton where citigroup is holding its annual shareholder meeting, the third meeting for vikram pandit. the last two, the cbo received or heard an earful from the hundreds of investors who attend these annual gatherings.

we had a chance to speak to a couple of them before they went into the meeting and asked them to give us their review on the board and the management over the last year. and those reviews were mixed. >> i think they're doing okay. i personally am going to hold on to it. >> i'm here, again, to express my displeasure with the board. particularly the fact that there are still incumbent members on the board that have taken us through this entire financial debacle and reduced our company from what was to what it is now. >> one of those incumbents, dick parsens, arriving earlier today. he's revamped a board which now includes four new members. most of the directors arriving together earlier this morning. now when pandit takes the stage, does he so knowing the company he runs is in better shape than it was last year. fresh off of strong first quarter profit reports, citi is smaller, focused on being a global bank, not a financial

supermarket, and is guided by new management and, of course, those new directors. but some investors are still smarting from the bank's performance during the financial crisis. a government bailout and billions in losses leaving them with a smaller stake in citi. some like the california state pension fund calpers wants accountability. it says it will withhold its shares or votes for the re-election of two directors. those two directors being dow chemical ceo andrew liveris and judith rodin of the rockefeller foundation. calpers saying in a statement both incumbents served on the company's audit and risk committee before the financial crisis when appropriate risk management governance practices were lacking. the meeting is under way as we speak. at the end, of course, we'll know whether the other shareholders voted in line with calpers, but as it stands now, it is not expected any of the directors will be pushed out. they're all expected to win re-election. pandit is actually addressing the shareholders as we speak. so i will have highlights from his speech coming up at 10:00.

mark and erin, back to you. >> thank you, mary. coming up, some premarket movers to watch ahead of the open. and is it safe to buy the big banks that are driving the markets higher right now? and later, new details on legalizing marijuana in america. trish regan has some surprising revelations from our cnbc associated press poll. that's coming up after the opening bell. ♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco.

we got you now to the opening bell. here is a check on the futures right now. we're gaining strength. well, no, actually, no, we're not. but we're still looking good. s&p looks like it will rise, oh, i don't know, going to say they

took it away before i could do the math. but the dow was looking up about 20. s&p up maybe 6. >> a few stocks on the move now for the real time flash, get to work matt nesto. i'll do it. harley-davidson trading, as you can see, 32.77, going to open higher. first quarter profits fell by 71%. human genome sciences in the news, stock lower, company saying the lupus drug it has been working on with glaxo failed to meet secondary goals. and td ameritrade, the online brokerage, reporting a 23% jump in second profits that was short of analysts expectations and the stock will open down just slightly. we'll speak to ameritrade's ceo today at 10:50 a.m., mark. the volcanic ash plaguing european air travellers is finally starting to dissipate. eurocontrol expects that roughly half of the normally scheduled

flights over europe will take off today. britain, though, still having problems. another eruption formed a new ash cloud that has spread towards great britain. british airways said it will not operate any european flights today. brings us to our street poll. would you fly to europe right now -- >> today. >> despite the volcanic ash hovering above the continent? this is a big picture question. don't have to worry about europe. the point is, would you go up in an airplane knowing that this volcanic cloud was around? >> was around, right. you don't know whether you're going directly through it or through a thick clump or a thin clump. >> so -- >> please vote. >> vote. squawkonthestreet@cnbc.com. final countdown to the opening bell right on the other side of this commercial break. focus on the bank-driven market rally. two investment strategists on

whether they'll put the money right now in the big banks. we'll be back.

all right, you're watching cnbc's "squawk on the street," live from the financial capital of the world. the open bell is going to wring in about 1:45, 1:15. no, i was right the first time. that countdown is actually to the opening of trading. the bell -- >> is ten seconds earlier. >> ten seconds earlier than that. headlines. goldman sachs nearly doubling earnings from a year ago. posting a profit for first quarter of $3.46 million. stock up in the premarket. number overshadowing s.e.c. charges. coca-cola beats estimates. net income of $1.35 billion, stock bid lower. j&j up slightly, they beat expectations. >> let's bring in a trader with scotland equities. dan, you got the citi meeting, goldman, the latest bank to proverbially hit it out of the

park. what do you think about financials? >> i think we found our michael orr in the earnings front. after getting blind sided last friday, the market found support on the earnings front. had a gap opening last thursday, broke down, will look to fill that gap today. i would like to see the xlf trade as the banks continue to trade higher. >> anything else? >> other than that, looking at volatility, the one reason i think that we're seeing a market kind of support itself here is that realized or historic volatility is around 9.25%. the fix, if you look at forward looking volatility, 7.34% coming in this morning, a big gap, so i think we're going to continue to see volatility to come in. that's the place we're seeing right now in the -- >> dan, thank you very much. we appreciate it. >> you're welcome. >> mark, by the way, goldman hitting it out of the park to

ensure their debt, jumped on the fraud charges and they're back down again. >> you're watching the opening bell. the big board, it is the archbishop of new york here for the annual breakfast for the wall street division of the archbishop committee for charity. and at the nasdaq, the animal medical center, a nonprofit veterinary center in new york celebrating its centennial year, been doing it for 100 years. >> going to refrain from any commentary on anything. our market reporters were standing by, up eight points for the dow. bob pisani. >> goldman sachs will open up a couple of dollars more here today. big story really is continuing earnings reports, kicking off earnings season for the hmos, airlines, industrials, and they're all generally higher. so in the hmos, united head hea the first to report, revenues are in good shape, boosted their

2010 guidance. that opened up 3%. in the airlines, delta kicks off airline reporting season. they had a loss, but it was a loss in line with expectations, just opened up 1%. generally pricing is improving and capacity, well, you know, putting more people on those airplanes. in the industrials, still some good news too. in the industrial space, we saw eaten reporting earnings. we saw illinois tool works reporting earnings, all above expectations, both of them raised guidance. both eaton and illinois tool works will be opening to the upside. still waiting for them to open. ibm is a mixed bag. we have good news with ibm. software up 5%. and some of the hardware was doing better, up 2%. but service signings, this is a key metric, it is future activity down 7%. stocks open to the downside, but remember something, ibm has sold off the last two earnings periods rather hard. don't be surprised if you see a couple of weak days for ibm. scott, how are we looking at the nasdaq? >> talking about ibm, it is going to give us those results

which were better than expected. technology and the nasdaq up .4%. apple,ia you hue report after the bell today, apple's sxeg tagss are hig expectations are up high, up .3%. look at cisco this morning, higher by 1% as well. another key enterprise tech spending business there. microchip is up 3.5%, upgrade over at ubs. look at -- or excuse me, yeah, microship was upgraded over at ubs. ameritrade up half a percent. their results were short of expectations and cut their outlook for the full year. zions bank corporate is up 1.5%. contradicting calls here. downgraded at bernstein, apparently the stock likes the upgrade. it is up 1.5%. northern trust down 4.75% as the ups was below expectations. >> when you look at every pit down here on the nynex floor, the risk trade is back on. we're looking at crude prices

for the front month contract, for the ma contract, above $82 a barrel. the most active contract, the june contract, it is up over $83 a barrel, close to $84 a barrel. we're looking at copper prices that are bouncing off their three-week low. gold up $7. keep in mind, we're also hearing from kuwait's oil minister that oil prices around $75 to $90 a barrel, that's a pretty good price for oil. and that's where he thinks that oil prices will be for the near term. meanwhile, we're also looking at gold, seen as an inflation hedge by many traders, and seeing signs of inflation when you look at india raising interest rates, look at the acceleration producer prices in germany. the other factor helping oil prices today is the fact that we have had about half of the flights in europe that were grounded back in the air. and that is helping to lift the proxies for jet fuel. that is heating oil and gas oil as well. nick santelli, to you in chicago. >> thank you very much, sharon. we're seeing something today that is interesting. we're seeing the curve flat a

little bit, which means short and maturities like a two-year note, their rates rising a bit, it is leading the curve flatter. the reason why, very fascinating. 9:00 eastern, did not raise rates. but they're talking tough for maybe the june 1 meeting to actually begin doing so. that put a little flattening in the u.s. curve. wasn't the only reason. thursday we get announcement how many two-year, five-year, seven-years we'll sell next week. 27, 28, 29th, that's tuesday, wednesday and thursday. the dollar is down a little bit today. and we saw that greece moved some three-month bills, their yield about 365 over subscribed to. ireland moved some paper as well. mark haines, back to you. >> a quick check on the markets for you. the dow as indicated by the futures has opened higher. actually a little stronger than we expected, up 32 points. s&p up 7 points. which is way stronger than the

dow industrials. and the nasdaq, actually the dow is lagging the other two indicators. let's get the info from the early tick, joining us david kelly, and jim paulson, chief investment strategist with wells capital management. david kelly, what is your strategy these days? >> well, i think you still have to play the trend, try to avoid the distractions. there is a lot going on, european volcanos and the financial issues last week with goldman sachs. but the basic trend is the economy strengthening here. we have numbers earlier on this morning from the international counsel of shopping centers showing very good retail sales right at the middle of april. the economy is strengthening here. and for the last year, the right play has been ignore the little corrections along the way, recognize that if the economy recovers, the stock market is cheap, and we still think that's true. >> i don't want to get into an

argument with you, but, you know about the economy, but jobs still lag, housing still lags, what is more important than that? >> jobs always lag. and what is most important is actually economic growth. the growth generates the jobs. we are finally see something job growth. we saw that in march. we'll see some more of it in the second quarter. but we -- when we look at the numbers, it looks like 3% gdp growth in the first quarter, about 4% to 6% growth in the second quarter, consumer spending in the first quarter looks to be up about 4%. so we're seeing some gradual momentum, but we got a long way to come back. that's why people don't feel is right now on wall street. >> jim paulson, can we improve if unemployment stays at 10%? if we fix the underemployment problem, for example, you start to see people who are underemployed get better jobs, if that fixes but the key unemployment rate doesn't change, can we still have the market go higher, profits go higher, gdp outpace

expectations? >> well, i think so. i'm not so worried about the unemployment rate from a stock market perspective, erin. if you look back historically, matter of fact, since 1948, they started to keep the month end unemployment riot, we had the highest unemployment labor rates. oftentimes we also have produced some of the greatest growth perspective growth in the economy from the highest unemployment rates. we had high unemployment rate, for example, throughout the 1980s, but we had very strong economic growth and, of course, very good stock market. i think there is a few things that are coming down the pike that could still be a real positive for this market. i agree a lot with david. i think the economic momentum is the biggest thing, but there is still a lot of cash out there that is underinvested in risk assets for $7 trillion in the household sector alone. almost a record-setting proportion in relation to disposable incomes.

that at some point, maybe not this year, will get brought back into the market rally and create more upside. and in addition to that, i think we're very close to restarting bank lending. if we have job creation again, we're going to see some consumer loans. if we get inventory building started again, we'll see commercial industrial loans. if you restart the lending engine, i think people will feel more confident about the sustainability of this recovery. and then while we may be pricing in a sustainable recovery now, i don't think we're pricing in a better than average recovery. in other words, there is still a lot of new normal thinking. and if this proves to be a better than normal recovery, which i think is possible down the road, i think that could be another catalyst to further upside in this stock market. >> but, you know, to your question on unemployment, the one thing i worry about here is the unemployment rate will begin to come down in the second half of this year, believe, based on 4% gdp growth. but there is such negativity in the economy right now that a lot of individual investors are still sitting in cash, still

pour money into bond funds and missed this big run-up and in danger of -- they missed a lot of run-up and could miss more of it here, but just by staying so negative because they hear the economy can't recover. by the time they figure out that the economy can recover, the stock market may not be cheap anymore and that's a terrible shame for the small individual investor who i think is getting left behind here. >> thank you very much. bank tax talk is back. there is a new push in the senate. we'll be debating that coming up. >> and goldman sachs, we talked about their first quarter way better than had been anticipated and that came on the heel of citigroup's return to profit, way better than expected. a looming threat, new taxes, increased regulation, maybe fines and fraud charges from wall street. is this time to get out of the big bank stocks? we'll find out next.

cnbcsquawkst. and welcome back to "squawk on the street." i'm mike huckman in this morning's "real time flash". it is all about the ash or the ashalator as jamie baker is calling it. first of all, delta airlines, though, their shares are higher this morning after the company said despite the volcanic eruption and disruption that it expects to post a profit in the current quarter. that forecast reports with jpmorgan's baker is telling clients in research note, for all the media attention to the ongoing flight cancellations especially over in europe, baker points out that for the domestic carriers, transatlantic revenue makes up a small part of their top line. a roughly estimated $100 million in direct u.s. losses from this situation. continental has the highest

percentage of revenue at risk. usair the lowest. there is all the merger talk in the sector as well. stephan padrazi will have more on "squawk on the street" and a live report from paris and that's your "real time flash". citigroup meeting now in new york. citi shares have been really right around that $5 per share level, which is so key. both for getting on margin to short and big investors buying it to bet it will go up. and citi shares are up more than 7% over the past week of t. right now just over $4.99. the profits were $4 billion, profit was the key. many people are saying citi is no longer toxic. goldman in the meantime this morning, posted significantly better than expected bottom line results this morning. off 8% this week after the s.e.c. filed fraud charges. down again this morning, mark. alan lance is editor of "the lance newsletter."

jim paulsen is back. jim, let me start with you. when the goldman charges were filed last week, we were speaking on friday afternoon, what is your perception of goldman sachs right now? would you come in and buy if t say this is way too dicey of a situation? >> well, i'm not sure specifically that goldman sachs, erin, if i would be a buyer now or not. i don't follow that company very closely. but the sector i very much like. i would be fine owning a part of that within the diversification of other financials right now. i just think that -- i think it is not uncommon at the end of crises to have what is happening to goldman sachs come out. you know it kind of common in the past to close the barn doors after the cows left and we have some of that. i think the fundamentals here in this industry are really good. we have recapitalized this industry. the charge off rates have seemingly peeked now. there is increasing evidence of

that. the relative price performance of the stocks do really well as chargeoff rates come down, which will happen over the next couple of years. we have got a wonderful fundamental environment of very steep lending spreads and steep yield curve, cheap deposit balances. >> right. >> you're seeing activity come back. you know, the goldman report fixed income activity was great. i think fundamentally i think that trumps the likelihood of what may come out of this suit. >> alan, would you buy it? >> well, erin, goldman sachs, we had a target of 185 to 195, where it was trading, you know, before friday's news. we were starting to take profits and getting out of goldman from recommending it on your show the day after thanksgiving 2008. so but the financials in general i think jim is right. the trend is up. the fundamentals are good. why we are a little bit hesitant

and gone from an overweight to -- as far as underweight on the banks and an equal weight on the financials in general is just the inherent risk of if you look at the earnings, and the progress that they have made, most of it has been proprietary trading, and the derivatives. and with what is going on now, with bank, looking at regulatory reform, and the added, you know, catalyst now, with the goldman suit, i just think that a lot of their lucrative areas are, you know, might be restricted and a great source of profits, you know, might be lowered. i think it is going to be a difficult time period for the financials. you have to be in the right ones. for example, citigroup earnings were good, everybody is doing the right things, but their nonreoccurring revenue and recurring revenue was down and tangib tangible book value was down. they still have a ways to go.

jim is right. they made great progress, but it is something i would be equal weight at best. if you're underweight, be very selective. >> all right. gentlemen, thank you. alan lance, jim paulsen. jim played a double hitter. thank you for that. surprising new details on what american really think about legalizing marijuana. cnbc has a special series starting today. that's coming up. clearing the way for air travel over the atlantic and to europe. we're live to show you how the air traffic is moving. don't forget, the street poll. would you fly through the ash today? go vote. squawkonthestreet.cnbc.com. with fidelity, you can take your trading around the world, because now you can trade u.s. and foreign stocks online, in 12 markets, 24 hours a day, all from the same account, and settle in u.s. dollars or the local currency.

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europe is getting ready to open air space after last week's volcanic eruption in iceland.

cnbc's cnbc. is this survival of the fittest of who gets the first flight out, stephane? >> the largest airport in france is not back to normal yet. we have 800 flights scheduled for today, which is approximately 40% of a normal day. air france gives priority to its long haul destinations, including some flights to new york, which the company hopes to reach 80% of its schedule today. that being said there are still a lot of disruptions in europe because of traffic restrictions, but also because some airports in europe are still closed. the french transportation minister is confident that the situation will be back to normal within the next three days and he hopes that 85 dozen french people should find their way back home by the end of this week. also they're confident that the new ash cloud which is in the uk right now should not impact the traffic in france in the next

coming days. was it the right decision to ground so many planes so quickly? the engineer admitted that the first measure to estimate the density of the ashes was made only yesterday, which confirms that the decision to ground flights in europe was taken as a principle of precaution. who is going to pay the bill? that's the question also because the airlines and europe lost $1 billion over the last five days. $250 million just for air france. this afternoon, the french finance minister and the tourism minister will meet. airlines tour operator to check the damages and check who is going to pay the bill, but at this stage there is no guarantee that the french government will offer a compensation to the airlines in france. back to you. >> stephane, thank you very much. capacity from new york to paris or paris to new york will be at 80% of normal from air france.

we asked you whether you take a flight to paris or london or anywhere else in the ash cloud? right now, vote on our street poll, squawkonthestreet.cnbc.com. yes or no. and, mark, coming up, i'm very excited about this story. it is called "the ash detector." back in 1982 when the 747, the four jets shut down because of an ash cloud and eric moody, the pilot, was able to restart them right before it crashed -- >> before it would have crashed. >> right. it didn't and everybody survived, it was fine. after that, another pilot came up with an ash detector, which could have gone on the planes. it was too expensive, they didn't think it made sense. we'll talk about it because he'll come on the show and he thinks right now it is still not safe to fly. primarily because the way ash acts in clouds is different than the way it acts in the open air, and when you fly, you fly through an unpredictable combination of blue skies and clouds. so we're going to talk to him about it today. >> all right.

>> at 2:00 eastern on "street signs". >> i'll tivo it. from ash to hash. money and marijuana all day on cnbc and cnbc.com is covering it as well. cnbc's trish regan is back at hq. the brand new poll on pot. >> i love that segue. ash to hash. hash is what we're talking about here today. thanks, mark. our poll is part of a cnbc.com special report. blowout special, pun intended, that takes an in depth look at the economics and politics of marijuana in america. it shows americans oppose legalization of pot but support it for medical reasons and are unshirt about the potential impact that legalization would actually have on the economy. while the idea of legalizing marijuana was one pretty far fetched, you know the reality here is that it soon could become a reality, at least on the state of level starting in california. voter will decide this issue later this year. in our poll, 56% of the people surveyed in california already support the regulation and

taxation of marijuana ahead of a november pilot referendum to do exactly that. also i want to show you some more states -- more stats here. 56%, as szweaid support regulat and taxation of marijuana. nationwide, a different story going on. our poll shows 55% of americans oppose the complete legalization of any amount of marijuana, however 60% favor legalizing small amounts for medical purposes only. and if marijuana is legalized, well, what do you know, most believe state government should tax the sale of it. as for how much to tax, it is up for discussion there. just over a third of the people we polled say a 5% tax would be too low, while almost half say a 25% tax, you know what, that's going to be too high. so if pot is legalized, how big of an industry might it be? what is the real market worth? is it millions of dollars, billions of dollars? the number may surprise you here. i'll have some answers coming up

on the call at 11:00 a.m. check out our special report "marijuana and money" online at marijuana.cnbc.com. and, mark and erin, one of the interesting things i this i about this right now is that we're at a rather special time in history, at least, as the marijuana enthusiasts would like to say. because if you look back at prohibition, and the prohibition of alcohol, that was actually repealed for economic reasons in the 1930s, because the government said, hey, we can tax and regulate this and make a lot of money. and so that is some of the chatter that we're hearing surroundi ining some of the eff in california to get marijuana legalized. >> that analogy kind of limps because alcohol started out as legal. then was made illegal. >> actually it doesn't totally. because mare yaijuana started os legal. it was listed in certain pharmacy recommendations back in

the 1890s and was something that people took, believe it or not, on a regular basis. >> okay. >> all right. up next, coke, j&j, what you need to know about those major dow components out with earnings right now. and how to bombshell proof your portfolio. there is a lot of meanings that could take. we'll be back.

oh, yeah, we're still live and we're still looking at the financial capital of the world this is it, the second fun-filled hour of "squawk on the street." i'm mark haines. stocks are nicely higher. caterpillar, bank of america leading the dow. both up more than 1%. harley-davidson, best performer on the s&p, up about 8%. that stock along with mcdonald's, chevron and home depot hitting 52-week highs. erin? all right, goldman sachs at the center of a legal storm, doubling its earnings beating

expectations. executives of the firm, everybody loves to hate right now, talking to investors on the conference call. michelle caruso-cabrera was dialed in. michelle, what did they say, how specific did they get on this case and, of course, for those just joining, did lloyd blankfein break tradition and get on the phone? >> no, he did not. this was the general counsel who had -- who joined the call to discuss the legal ramifications and also the cfo. let's run through the numbers and then a sense of the tonality of the call. numbers better than expected. $5.59 per share, that was 91% better than a year ago. far above the estimates. that translates into a profit of $3.5 billion. revenues came in at $12.8 billion. also better than expected. the expectation was only for $11.1 billion. now, the conference call -- and, by the way, fixed income, the biggest provider here of revenue, $7.4 billion out of that $12 billion coming from fixed income, which really knocked it out of the park

according to analysts estimates or what they had thought they would get. so the conference call, most of the questions going to the general counsel related to the complaint from the s.e.c. at moments, it got a little tough. we have edited down -- there i was three-minute interchange between david trone and the general counsel. we want to play for you the following 50 seconds to give you a sense of the tonality. this is david trone and the general counsel of goldman sachs. >> the synthetic needed a short presumably aca knew that construct. did they know that paulson was that side of the trade? >> long pause, long pause, long pause. >> i have no idea. >> you mean you, as a person, or goldman sachs itself has no idea? because you were the broker, right? you brought the parties together. >> long pause. >> me as a person, no, i'm

speaking on behalf of goldman sachs now. what i'm saying is -- >> right, right, so how could you not know the -- you know, you were the -- you brought the parties together. >> okay. that was edited down. we took out a chunk in the middle. that gives you a sense of the kind of questions that they were getting, so not so much focused on the numbers, though people did ask questions about the bottom line numbers, but in the end, very focused on the s.e.c. complaint. back to you. >> thank you, michelle. two dow components out this morning, coke and j&j, both beat the street. coke's revenue fell short. tracking both stock moves, as the day goes along, mike holland, chairman of holland companies on j&j, david katz. michael, we'll start -- >> i can hear you fine, thank you. >> we'll start with you, michael. i'm told i'll start with david. david katz, should we buy coke?

>> we like coke here. what coke did was they delivered consistent growth. the stock selling at a pretty reasonable 16.2 times this year's earnings, we think the stock easily has 20% appreciation over the next year, year and a half. it is a very low risk investment in a pretty risky market. >> how fast are coke's earnings growing? >> we think they should be growing in the low double digit area in terms of the bottom line, which is very good. in terms of predictability, and you're not paying a whole lot for that. >> all right. so you think i -- well, if i'm paying 16 times, something that is going 11 times, what am i paying the premium for? >> you're paying the premium for consistency, for the ability for the company to come through with earnings, through good times and bad times. probably in this market their earnings will not look glamorous relative to a lot of cyclicals and companies coming up with

strong earnings. we wouldn't earn 40 coke coalias in a port fo portfolio. >> you own and are continuing to buy coke, correct? >> we do. we started to buy our position at the 39 to 41 level about a year ago. we think it is worth about 64 pdza share so we're adding in here and think you have nice upside. >> thank you, david. >> thanks. >> so let's bring in mike holland, owning shares of johnson & johnson, out with earnings today. you buying more? >> erin, yeah. i think it was a good report. i think all the things that are attractive about coca-cola as david katz was talking about or even more attractive about johnson & johnson. and actually selling at less than 14 times next year's earnings. it has a 3% yield. and it is easily one of the best managed companies in the world. and if you want to own a health care stock to take advantage of some of the things that growing on in washington, it is probably as good a choice as you can

make. >> how are they going to ben sfit? >> we . >> it is interesting because the current quarter is one example of that. when the ethical drugs didn't do all that well, the consumer was kind of -- they did it in the medical technology area. the instruments area. they have figured out ways to make money in the health care space for 25r, 50 years and wil continue to do it. they understand what is going on in washington better than i do and they'll be able to make money out of it. >> why do you think j&j shares will go? pe less than 14. what would be a fair pe valuation and how much higher would that be than where it is now, noting it is 26% higher already. >> that's a big underperformance to a lot of quality companies. that's a good point. 26%. while it sounds pretty big by itself, plenty of other companies have done much better than that. i think the stock deserves to sell at -- not at a market multiple, which it is, but rather a premium to the market.

i think you could probably get earnings growth, plus let's just say 5 to 10 to 15% over the next several years. you get a yield right now that is 3%. that yield grows, because they increase the cash dividend, and i think you probably get an appreciation in the multiple of the company. it shouldn't be a 14 times, it should be higher. >> mike before we go, he want to make sure that that penn beat harvard in lacrosse over the weekend didn't escape your attention. >> i'm sorry, are you a lax daddy? is that what you are? congratulations to your son. >> my son is going to hofstra -- >> i know. and he's playing well for hofstra, right? >> i'm giving him a hard time. no way penn should have beaten them. >> hofstra is having a good season as well. >> they have been having some tough -- >> i want you to know, mike, mark is just tick lating during your interview, he's got to get in, has a crucial question and i'm glad you got it? >> i want to jerk his chain. just wanted to jerk his chain over harvard lacrosse.

>> the lax daddies are tough. >> ibm is another dow component and they'll report their numbers after the close today. stocks taking a hit leading into that. bob pisani has that and the other big stock stories of the morning. mr. pisani. >> good corporate earnings, better than expected economic news out of germany, the s&p over 1200, that's psychologically important. we got ibm and good news and bad news. the good news is software sales were good. hardware sales okay, better than expected, up 2%. service signings only up -- were down 7%. folks, that's a key metric looking ahead. that's not a very good sign. and that's one of the reasons stock is a little down here. you notice how ibm has underperformed. ibm is the lower line here, the xlk, the whole tech sector, that's because it is not exposed to the pc group, the group that is doing really well recently. let's move on, talk about other positive news. look at the retailers, coach, one of the first ones coming out, reporting here sales up 5% overall. that's pretty good. they raised the dividend,

authorized $1 billion buyback. that stock doing a little bit better as well. industrials, first ones are coming out. illinois tool works came out and eaton came out and they raised their guidance overall. on the airlines, i don't want to make too much of it, but delta in line with expectations, first airline to report. pricing was better. load factor also on the upside. and they said they'll be profitable this quarter. who would have thought? how are we looking at the nasdaq? >> higher today about .3%. but not getting a huge jump off the fact that ibm had earnings that were better than expected. now the nasdaq is up .3%. that's about 8 points. look at the big stories of the day. it is going to come after the bell. apple and yahoo! report results. apple lower by .75%. it sold off yesterday, could be because there was data out from the npd group related to mac sales, potentially they could fall below some of the very high whisper numbers or below the

expectations out there. that will be a key metric to watch. the iphone and the ipad, what apple says about its computer business, that being the mac. look at yahoo! after the bell as well, .2% to the upside. intel ceo stacy smith on "squawk box," optimistic, had good earnings as well last week. cisco is higher as well. to sharon at the nymex. >> on ice we're looking at oil prices up after three down days. we're seeing the biggest surge in the front month nymex crude contract, that's up over a dollar, that will expire at the end of the trading session today. we're seeing the surge in equities or the upbeat outlook for equities helping the sentiment in commodities across the board. and the risk appetite for commodity etfs is back on. whether you're talking about the uso, the oil etf or broader commodity etfs. and looking at the double long etfs for commodity, that's seeing a long of buying activity today. gold futures are up after the two-week low, buying on the

dips. we're seeing buying in the gold etf, the largest one the gld that holding is there now at a record level. and meanwhile, keep your eye though on what has happened to the baltic dry index. making an interesting point about when that baltic dry index peaked, often we see commodities peak and sell off as well. we have seen that considering the fact that oil prices were ed aat $87 two weeks ago. lots of stuff ahead this morning, including fantasy finance. >> what is that? >> i don't know. is it a new game, like fantasy football? >> maybe so. >> the truth about the now infamous synthetic cdo, whether it offers value at all. and the bank tax coming back, being debated on capitol hill, likely will get into legislation. we'll talk about it right here. plus the man who knows if the individual investor will get back into the game, just heard him talk about $7 trillion of household assets, i believe that

was jim paulsen, sitting on the sideline, marinading, the ceo of td ameritrade will talk about whether it is time to cook.

nesto is out. that means i'm in. i have stocks on the move. let's talk about parker hanafin, a motion control systems maker. it boosted its outlook for the fiscal year and profits tripled. weatherford, one of the top four global oil field services companies, wft, posted a quarterly loss. the company says it was hurt by slack demand. and illinois tool works swinging to a first quarter profit, boosting its full year forecast and citing strong global sales of auto parts, an interesting point. all right, now back to cnbc global hq, where david faber throne is -- >> throne? >> -- is located. yeah he has a throne, as well he should. >> yes, of course. >> what's up? >> thank you, mark. the s.e.c.'s complaint against goldman sachs has put the spotlight on a now defunct product, the synthetic cdo. a market, though, that boomed in

2006 and 2007. james frischling knows the cdo market intimately, now runs nuo capital, it helps people understand the complex securities like synthetic cdos and others that wall street created. it is nice to have you here. the synthetic cdo market, you started in structured products in early 2000 and watched this market grow. was there a place for this product to begin with? some would say including me it is somewhat reflective of wall street's ability to create things that in some ways don't even seem necessary. >> there are investors in the world that need aaa securities or need exposures to various underlying asset classes. and i think the genesis of this product had a lot to do with rather than building out all their own complete infrastructure was to outsource some of the asset management responsibilities of these products to the collateral manager of a cdo, but also to generate the proper risk return where in the capital structure,

what ratings they would get and the return they would get for taking a less liquid debt investment that was backed by the cash or synthetic but essentially the bonds issued, the tranches issued by the cdos. >> i get cdos, though, but then a drive trerivative of a deriva a derivative. >> i think many people and the government faced the stock or cash standpoint was a fraction of what ended up becoming the exposure to subprime as a result of synthetics. and i think one of the questions being asked and we talked about briefly was were these transactions or were these trades? i think from mr. paulson's perspective it was a trade. from a number of investors, they viewed this's new issue. they viewed this as a transaction that would be around for a multiple years, earn their

coupon and get their principle back. and i think one of the arguments we're having in the case of this abacus deal is was it a trade or transaction, is there a legal difference? i defer that to the attorneys. that's one of the issues people are arguing about, was this in fact -- >> trade being shorter term, transaction being longer term. >> i hear from goldman and with all respect, they were the market maker. they were standing in between a buyer and seller, a long and a short. >> guy comes along and says i want to short the mortgage market in a big way and they want to accommodate that desire and see an opportunity to make money doing it. >> absolutely. if they turn around and say we have a guy that wants to short the mortgage market, anybody want to go long, i would say without question that's a trade, and i think people do that all throughout wall street without question. >> how does this differ, in your opinion, and why would it necessarily be a bad thing? >> well, i think my question would be and, again, all legal issues aside, it was certainly made to look like something else. there were marketing books put together and with all the proper

disclosures and i red throuad t them, don't rely on this, you could lose your money, we might have nonpublic information we night not sha might not share with you. was it made to look like a transaction and was the impression given, legal or not, was the impression given thises with a deal that got the seal of approval or endorsement and made to feel like this was a transaction that a invest coor could expect to get their coupon. when you're a investor, a aaa investor that principle better come back to you because you can't make up the losses in a lifetime that is ensued. >> final question here, in the market as you saw it, and you put together a, why you know, you were heavy into synthetics, aware of them, wasn't it typical to be conversation between the potential manager and those who were going to short the portfolio? >> it is a great question.

i'm still a little confused as to how aca is such a victim in this when they have clearly met and spent time with mr. paulson and goldman and a portfolio was constructed with all three parties in my opinion and how much of that information was given to the investors. but these were highly structured deals, highly complex and, yes, there was lots of negotiations, not only among the manager and the arranger and the equity investor, but a aaa investor or model line could come in and give their terms. at the end of the day, all the terms need to be compiled, all need to be presented and then decisions are made whether to move forward with the transaction or not. so there was a lot of dialogue. i don't know if some of the debt investors were aware of all of those discussions. but aca certainly understood mr. paulson was playing a role in this transaction. >> we wonder whether in fact is the s.e.c. basically saying this entire market was not a good market or one transaction in particular. >> i don't think we're going to see any more synthetic cdos for some time and probably not ever.

>> okay. >> and i certainly think people are looking at the participants in this market and questioning was this casino somewhat rigged. if it is buyer beware, so be it. but i'm not so sure that's going to answer everyone's questions and certainly not the public. it will fail in the public, in the -- i guess among the public. >> thank you. appreciate it. james frischling, back to you, mark. >> just ahead, another real estate bubble lurking perhaps on the other side of the earth? when it bursts, could it be a whole lot worse than what we saw here? we're going to look into that. that would be if they had mortgages, but they don't. and three ways to protect your money from another goldman sachs-type bombshell. as we head to break, we'll show you a few of the trading highlights. coach is on that list. lou frankfurt will be on our air later today. and the airlines, still mixed today. delta lower.

but a couple of them higher. we'll be back. ♪

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7:28 on the west. 10:28 on the east. 10:29. head tlnz hour, 44 s&p stocks hitting fresh lows. j&j and harley-davidson reporting better than expected earnings. the ipad will be available in the united states on april 30th. many wireless networks and universities across the country are unable to use the ipad because it is a data hog. and greg palm says there is no intention to have ceo lloyd blankfein speak on the s.e.c. fraud charges, something we're already aware of. let's look at the markets and their internals. dow is lower, just slightly. nasdaq, s&p are higher. let's look at advancers, decliners for the new york stock exchange and the nasdaq. on the new york stock exchange, you're looking at a little bit over 2 to 1 in the advance and decline, interesting give than the dow now turned negative, down about 5. on the nasdaq, slightly better

margin but still in favor of advancers. the nasdaq is up slightly. if you thought the u.s. real estate market was a roller coaster over the past couple of years, look at what jim chaino continues to kohl t s ts to cal to hell. that blue line is the chinese housing index, back at peak levels not seen since 2007. by the way, note that it was -- had gone up more than ours, but also that the correction was much more significant than that here in the united states. the chinese government has taken aggressive steps this week to let air out of the bubble before it bursts. let's go to trading the globe, tim seymour, emergingmoney.com, joins us from new york. that chart is an interesting one. because it shows it is a lot more volatile of a market. >> good morning, erin. it is a lot more volatile and i think that's indicative of the loan growth in china, in the property market. they have thrown so much money, long growth, up 44% in the property market. even though, you know, the overall long growth is about 21%. that type of volatility is what has a lot of people very

concerned. and, you know, i think there is truth and there is hyperbole. there is no question there are bubbles forming and i think it is time to take a look at really the reality of where there is one. >> so is there a real risk of a bubble in china? they don't have a mortgage market like ours. and on top of that, the country has a lot of cash. so a sort of debt issue that the united states had that made our problem so much worse, they don't have. >> right. the securitization, the synthetic cdos which you were talking about are absolutely nonexistent. the household debt to gdp in china is about 17%, 18% and the u.s., 96%. and if you look at the growth of housing prices in china, again, up 11.7% year over year, but they have more or less kept line with gdp growth and you can't say that for the u.s. property bubble of 2005 and 2010. i would say when you're looking at the bubble be more concerned about it on the local government

level where these are the entities that have been getting the cheap funding, they probably are 40% of the property loans. that's where the problems are. on the consumer basis, this is an underlevered economy and underlevered household growth. and the urbanization of the chinese population is not to be underestimated. this is increasing and it should be increasing property prices. >> right. they also have that kind of broader macro economic issue which always stuns americans to hear. they have got to create more than 20 million jobs a year just to stay even. 20 million. >> you're right, erin. the socialists for china to me means that, one, they're more ware of the property bubble than anyone, affordable housing in china is a must for their society. i think this preemptive strike, it is interesting, we were all expecting rate hikes in china first and second quarter. these aggressive property moves may alleviate some of that pressure. that may be, you no hknow, veryd for overall markets in the global economy. in the short run, they're focused. i think that's the key part of this story.

>> all right, thanks very much. tim seymour, we appreciate it. you can get much more of tim's international trades every single tuesday on "squawk on the street" and, of course, get it every day to get your fix, 5:00 on "fast money." the senate finance committee holding a hearing on president obama's proposed bank tax. it would be levered against large financial institutions only. and the money raised would help cover the costs of winding down banks too big to fail, except they don't like that term. is it a good idea? let's ask keith boykin, editor of "the daily voice," and cnbc contributor and dan mitchell, senior fellow at the cato institute. i think i know how this is going to break down. but we'll start with dan. what do you think? >> well, actually, i may surprise you a little bit. the idea of having some sort of insurance premium that can be designed to liquidate bad banks doesn't strike me as a terrible

idea. unfortunately, there is nothing in the legislation that says you actually liquidate bad banks, so this probably will wind up being sort of a rebirth of t.a.r.p. with unlimited authority for the politicians to bail out their friends on wall street. so the concept isn't necessarily bad -- >> whoa. >> but the legislation is rin n written in the wrong way so it will probably end up with another t.a.r.p., moral hazards. >> whose friends on wall street? >> republicans and democrats, they're both neck deep in terms of campaign contributions. >> okay. keith? >> well, that's an interesting charge. i hadn't heard that argument before. i think that the real issue is we have to have some kind of accountability for the crisis that wall street created. some of these big banks that are being handsy compensated to the t.a.r.p. funds, there needs to be some sort of insurance policy, but also some sort of payback so that the taxpayers don't get stuck footing the

bill. these dangs that are repo s thb goldman sachs, $3.5 billion in earnings in the first quarter, bank of america, $3 billion in earnings, this is a tax we're talking about that is less than .2%. it is hardly going to make a difference for these banks to make this kind of money. >> let me simply make the point, if we're wanting to assign blame, then this legislation should do something about the fat. it doesn't. and should do something about fannie and freddie, which were really the big government-created entities that caused the whole mess. but because fannie and freddie were such a big source of campaign contributions, for obama and barney frank and chris dodd, they're being left alone, it is like trying to win world war ii and not atatacking germany. >> i don't think that's a fair assessment of what's going on. i think fannie and freddie are culpable too and have to be held responsible but i don't think this is payback for barney frnk or barack obama. there has some kind of comprehensive reform. >> this is not a comprehensive

reform bill. >> the bill has to include a lot of different components. we're talking about the bank tax. the bank tax alone is not the issue. it is a part of that whole package that includes more transparency for -- >> you made the point about we have to make the banks pay because they caused the problem. no, fannie and freddie and the federal reserve caused the problem. so if you want to make that change, let's actually attack the institutions that caused the mess. >> it is debatable, though, whether you can point the entire finger at fannie and freddie for causing the problem you have people at goldman sachs -- goldman sachs is being investigated and sued. you have the banks that were responsible for creating these complex derivatives that they were passing on to others. and repackaging. i think you can't excuse them from the culpability and point the finger at fannie and freddie. it doesn't seem to make sense. >> i agree with you they bare some blame and i hope you join me in saying we never should have bailed them out in the first place.

any institution that makes mistakes in a free market system should go underwater and to the extent taxpayer money is involved, it should only be involved in terms of shutting down and liquidating the bad assets, just like we did with the s&ls 20 years ago. >> even if it takes the system with it? >> it wouldn't take the system with it. >> how do you know that? >> it would have worked just as well, recapitalized the banking system just as much. the reason that t.a.r.p. was bad wasn't because taxpayer money was involved as much as i hate that, it was because we bailed out and propped up the institutions that made mistakes. >> not all of the s&ls were so big that the failure would take down the system. that analogy doesn't work. >> not to mention -- >> the same underlying principle. >> and not to mention aig whose huge responsibility he for ensuring many of the big financial stuks institutions wa propping up the entire system. if we didn't prop up aig and the banks, we would be in big trouble. the reality is that something

had to be done, president bush, i give him credit, stepped up to the plate and did something. i didn't like the way they orchestrated the t.a.r.p. plan. there were problems with it with oversight, but there had to be something done. now we're arguing about the past. we have to do something about the future so it doesn't happen again. >> and that's why creating a new t.a.r.p. in dodd's bailout bill is a bad idea. >> you think because it is there, it will be used? >> i think because it is there, it is exacerbating the moral hazard problem -- >> that's like saying because unemployment exists, people are going to quit their jobs. >> all the academic evidence shows the more you have unemployment insurance, the long terre takes people to find jobs, so, yes, i fully embrace that position. >> but you don't -- >> would you rather get $3,000 a year in unemployment benefits or get a job for $20,000? >> i would rather get a job, but all the academic evidence shows that unemployment insurance subsidizes joblessness. >> you missed one point.

you don't get unemployment insurance if you quit your job, right? you get it if you're fired. >> you get it if you lose your job. the idea that someone would say, i'm not going to go look for a $25,000 a year job, i'm getting 4 grand a year in unemployment. >> for every week of unemployment -- hold on, hold on, hold on. the studies do show for every five days of unemployment, the -- those with unemployment benefit spend an extra day unemployed. maybe that's to find a better job. >> you have extra weeks of unemployment, what is going on in the economy? you can't -- you got to view the whole context. the extra unemployment insurance is out there because the economy stinks and there are no jobs available. >> right. i'm not -- i'm simply saying -- >> it proves zero. >> it does show that people take a longer time to find a job. >> because the economy is bad. >> no, studies have been done over various periods of when unemployment benefits have been given out over several decades, short recessions and long recessions. >> i'm not trying to question

the motivation. instead of taking the worse job, they're looking for one that is better. the facts are the facts. >> okay. coming up, free ways to protect your money from another goldman sachs-type bombshell. >> shares of td ameritrade up. the ceo talking to us about hiring, buybacks, potential acquisitions, everything is on the table. before the break, a couple of the dow winners for you. bank of america, caterpillar, mark, our parent ge is up almost a full percent, still shy of 20, but we're getting there. 3m and jpm.

and today on "street signs," the ash detector. we'll have on the scientist and

the technology that could determine for a plane whether they're flying in a thick cloud or a thin one. as we all know, the whole point of the ash is that it often is undetectible. can't see it. it looks clear, but it is there, globing up your engines. >> okay. >> he says it is still not safe to fly over europe. but, you can fly over europe if you would like to. >> i would think what we need is something that would make a hole in the ash. >> yes. mm-hmm. >> that would be called -- >> hole in the ash. or as we said, britain sent iceland cash and they sent back ash. they did. all right, do you feel safe enough to fly? please vote in our street poll, squawkonthestreet.cnbc.com. if the goldman sachs fraud case has you thinking twice about investing in stocks, we're talking about other ways to make some money.

addison armstrong is on oil for us this morning. michael kujino is on gold. rich bird is on bonds. i'm going to start with rich, because, boy, that's the hardest case to make, rich. how can you advocate bonds when the only way rates can go is up? >> well, i would -- back up a second, mark. >> sure. >> if you're in bonds, you better understand what it means to be in bonds. i saw your producer last night, if you're in a bond fund that definition of yield is different than if you're in a bond. you have to know what your bond fund definitional things are and you have to know what will cause your bonds to go up or down in price. i can't make a great case for bonds in terms of total return right now. i would say if your viewers are in bonds, expect 2% to 4% best case over the next five years. >> that ain't a whole lot. michael, what am i going to make in gold? it is already up to close to 11.50. hasn't gone much -- hasn't gone anywhere in quite a while now.

>> yeah. it is better that -- gold has been in a trading range, mark. i think in the longer term there are several bullish factors out there. we'll see where they go. but you have very easy monetary policy, low to negative real short-term interest rates, no increases on the near-term horizon. demand is up on a institutional and personal consumption level. investors as well as people desire it for discretionary spending. the monetary system keeps producing a lot of government programs and liquid money that is causing gold in relation to that to continue to increase. it is not only here in the united states, but it is worldwide. so there is a sort of global race to the bottom currenciwise, devaluing, that's a bull ush sign f sign for gold as well. >> addison, what is your view on that? >> you have to take the long-term as you do in gold. i think oil is probably a little overvalued in the front month. i don't think you'll want to be

hold on to the physical commodity as a invest and probably the futures market is not the way to play it now given that it is a little too high given the fundamentals. i think for the long term, you know, oil above $70 is, i think, a pretty safe bet for the long firm and certainly there you've got the ability to develop new projects and really see some good value in the driller and the oil field services companies. >> wouldn't i be better off with something like copper? i mean, oil, very political. copper is a much more, i don't know, seems to me predictable. >> well, as our friend dennis carbon says, it is the ph.d. of commodities. i think copper right now, you're really looking at a bet on what kind of growth we're going to continue to see in china. and when the u.s. economy will rebound. we have this huge housing overhang and copper is such a big part of housing are, whether it is wires, pipes.

until that housing overhang gets taken care of, i think the only thing you have to hang your hat on in is copper is china. we don't know how long that stimulus will last. >> you got to separate the fact that copper, oil, gold are speculations. there is no cash flow at all. it is what do i think is going to happen? bonds are cash flows. you have to understand certain cash flows are a lot safer, maybe low, maybe boring, than other things that are more speculative in value that i don't know what i'm going to get, i have no idea what i'm going to get because there is no cash being generated. >> all right. addison, michael and rich, thank you, all, very much. straight ahead, the ceo of td ameritrade fresh off his earnings conference call answering some of our questions. is he in hiring mode is one of them.

all right shares of tdameritrade higher. 23% rise in profit. and they also lowered their 2010 forecast, but what the hay. the stock is up. ceo fresh off his conference call talking to us first. joins us from omaha, good morning, sir. >> good morning to you. >> you lowered your 2010 forecast, why? >> well, when we looked out at 2010 what we've seen this year is continued low interest rates near zero interest rates which we've seen now for five quarters which definitely impacts us and the volatility in the market, particularly intra day volatility has come in quite a bit and that has an impact on our short-term earnings. when we look out into the future, we're very optimistic

where we're at and our organic growth is very strong. >> let's talk about the business. we have just gone through a rally which has brought the dow up, oh, i don't know, 50%, maybe more. very strong rally. one of the strongest in history. what are you seeing activity wise among retail investors? >> well, retail investors, you know, we look at our clients they're very much consistent with what you would generally see in the market. there's definitely been investors coming back in and much more interested in the long term. we see an increase in demand for mutual funds and etfs. it could be in a bond fund or international equities. we see that appetite there. with all that has gone on in the last week, we have seen a fair bit of financials in the technology sector. >> what about hiring?

we were telling people we would ask you about this question. jamie dimon said he would hire 9,000 people at jpmorgan, what about you? >> we've been hiring for the last couple of quarters certainly to get us through the busy ira season and the tax season and now that we're largely through that, over the next couple months i think we will be pretty stable and we won't be in an active hiring mode, but as we come through to the fall depending on our view of next year and the view of the market which continues to be more optimistic, we will certainly consider hiring but in select areas, technology and front line service sales people. >> when you say technology and front line, where do those jobs come from? technology jobs mostly overseas or are those jobs here? >> most of those jaup jobs are here. >> thank you very much, fred, we appreciate it. ceo of td ameritrade. do you feel safe enough to fly

through the ash? >> that's right. >> maybe there is a hole in the ash you could sneak through. >> we know -- squawkonthestreet.cnbc.com is where you vote.

this was the street poll question of the day. mark was not allowed to vote because otherwise he would have voted hundreds of times. so, his vote is not in here and here are the results. nobody wanted to fly through a hole in the ash. >> can't blame them. >> no. >> see our producer just got it. like 15 minutes later, would that be -- here's the thing, your car engine gets clogged with dirt, you pull over to the side of the road. your plane engine gets clogged

with dirt, you become part of the road. >> well, that would be one way of putting it. >> anyway. >> watch "street signs" today for the ash detector and the guy who after that now 747 incident in the '80s when the plane almost crashed and they were reable to start them developed an ash detector. this is one of those things, it doesn't happen that often. there are something like hundreds of airports around the world, hundreds that are within currently active or at any moment active volcanoes. not an uncommon thing to have little bits of ash floating around. >> that would have been my first question. how common is this? >> it just depends on the density or the makeup of the ash. anyway, he says it's not safe to fly. >> i think we have to go. i think we successfully filibustered through 6 in 60. erin is back at 2:00 on "street

signs." >> everyone have a wonderful day. it's time now for "the call." good morning, everyone. welcome to "the call" i'm trish regan and melissa francis is off. strong earnings from a variety of companies not giving stocks a boost here. goldman sachs one of those companies and we'll tell you why some of the company shareholders are not happy and it has nothing to do with the sec lawsuit, right, larry? >> good morning, trish. i don't know. smaller banks came out with great earnings. we'll discuss whether they are investment play than the bigger ones. more and more companies are increasing their dividends. we'll look at whether they're investing in, as well. this is "the call." we are cnbc. okay. here we go. so far, it's a great earning season. goldman sachs, ibm, united health care and coach all reporting strong results here, but stocks not getting so much

of a boost. investors selling on the news. take a look at the s&p. it has moved back into positive territory here. we are in the green, up 0.5%. up six points. the dow up 20 points there. you can see recovering from the lows earlier in the session moving back into the green and the nasdaq trading up nine points. we want to head down to bob pisani with the market action. bob, some folks are saying this is rather muted and we should see more of a move as a result of this strong, earnings news. what is your take? >> three stocks advancing for every one declining on the new york stock exchange. that's not bad. the dow is flat. not always a good signal of what's going on. given the gains we had recently, wouldn't be surprised to move sideways but don't let that mute your enthusiasm. goldman sachs real quick because we have big volume and already at 22 billion shares. that is a normal day's volume. the numbers will blow out, you know that. the trading