cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. standard & poor's is cutting greece's long-term ratings to selective default. now this move was widely expected because ratings agencies have said that a bond swap with private creditors would constitute a selective default. but now the ecb is suspending the eligibility of greek bonds for use of clarl and its funding operations. the ecb requires guarantees in the form of eligible collateral for all banks to seem funds in its lending operations. today greek lawmakers are voting on a package of salary and pension cuts as part of measures needed to secure a second bailout. >> and back in the u.s., gop voters head to the polls in michigan and arizona today. arizona looks like a shoo-in for mitt romney but his home state of michigan will be another story. the polls now have him virtually tied there with rick santorum. >> senator santorum is a nice guy, but he's never had a job in the private it tech tore.

>> we're doing very well. >> john harwood will join us live at 6:20 eastern, 20 minutes from now. >> so it is a leap year. >> this is what we were discussing before. this is february 29th, why? >> tomorrow is. >> this year is leap year, why? do you like it? >> either tomorrow is march 1st or it's not. so it's not march 1st? >> no. >> we have an extra day. yes! you have an extra day. you don't like having an extra day? >> i'm a february -- i was born in february so i pay attention to leap year. >> so you knew? >> i knew this was a leap year but i didn't think about it the way you just did. >> tomorrow is like a bonus. a three-day bonus nm. it's a wednesday that wouldn't have been. it would have been thursday. >> i always feel bad for people whose birthday is february 29th. a birthday party every four

years. >> it's cheaper. >> you are terrible. >> i used to think about that if my birthday was on a leap year. >> not surprised. because you're cheap basically, right? >> no. >> you're not? >> no. >> going to buy me something today? buy me lunch. will you get me a muffin? >> will you get me a muffin? >> in washington the president is going to sign an executive 0 order this morning creating an interagency trade enforcement center. he called for its creation in this year's state of the union white house. officials say the center will enhance capabilities to aggressively challenge unfair trade practices around the world. in corporate headlines morgan stanley is outlining the effects of a possible down grade. moody's has warned it may cut the long-term debt rating by three notches. morgan says it would have to post another $6.5 billion in collateral for clearing houses if moody's follows through on that warping. you can see the stock at 1875

but laying out what would happen if that down grade were. >> just to answer your question, you said before the show what is their current rating, it's a-2 and moody's said in february, february 16th, that they might down grade. >> why three notches? >> no, no. they didn't say they would down grade them three notches. they -- what morgan stanley did yesterday was walk through sort of the various permeations of what could happen. one would mean they post 0.4 billion, two notches, 5.17, and we gave the three notch number, the big number 6.5. >> and the different ratings agencies, remember when i had to know when you were a stockbroker but 8.2 equivalent to a aa? >> it is one notch above s&p's a-minus. >> all right. so then it is like a single "a."

>> yes. >> it's ridiculous. >> i used to have a chart. i'll look it up again and print it out. >> every time we have an election we have that extra day so it's always like that whenever we're in an election year. >> that's really good. i never realized that either. it's the same year -- >> i'm dealing with the extra day. >> one more day of campaigning on the trail. >> right. do you like -- >> i like one extra hour of sleep. >> is that spring forward or fall back? that's fall back. >> spring forward is not good for me. >> but you're heading to spring instead of to winter. >> and you get more daylight and evening hours. >> one less hour of sleep. >> i'm very excited about -- you get to this point in your life you like these years that have extra days. i like it. >> in some other financial headlines, jpmorgan is holding an investor day in new york

today. the ceo, jamie dimon will be offering his outlook for the six major operating units and the profit potential tore the entire company. shares of jpmorgan have lagged. >> in economic news fed governor elizabeth duke will head to capitol hill and testify before the senate banking committee. she will be outlining the case for more action to bolster the u.s. housing market. in january the fed issued a study of housing woes but laid out congress and other regul regulators could take to shore up the market. the report suggested granting fannie mae and freddie mac greater scope with regard to loan modification, refinancing, and the position of foreclosed property might speed the recovery. on today's economic relief calendar we have a lot of data, durable goods at 8:30 a.m. eastern be a then at 9:00, the case-shiller home price index and then consumer confidence and the richmond fed survey. we have a lot to keep our eyes on. >> check on the market.

a little bit of -- didn't make it again yesterday. >> the s&p did. the s&p got above 0 the key -- its highest level, its highest close. >> but did you know there's a guy out there who is e-mailing around, he has an e-mail to say that as of friday that you called the top and said it's over. >> but i never did say that. i looked at that and he sends out other things. he's crazy but he sends out other things that says other indications that the economy is slowing or the market is peteering out. he has some kind of an ax to grind somewhere. >> it was when you said -- he wrote that because you said you were going to call your chips now because it was a 25% gain from october. >> i was going to call it. i wasn't letting my profits run. i was just having it both ways. i was going to say i've already made it and i'm no longer -- >> the problem is we had lock on the show and lock gets you all pessimistic and he gets you --

>> scared me. >> he scared you. >> and then we even had the fed guys, who was it, it fisher or bullard that day. >> the combination of both. >> itch the chart. what was morgan stanley? >> bringing out the charts. >> after the financial crisis, you have no idea. >> moody's -- >> can't do any better. >> moody's rates morgan stanley's long-term debt as a-2. >> that's an a for s&p. an a-plus would be an a-1 and an a-minus would be a-3 unless you're talking about fitch. >> hold on. >> fitch is similar to s&p. >> what i'm reading here, it says morgan stanley currently has a split rating among the primary rating agencies. >> meaning different. >> moody's rates long-term debt as a-2. >> single "a" for s&p. >> s&p, though, i think is an a-minus rating.

>> then that's one notch below. you know how these ratings agencies, their ability for resolution is so fine, they're so good as you saw. as you saw back in the credit crisis. >> it depends -- >> they're so good at this they can do it just to the slightest degree. >> but it has huge implications for the companies. >> people question that. as to why it still matters and there's a lot of firms that do their own due diligence. they don't necessarily use moody's and then you have shawn egan trying to weasel in there and move the others out because it's a totally difft way of being compensated. >> people don't want to pay for ratings. that's the fundamental problem. >> what are you looking at? >> i know what you're looking at. you look fashionable. >> i am not mr. fashion. you look good. you look fine. >> here is the issue. the issue is you believe that i have stripes -- >> i think a belt -- >> i think it works. it's okay.

>> i think a belt would break it up. >> then it goes down to pinstripes on your pants, too. >> that's what i'm talking about. >> the shirt and the tie -- >> i got all unsettled. >> are you that disturbed? >> it's a little -- >> the tie, i think, is fine. >> my stylist thinks it's great. >> what's his name? what? you have geeves, you have the helicopter. >> i have a whole team in the morning to help me. they thought this get-up was a good one. that's pretty much what happened. >> i do like the tie and the shirt together. >> i worry that we could probably -- we we should probably do the news. >> oil, look at the oil board. you heard at the top as it gets up to levels like this, it's a self-fulfilling thing. you wonder whether it starts hurting demand when it gets up this high. i like the whole "journal" editorial today.

transcanada will build and president obama said this is great. i'm fully behind this. this is a great idea. start, do it piece meal. i may let you do the whole thing. suddenly he's happy with oil at $108. i think they're looking back at the whole keystone thing, wow, we didn't appease our base but we screwed the unions. so we'll see. we'll see how this works out. did you see "the journal" editorial? has it both ways. i blocked it but i liked it before i blocked it and now i like it after i blocked it because it still might happen. it's an election year and a leap year. >> we had know what will happen eventually. >> oh, you do? okay. all right. we don't care about those jobs, they're only temporary, according to you. the ten-year note this morning -- >> wow. >> well, you did think -- >> i do think they're temp raerp but i think long term all are temporary. it's something we need to do. all i was saying it -- i was not

the person that is agreeing with the other side. i was suggesting there was another side. >> there is a side that doesn't want to build any more infrastructure for any hydro carbon. >> that's because they don't want any hydro carbon. >> look at the dollar quickly. says the dollar bored i think the euro has been doing a lot better 1.34 at this point and then quickly take a look at gold and we'll see it it shall it won't go over 2,000 this year but getting close again. time for the global markets report and ross westgate is standing by in london. that was neal shapiro, wasn't it, ross? >> that was who? >> who did you have on your show earlier today? >> robert shapiro. >> oh, robert shapiro, that's right. never mind, i was watching and listening. getting some insight. that's a good show you've got there at -- what time is it? >> we have to lead people in to

your show. >> we appreciate that. >> that's what we have to try to do. >> work harder. >> what he said about argentina and world bank loans is interesting, the u.s. wants to stop the lending to argentina and the uk is still approving it. we'll see where that story goes. ahead of the u.s. open stocks, you can see, slightly edging up. we're about weighted to the upside 6-4. 3-2, something like that. advancers outpacing decliners. slim losses yesterday. slim gains this morning. the ftse up seven points. debt> xetra dax. italian debt sales, they raised the amount they wanted over 6.at that billion. they reopened the five year and a fresh ten year. the key thing here was bid to cover pretty much average for what you expect but a sharp fall in bond yield, 4.19% with the auction yields for the five year. that's the low since may 2011.

we had a yield of 5.5%. it was over 6% a month ago in an auction of ten years. and this was the lowest yield since august 2011. so we're starting to move towards sustainability potentially on italian debt. they have some big redemptions coming out, the total nearly $30 billion. so some of that was available to move into this and we have the ltro from the ecb tomorrow as well. some suggest ising that didn't d through in this particular auction. confidence is strong. so yields it continue to decline across the board. you can see in spain here on the 5% mark for the ten year french yields are lower flat. and here the ten year bund yields down getting to extremely low levels once again. so bond yields continue to get contained at the moment. stocks are going to wait to see

just how much money is being drawn down from the second three-year ltro from the ecb. that data comes out before you go on air tomorrow. joe, becky, back to you and andrew. >> thanks, ross. coming up, we'll be heading to michigan where mitt romney and rick santorum are squaring off in a key contest. but first, check out this video. a russian bear quickly becoming an internet sensation. this is unbelievable. at a zoo in central russia and his keepers say he's a real kung fu master. the bear likes to play with a martial arts staff rocking it from side to side and around his neck. got to love this, right? joe, do you know how to do this? >> i haven't seen any real impressive moves. i thought it was on a loop. have you seep this before? >> i have not seen this before although i saw an image of it yesterday. >> the kung fu panda. ♪

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welcome back, everybody. take a look at the u.s. equity futures. right now the dow is looking sharply higher on the open. it looks like we'll open up 48, 49 points. the s&p is indicated higher by six points. in our headlines on this tuesday morning, yahoo! is demanding lie

sen licensing fees including technical mechanisms in facebook's ads, privacy controls, news feed and messaging service. representatives from the two companies met yesterday and the talks involve 10 to 20 of yahoo!'s patents. scott williams joins us from the weather channel. good morning, scott. good tuesday morning to you, becky. of course we want to start with decision 2012 and look at the primary weather in michigan for today. marquette, some snow showers, 33 degrees. traverse city upper 30s with snow later on in the day. detroit 37 degrees. sun and clouds. what about arizona? flagstaff with some snow in the forecast. phoenix and tucson, upper 50s, low 60s, morning clouds and showers early. the national perspective as far as your air travel will track snow in the northern rockies, the upper midwest. minneapolis watching out for major airport delays.

kansas city, thunderstorms for you. new york city, enjoy today because we'll find changes by the middle of the week. high temperatures topping out in the mid-40s by this afternoon with sunshine around, rain will arrive by the middle of the week. some of that could mix in with wet snow but, primarily we expect rainfall wednesday as well as thursday for you around new york city and we'll keep clouds throughout the balance of the week. otherwise watching out for some of the wintry mix as you move into sections of new england as well as upstate new york. tomorrow through your thursday time frame. we're looking at a mess across parts of the upper midwest. a blizzard warning for parts of north and south dakota for blowing and drifting snow. visibility is dropping to zero as well as winds gusting over 35 miles an hour so cold air to the north of the jet stream. we'll find unstable arp to the south, so the battle of the air masses will mean a severe weather threat across parts of the midwest so if you do have

some travel plans later on this evening, from oklahoma city to kansas city, watching out for damaging winds as well as hail and we can't rule the possibility of isolated tornadoes. so the overall forecast for today, we're looking at 32 degrees in minneapolis and snow. storms to the south. guys, back to you. >> scott, thanks. we have two -- as scott was just saying, two key presidential contests today, arizona and michigan. our chief washington correspondent john harwood joins us from detroit. i feel like sometimes i've seen this movie before. we were just talk iing about, remember gingrich won south carolina and then he had a huge lead in florida and people st t started thinking, wow, newt. and then all of a sudden he lost footing. it reminds me of the same thing. santorum won a couple of surprises a few weeks ago and he had a huge lead in michigan and now doesn't it kind of feel like they're going to come around and maybe romney wins? if it's a tight battle he should have done better in his home --

one of his home states. >> people are calling even a close race a victory. >> does it remind you of this ongoing thing where the republicans look for somebody else and say maybe it could be him and take a closer look and go, ah! and they come back and they're back to romney again. >> reporter: it's been repeating itself in different forms. the non-romney candidates rise and then fall back again. i talked last night to one of mitt romney's senior strategists after his event near detroit. they expect to win a close race here and i think the santorum campaign is bracing for a close loss here. but some of the people who follow michigan politics the most closely, the longest observers, don't think it's impossible that rick santorum if the turnout falls the right way does well. some of the things rick santorum has said in recent days with other parts of the country have

taken to be huge mistakes what he said about church and state and jfk, what he said about barack obama and college education, other comments that he's made. seem to have the effect of producing a little bit of energy among the conservative christians, the ivevangelicals, some of the tea party/evangelicals are known in some of the western parts of the state. he has a shot at this. we'll have to see it play out. it's very, very close because in the last polls, joe, santorum has bounce d back a little bit. >> interesting. so do we need to revise the march timetable we both had? now people say it may go through may. >> reporter: i think i do, yeah, considering i've gotten most things about this race wrong, it's not hard to say the timing -- i was quite certain that on march the 6th after super tuesday we were going to have a nominee. look, i still think mitt romney is going to be the nominee but i

think it's going to take longer to slug it out and win than i originally thought and if rick santorum wins that's one more indication this thing goes deep into the spring and maybe even the summer. >> and then the question is, and we head to the "usa today" poll, they talk to republicans and most said this is fine. we'll settle on one eventually but you have to ask yourself how much damage was really done and how much money did you really blow with the in-fighting and how much grist did you give the democrats. they can pick up your talking points basically. you've given them what to run on. we know all the bad stuff about all of these guys from each other. the playbook has been happene d handed to president obama. >> reporter: there's no question

that the primary outcomes from revolved around how people have done with the most conservative republican voters. mitt romney does better with moderate and less conservative republicans, santorum and gingrich on the right end of the scale. in different states when romney has done well, he's done well among the very conservative voters. to appeal to them, you have to say some things that puts you in a difficult place. they're going to have -- i was talking yesterday to a former republican chairman who was saying in the republican primary romney's criticism of the auto bailout plays well because a significant number of republicans don't like the bailout. but he's going to get hammered in the general election on that. he's been talking about union stooges and all those things when we get to a general election will make it easier to get their people out and appeal to swing voters. >> like a losing argument in michigan. >> it's going to be a tight

election, john. >> reporter: talking about the general election? >> yeah. ever since the gallup guy was on, i've been watching. nbc news and "wall street journal" that thing doesn't budge. it goes 44, 45, 44, 45. it hit 45 this morning. now i think that has to do with for obama being re-elected, has to do with the republicans, git who can't shoot straight but that approval rating, that's a tough thing -- if it stays at 45, that's a tough thing to deal with during the general elect n election. >> reporter: obama is a favorite to win re-election to this point but he's not an overwhelming favorite. >> who wins at 45? who wins at 45? no one has ever won at 45. no one has even made it much of a race at 45. that's going to have to change. >> we have a huge long history.

you are only talking about, what, seven or eight? >> george bush was fluctuating between 45 and 50 in 2004. if he got to 45 that was the danger zone. going into election day right around 48 maybe. 47 or 48. they have been in most of the polls in the 47 or 48 range. that could be adequate but it's not robust. he has significant problems. >> i just wonder what you're hearing. i don't know whether they want to act confident or hungry and underdog like. i don't know what the better position to take is for the obama camp. >> the one thing about obama is he tends not to hide very effectively how he is feeling and so when he was feeling confident last week he was at a couple of events and he said i

have five more years to do immigration reform. so he's going to fairly well wear it on his sleeve. we'll be able to tell how he's feeling. >> all right. all right, john. i see it's cold there. cold in detroit. >> reporter: it is cold but at least it's not a wind tunnel up on the roof of this building like yesterday. that was crazy. >> either that or -- >> reporter: and, by the way, the calmer the weather here in detroit, the better for romney because romney's vote is coming disproportionately from detroit and the metropolitan area, the suburban areas around detroit where rick santorum does better in the western and northern parts of the state, more rural parts of the state. so good weather in detroit is good news for mitt romney. >> so you are outside. remember you used to fan it in high school so no one would see it. >> the green screen behind him. >> reporter: i'm really outside. if i took 20 steps backwards,

this would be my last live shot. >> be careful. be careful on top of the roof with stuff like that. john, how does it affect the vote potentially? >> reporter: sure. it's an open primary. people who are experienced in michigan politics expect about 15% of the vote to come from democrats and independents. and there will be some -- rick santorum is hoping and appealing to sort of work iing class democrats who may be disaffected on cultural issues, to come in and vote. you also could have a little bit of mischief making by democrats who want to weaken mitt romney because they think he would be a stronger candidate against obama. there will be a mix of those. and of course you have independents who have their own reasons for going out. ron paul does very well with the independents. so a lot of the libertarian type people who don't consistently

identify will vote as well. >> thanks, john. appreciate it much. coming up, we'll head to the futures pit for a preview of the trading day ahead. first, the morning's sports buzz. check this out. matt kenseth winning the rain delayed daytona 500 last night. but there were some very scary moments during the race after driver juan pablo montoya lost control slamming into the back of a jet drier causing a massive explosion on the track. the good news nobody was hurt. now as we head to a break, take a look at yesterday's winners and losers. 9

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at ge aviation, we build jet engines. we lift people up off the ground to 35 thousand feet. these engines are built by hand with very precise assembly techniques. [ mike ] it's gonna fly people around the world. safely and better than it's ever done before. it would be a real treat to hear this monster fire up. [ jaronda ] i think a lot of people, when they look at a jet engine, they see a big hunk of metal. but when i look at it, i see seth, mark, tom, and people like that who work on engines every day. [ tom ] i would love to see this thing fly. [ kareem ] it's a dream, honestly. there it is. oh, wow. that's so cool! yeah, that was awesome! [ cheering ] [ tom ] i wanna see that again. ♪

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for 2011. but the dow falling shy of 13,000. which is the more important indicator? >> well, i think the 13,000 indicator on the dow is psychological. i love to see the technical levels breached, accepted or rejected. that's the way i measure conviction and followthrough associated with market activity and the activity we saw yesterday exhibits an enormous amount of strength and energy and conviction as well as acceptance of certain levels. last week was sideways. traded off of that 1369 level in the abbreviated holiday session, sunday night or monday night, early last week, and we were unable to get up above that until late yesterday. but yesterday the real conviction was the fact that there were a couple of factors, one a gap down open in negative territory. an enormous amount of strength and then up above that key level of 1369.

in addition to that and which i've mentioned the last few times we've talked together is the fact the dollar didn't have to come off and break and crater out to see that strong activity. we're seeing relative dollar strength amidst strong strength in the stock indices future products across the board. last but not least all of this amidst crude at $108. >> how does that start to play into the stock market? in the past we always said it's going to hurt consumer stocks but it does end up helping the oil stock. >> yeah. well, i mean, it was just a couple years ago that there was talk of will crude hit $80 and what impact will that have. then what will $100 do to the market? clearly up above $108. there was talk in terms of was that slowing the rally? the monday holiday abbreviated high, that 1369 level and then sideways all last week. was the sideways action the

cooling off from the upside activity we've been seeing which you could attribute to that crude oil price but you can't really chalk it up to that. yesterday, again, strong activity amidst the higher prices. maybe this is the new $80 a barrel, if you will, this $108 level. i would like to see the conviction and followthrough. you have to give the benefit of the doubt to the bulls at this point. >> and in terms of other catalysts, is it more europe at this point? more the economic numbers coming interest here? today we get case-shiller and better than expected numbers. >> i think it's more technically focused. i think we establish that value determined between buyers and sellers, level of accepted value and right now we're in the probing process. so clearly buyers are saying that there's val is you at higher levels and as long as we continue to see that again we're

going to continue to establish higher values at higher levels. so right now there's not been much talk about europe, not much talk about numbers this week at all but what we've been seeing out of the case-shill eo eor am all of that we're seeing the strengths in the stock. a lot of optimism about the jop market. we had warren buffett come out and say optimistic statements over the last couple of days in terms of that. i think he said something about more employees working at the end of this year than there are working in the beginning of the year. and so that could be fueling some of it. there's a lot of optimism having seen some sort of resolution. it seems temporary and dust settling there for the most part so, again, higher highs and lower lows at this point and we continue to the upside and you have to give the benefit of the

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we're back on this tuesday morning. she's a russian-born novelist who has apparently become a motivating force in the race for the white house. gary weiss' book that looks at impact on culture and politics called ayn rand nation. gary is a columnist at thestreet.com. here is the book. took a look at it yesterday. explain, it if you could, the connection in your mind between ayn rand's fill philosophy and

race for the white house. >> well, what ayn rand did, when she put forth a philosophy of capitalism, she really was the person who was behind the, i think, the movement that we see in this country, you know, that sort of glorifies free enterprise and she pushed through her fill 0 os if i the tea party in the direction of free enterprise away from social programs. and i think that she indirectly pushed the republican party to the right. that's the thesis of my book. >> that sound like opposite things, though. if you push them away from social and to free markets -- >> oh. >> you consider free market philosophy further to the right than social issues? >> i think it's not so much a question of further to the right or left, but she was opposed to, you know, the government getting involved in things like abortion and intruding into individual rights very much like -- >> or libertarian.

>> like ron paul. and i think what you are seeing there is you are seeing -- although rick, obviously, rick santorum is vechl pushing the religious right the tea party has been, which is i think the origin of the right ward movement in the republican party. >> earlier today, harwood called them key-evangelicals. tea party does not imply evangelicals. tea party implies small government and low taxes and i don't see the social -- people would like to put the tea party further to the right in terms of social, but i don't think they are. i think it's an economic -- >> it is mostly economic. >> you also talked about in the same vein people like mitt romney who you with would think of as more moderate, sort of going right simply to sort of fit this philosophy. >> well, i think what you're seeing is the tea party has pushed republicans to the right and everything has pushed mitt

romney to the right. he is just willing to take whatever position, you know, is going to get him the most votes and, so if he just moves to the right blowing with the wind, in effect. >> if he's the nominee, he blows back to the left or blows back to the middle once we're in the general election? >> whatever will get him elected. >> you said the same thing about a lot of politicians. they move to the right or the left during the primaries. they try to move back to the center for a general election. i think i've seen it with many politicians. >> sure, sure. romney probably more than most. >> because of his background as a massachusetts governor or -- >> i think just because of his record for flip-flopping. i don't believe he has any convictions. i think he will do whatever it takes to be elected. >> that's for most politicians. >> even more redundant. >> i've seen such a lack of

principle for so many. even obama saying he would not take any superpac money and reversing. a president running with the benefit of being elected president, if you are not going to stand up for principle, then when are you? >> if you delve too far in, you can get to the point where it starts to look like the conspiracy or almost use it drn i notice the names you tied, the hot button issues. you don't even have to put an adjective next to glenn beck. people on the left know what he stands for. and i don't know whether -- some people that have never read ayn rand need to know the basic notion, the adam smith notion of two parties looking after their own self-interest is what's needed to allocate capital effectively. she didn't decide to be some subversive that's trying to take us all and turn us into selfish

objectivists, gordon grecco greed. i hope you write an effect on the current election. are you going to do that side of the equation 0 or not? >> i don't think they are anywhere near as impacts as much as ayn rand. didn't sell half a million books last year. >> who would ayn rand vote for? >> ayn rand -- i don't think she'd have particularly liked any of the candidates including ron paul. she'd have hated ron paul. >> really? >> she would have hated mitt romney. >> would he fit in her circle? >> no. he opposes abortion and she was very much in favor of abortion. she didn't favor ronald reagan for the very same reason she wouldn't favor any of the republican nominees, the social issues. >> purely an objectivist, if you've never read it, it at

least opens your eyes to that side of things. if you immerse yourself in it. i think in your book you are sort of actually some of the bad things that happen in the last years of alan greenspan's tenure you're sort of, are you tying that to some of his advocacy of ayn rand's views? is. >> i think that he was very much influenced by greenspan throughout his career. a great deal more than he's willing to let on. >> you're talking about in the deregulation aspect. deregulation goes all the way back to jimmy carter. >> sure. >> larry summers. this was a bipartisan -- >> absolutely. no question about that. greenspan was the key player and i think to the extent he was pushing for regulation -- >> a positive or a negleative i his service? >> definitely a negative. >> i think that's from where you're sitting. i think greenspan has been a positive for the country. >> i think he was definitely not a positive.

>> it was a global phenomenon the financial crisis, so, of course easy monetary policy does go global obviously. you've decided greenspan was a net negative? >> i think he was a net positive -- >> until he became a net negative. >> i think that's absolutely it shall. >> we could talk three hours. >> it was a regulatory problem at least in the last five or ten. >> which would have prevented it? the ones we have now? >> no, i'm not suggesting we need new regulations. >> enforce the ones that we have. >> there was an interest ratish knew terms of how he thought about monetary policy. >> that i might agree with. >> and then the fact the fed at the time was not enforcing the rules within the banks. they could have called up some of these banks and said we're just not doing this today. >> the interest rates, that was in the wake of 9/11 to try and get things back up and running.

>> i agree with you. it was keeping the rates as low as they were as long as they were. in any event -- >> that's different than the regulatory aspect. >> that's why i said there are two aspect and a the lot of other things. the book "ayn rand nation." >> you come back when you write that. >> i will. don't hold your breath. still to come this morning he is one of our most loyal viewers and frequent e-mailers. today pimco's ceo mohammed el-erian will be here starting at 7:00 eastern.

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greed, for lack of a better word, is good. >> that's michael douglas from his famous gordon gecko role in 1987. now the s.e.c. is using gordan gekko in a new role, saying if

you're an outside trader we're going to get you. listen to the new psa he has now. >> -- is good. greed is right. hello, i'm michael douglas. in the movie "wall street" i played gordon gekko, i agreedy investor who cheated profits while innocent investors lost. our economy is dpiependent on t success and integrity of the financial markets. if a deal looks too good to be true it probably is. for more information on how you can help identify securities fraud, contact your local fbi office -- >> that's for the fbi, not the sec and i can't think of a better spokesperson or someone who catches more attention. whistle-blowers, hard to make it sexy until you put gordon gekko

in. >> michael douglas, people would constantly and say god gordon gekko, i got into the business -- you always have to say it was a bad, and when you say -- every time you say psa to a man my age, psa i think of prostate specific antigen. i winced a little, mine's fine but all men eventually -- >> he finally gets to come out and do something with that character to do what he was intended to. >> you saw this and you knew of something, you would call the number? >> that's a weird thing to -- the public service announcement, this can happen anywhere, do we need to be -- maybe there are a lot of -- i don't know. how would you know whether someone was doing insider trading? >> it does show the authorities increased scrutiny of the arena. there have been a lot more cases where they tried to prosecute people for insider trading and

trying to go after people who are on the inside getting some unfair advantage against the small guy. >> we've seen huge cases in the past year. the article in the front page of "the journal" says 140 people who are under investigation and considered targets. >> it's a tough case to prove if you don't have a whistleblower or someone who can tell you what happened behind the scenes. >> you need a buddy to wear a wire. "i saw myself in you" that was a sad -- in central park where he hits his buddy. wall street, too, nothing. >> didn't love it. >> it was so bad. coming up the new normal, two hours with pimco's boss, mohammed el-erian coming up next and later if it's tuesday it must be time for trump. the donald will be dialing in to "squawk."

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welcome to a squawk master hour. pimco's ceo mohammed el-erian and evercorps partners chairman roger altman here to weigh in on the economy, the election and another bailout in the eurozone. it's time to face the music. ♪ the one and only donald trump speaks out in our new weekly segment "trump tuesday." crude awakening. how much higher could prices go the next time you fill up at the pump? >> i can get 70 miles to the gallon on this hog. >> gulf oil's ceo says watch your wallets.

prices could head to shocking level this is summer as the second hour of "squawk box" begins right now. good morning, welcome back to "squawk box" on cnbc. greek bonds are no longer eligible for use as collateral as the european central bank. that move is temporary and it comes after s&p downgraded greece's long-term rating to selective default, part of the bond swap process. warren buffett says home prices are a bargain. the latest case hiller home price day it at that is out at 9:00 eastern time. expected to show prices fell by about 3.8% in december from a year earlier. the costa allegra cruise

ship is being towed to the seychelle islands. no injuries were reported in the "allegra" in this incident. futures are indicated higher and right now the dow futures up by 46 points. joe? >> i had to listen closely, i thought it was the same -- >> different one. >> unbelievable. our guest host is a squawk master, mohammed el-erian, ceo and co-chief investment officer, he doesn't just invest in bonds now. >> and got the best phrases in the business. >> he does. >> i asked if he'd bring a new one to the table. >> mohammed i see that as kind of, i mean i don't know, you say he makes up phrases? >> comes one normal looking, no, he's got the language.

>> it's not just, you're not just pify phrases. they do a lot of thinking and strategizing. >> there's a lot behind the phrasing. that's what's powerful. >> andrew is thinking like a journalist. let me tell what you it's like at our end. >> the other side. >> the phrases are the result of lots and lots of research, strategy, et cetera and they're a way of simplifying very complex things into something that you can then disseminate easily. >> so the office looks out over the ocean so he can sit and think about exactly what's about to happen to the world. >> i've been thinking about the first question. so greece, who knows. we got something done there but the austerity is going to be so tough and they got such a, you know, such little prospect for any type of real economic activity that it's just going to be years of just watching this horse show in greece. so that's on the negative, even though the euro is in.

wouldn't you say what we've seen in terms of getting that firewall between greece andity will i that that's been incredibly positive in the past two months, what's happened in italy, for the whole contagion fear? >> absolutely. i would go further and say greece has been sacrificed in order to build that firewall. i think everybody recognizes what you said which is in greece we are sustaining the unsustainable and it comes at a cost and the cost is a society that has to put up with tremendous austerity without seeing a light at the end of the tunnel. that's why this package will fail like the previous package. >> the gangrenous arm is gone but the body lives. >> we have to deal with portugal next. >> do you write goportugal off do they have an italy rebound. >> it's more like italy than spain. i think you can draw the line

above greece and portugal and i think the europeans will draw the line when they feel confident that the fire wall is there. there's something else going on that we must not forget, there's also an effort led by germany to refound to use president sarkozy's term to refound the core. they want to end up with a stronger core and that would be good for the global economy. >> see i didn't talk to you about this yesterday and i would have. >> this is where i wanted to take him, too. >> you, you, wow! that's exactly where i was going. >> because i -- >> i wanted more research. >> i bought into the social welfare state caused a lot of the problems. he said that it wasn't that. >> it's the welfare spending and each of the pigs, he called them gypsy nations. >> gypsy put greece first.

>> if you look at the welfare spending as a percent of gdp, italy was the only one in the top five. i wondered how you break down the welfare spending, how you break down the idea when you're retiring at 50. >> and he put that sweden is a huge safety net and has been growing pretty well so he said there's more to it than it was a collapse of the european welfare state that was the single currency. i think it probably is a combination of things. >> so it's very complex because europe has two distinct problems, too little growth and too much debt. too little growth and too much debt. on the too much debt, the view had been it's all because the public sector was irresponsible. in most cases the public sector wasn't irresponsible. the public sector had to take over the liabilities of the private sector in order to avoid the pressure. so those who say the debt issue is all to do with the public sector in most cases, greece

being the exception, in most cases no, it had to do with the private sector falling in love with leverage and credit. but the second eissue is the growth, and here the camps are divided. those say spending on social programs undermines growth and those who say on the contrary look at sweden and that debate is a valid debate. >> the long-term structural issues involving the regulation in the labor markets in greece and italy, that makes it tough for growth. on the flipside you've got all of these -- >> they have the example, germany. people underestimate how hard it was for germany throughout the last decade to get its act together. that is why they are exporting so much, that is why unemployment is so low, they went through multiyears of very difficult labor market

performance. >> they may be equal to us or less contradicted from labor problems than we are here at this point, right? >> with the problem that they have contingent liabilities because they believe, and i think rightly so, they believe they have to be part of a union that have much weaker members, so they are carrying a lot of other people as they moved forward so they need to continue to reform. >> it's not a done argument, a done discussion. what surprised me in the krugman article he said it's a faulty argument and that's it in terms of the discussion. >> that's right in terms of the debt issue. >> greece is different in. >> greece, people recognized things happened. the public sector was irresponsible not only in spending but reporting. it lied to the rest of the world. second they fell in love with the notion that their rates can converge to germany so when the interest rates came down everybody overborrowed and

thirdly they destrl iindustrial. they have no industry left. that takes years to come back from. >> italy you said there was a valid argument to have, does the social spending help or does it hurt? where are you? >> i'm here about to irritate joe right at the top of the show. >> that's okay, i know when you're coming in, you're going to. i get to have arthur brooks in here, andrew gets you in here. >> oh, i'm andrew. >> i like mohammed. >> i like mohammed, too, but i know that we're going to have a -- >> you know where this is going. >> i'm a little bit hurt because he makes fun of all your phrases and i was defending you, but go ahead, you can antagonize me now if you'd like. nice season the mets had and the jets. >> indeed, and the jets. good thing the patriots lost in the super bowl, let's not fore get that, has to be mentioned early on. >> you're going to say sweden -- >> swede-a major banking crisis

in the '90s, major, and has bounced back, and what they have bounced back is a lesson for others, is that you can combine fiscal and financial soundness with a growth and system that has good safety nets. it can be done. sweden is small and special circumstances and can be done and that is what europe has to find, europe has to balance austerity for deficit reasons with growth and if it doesn't we're going to be talking about it for years and years. >> at least we're asking the question, because prior to all of this happening, the word was that this utopia had actually been realized. now the question is, and at the same time we were paying for nato, doing all the drug development in this country, our partnerships with the university doing all the basic signs so we were subsidizing all of the stuff in europe anyway so you didn't have to spend any money on that and spend it on the social safety net. the whole idea it was working

came crashing down recently. you're making the point it can work in sweden. maybe i'll grant you a slight. we don't have to argue on that. >> the question i ask you is we provide all sorts of global public goods. you've just talked about them. in addition we provide the dollar, we do the financial markets. we were the major locomotive of growth. we are funding nato, we're funding -- with so many public goods at some point we have to ask ourselves how are we going to pay for this. >> in a multispeed world and corners in a normal environment -- >> don't give me a hard time. >> he turned on me so i go back to the multi. you don't have a single new one? he'll come out with one but won't present it as a new one. >> it will be a "squawk" exclusive. >> we have a strategy week when

and we talk what the cyclical outlook looks like. >> group of thought leaders? you can look at mckinsey and find the terms. >> see how powerful the comments were, they're on the website, we have an archive. in '06-'07, it was "we are living in a stable diseven disequilibrium." in '08, it was the unthinkable is thinkable. >> bill is the leader? >> in bill is the leader. in '09, it was w.i.t., whatever it takes, and then we moved through the new normal which is sluggish growth, 1.6% last year, high unemployment, guess what,

we're above 8%, regulatory issues every day in the newspaper, right? >> right. how about mcculley. >> we miss mcculley. >> he's up on the mount tain the sound of one hand clapping, going what is the ohm, he's looking at -- >> paul came one shadow banking system. >> i would never play words with friends is with these guys. you know what words with friends is? >> yes. what's the one for rap? >> okay, if you've got comments, questions about anything you see on "squawk" or a new phrase for mohammed, shoot us an e-mail at squawk@cnbc.com and follow us on twitter. still to come prices at the pump on the rise, what will you be paying for gas during the summer driving season? we'll hear from the ceo of gulf as "squawk box" continues after the break.

coming up, another squawk market master to the conversation, evercorps's roger altman joins us to talk money. tdd# 1-800-345-2550 let's talk about fees. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee. tdd# 1-800-345-2550 so talk to chuck tdd# 1-800-345-2550 because when it comes to talking, there is no fee.

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opportunities and american business has the advantage to take advantage of the opportunities. there's not a shortage of investment funds in the united states in any way shape or form and there's not a shortage of opportunities. >> that was warren buffett saying there are opportunities in the u.s. to make money. let's bring in another squawk market master to find out where. roger altman, chairman and partner of evercorps partners and our guest host mohammed el-erian. >> hi, andrew. >> i hope you had an opportunity to see warren buffett's interview yesterday. >> i did. >> i see some of the things we talk about on the set and some articles quoting you saying the u.s. recovery has been "profoundly weak." i try to square the circle of what warren buffett is saying and what you're saying. >> my point is, andrew, it's been profoundly weak by historical standards. if you look at all of the recoveries since the '30s, this is the weakest, and if you look

for example where labor markets are today and 98.3% unemployment rate in my view is not the best measure of the weakness of labor markets, the labor participation rate, the employment-to-population rate are both i think better indicators. we're still weak in any historical context, are we recovering? yes. are we going to have a reasonable year in 2012? yes. but in the big picture, the most notable thing about this recovery since the very bottom in june '09 is how weak it is. >> let's talk politics for a second, given your prognostication about the economy. where are you in terms of what you think the unemployment rate is going to be going forward and how that will affect the race? >> well the unemployment rate, as we all know and you guys have talked a great deal about this on "squawk" is quirky and hard

to predict. last month we all know and in recent months you've effectively seen a decline in the size of the labor force which has produced an unemployment rate which is lower than the broader measures of labor markets would suggest that it would be. so my own guess, and i really wouldn't put a lot of money on this because of the quirkiness of the statistics, is that the unemployment rate at the end of the year will not be much different than it is now, probably a touch better, but i don't think it's going to be a lot better. and again, if you look at the broader measures of labor markets you see how weak these markets remain. >> roger, given how problematic the unemployment rate is, as a measure, if you go to job creation, do you think we can get above 200,000 per month and stay there for a while? >> about that, mohammed, if we were to, if someone said to me

you can choose between 100,000 for the month for the rest of the year and take it now or take your chances on doing better than that, i would take it now. that's a pretty good guess in my view. >> if you were in the administration and asked what are the one or two things we can do to get that number above 200,000 in a sustainable manner, what would you tell them? >> well, if we could wave a wand and i've said this before, with you guys, i would be in favor of more stimulus now in 2012, more stimulus than we're going to see and that would be in the context of a long-term serious reduction plan which is agreed now and takes effect beginning next year. so i'd like to see more stimulus now. there are lots of different ways we could do that. i think the original proposal on

a bigger tax cut cutting 6.2 than 3.1 would be added and further business expensing could be added to that and so forth. >> roger, on the employment number i'm going back to the election for a second, it would seem over the past month that obama's done better in part because the republicans have been beating each other up but in part because it has felt like given the employment number we had last month there's been a little bit of a kick in everybody's step. does that go away? >> well, it's awfully hard to tell, andrew. if my expectation that the unemployment rate around the end of the year will be just a touch better than it is now, pick a round number and say 8% that fits with my own macro political view which is that the president is going to get a modest tailwind from the economy this

year, but not a big one. >> and you've been there for a while, roger. you've been expressing, i don't know whether you want your party to make sure it doesn't get overconfident but you've been talking a really tough election for at least six months that i've been, when you've been coming on the show, reading your notes. you've been warning about that. you seem a little bit more pessimistic than a lot of people around you. are you more pessimistic than a lot of people you talk to in the administration? >> joe my point of view at the moment the president is the favorite. we can all look in trade he's at 60.9% this morning. he's the favorite. i happen to think he's the favorite primarily for demographic reasons. we can come back and talk about that if you want. i expect him to win the election but i think it will be close.

>> there's different ratings on gallup but the 60% on in trade i don't think for the republican nomination it's iced on romney for in trade. it used to be at 90%. >> he's at 57%. >> it's come down 30%, unbelievable. >> we were at 90% after florida. >> roger, we have to leave it there but i'm sure we'll continue this conversation with you soon. >> great to talk to you. coming up, much more from mohammed el-erian and the next hour of "squawk box" former morgan stanley executive -- ♪ -- i love this song, steve crawford is our special guest, we'll be right back after this. carfirmation. only hertz gives you a carfirmation. hey. this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in,

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welcome back to "squawk box" on cnbc on this tuesday morning. among the top stories we're following, yahoo! and facebook now involved in what may become an escalating legal dispute. yahoo! is demanding licensing fees from facebook says it's utilizing patents in its ads and privacy controls in other areas, the two companies said to be in discussions and the issue has not gone to court but it could. microsoft said to unveil the public test release of its windows 8 operating system, it

will happen tomorrow in barcelona, it is considered key to microsoft's future designed to run on tablets and tadesktop and laptop tuesday. donald trump will join us every tuesday to talk to us about the latest in politics and business. joining us is mr. trump, president and chairman of the trump organization and author of "time to get tough, making america number one again." welcome, we're excited about the new segment. >> sounds exciting to me. we're going to have some fine. >> we are. >> you're hired. >> that can only be joe. >> you're hired and i did the hand movement. we just can't see you. that's what we're missing. >> well, we'll get there at occasion there, too. >> can't we get you a camera? >> we could do that, interestingly i tried to get you guys in 40 wall street which i

just rented to dwayne reed but i wanted to get you in wall street you would have had me every tuesday morning no problem. >> us? >> we had to come to him. >> you decided to go to new jersey, which is fine. >> you're probably in a robe right now. do we want to see you on camera? >> i don't think so, no. >> one of those heff robes, you know? >> donald, why don't we talk about the price of oil, watching this morning $108, it's been skyrocketing and soon it's going to mean a much bigger pinch at the punch -- >> while you mention idols, pinch at the pump. donald you talked about opec? what do you think? >> i think it's devastating and much more opec than anybody else or anything else. they're sitting around the table and laughing at us because we have no leadership and frankly

you go back a number of years when we had the problem, mohammed and andrew spoke about it brilliantly actually, i've watched them over the years, but when we had the problem of $150 a barrel, i really believed that was a bigger factor than the banks and the mortgages. now, i'm not going to say the banks are, you know, they did plenty wrong and lots of mistakes and they were devastating but i really believed $150 barrel oil was a bigger problem than even the banks, and we're heading back that same direction. that's the lifeblood, everything runs with oil, and that's the lifeblood of this country and even the world, and i'll tell you what, if it keeps going up like this i think we'll have some really big problems perhaps like we had a few years ago. >> how come we've had several years since this happened, i guess about four years and here we are in the same situation without any sort of a national energy policy that addresses this? >> because president obama has not seen fit for that as a major agenda. obama care was a major agenda. he would have spent one-third

the effort on energy we wouldn't even be bringing oil in. we have so much energy under our earth between natural gas, oil and everything else, frankly, things that we didn't know we even had a few years ago. and now we have methods of getting it out. the problem is you can't get through the environmental impact studies. you can't get it approved environmentally which is ridiculo ridiculous. >> boone pickens has come on our show and he was running with this up until the point where oil prices collapsed where he built up momentum in congress to try to get truckers at least switched over to natural gas, and it seems like the moves take much longer than you might anticipate. >> they shouldn't take much longer and whether you like it or don't like it, if you look at wind, wind is turning out to be a disaster. they're closing wind farms all over the place, and lots of different countries, even some of the original countries they're closing up their wind farms. very, very expensive to build, and they're ruining the

environment. you have the horrible machines all over the place on countrysides and oceans and the wind is really turning out to be a disaster for a lot of people. >> is that a wind farm in the way of one of your golf courses? >> i have that situation in scotland where i built a course i think will be among the world's great golf courses and they want to put a wind farm two miles off the coast and i said you got to be kidding, and now in scotland there's a total uproar over wind and you know, these machines are devastating to the environment. they kill thousands of birds and create lots of other problems, so wind is turning out to be not very good, and i tell you the farms are being abandoned all over the place. >> donald, this is an example of you know, we keep hearing about that the government's got to invest in what it knows is going to be the winners of the future. if you look at cafe standards for cars that people really don't want to buy at this point and they've decided what the energy sources are going to be for the future taken didn't include hydrocarbons because of

the carbon footprint and that's what happens when the free market doesn't decide which way you need to go and politicians have favored industries and this is, we're getting exactly what we deserve. >> sort of interesting and some of the countries are talking about the footprint and everything and finding out wait a minute, this global warm something turning out to not happen because it's getting cooler in the countries and saying wait, there's something wrong with our calculations but of course, the people with this agenda don't want to hear it and then they write memos to each other laughing at the stupidity of everybody all over the world. i guarantee you one thing, china talks a good game but you look at the factories spewing out coal and others, any way they get their factories to go and sit at a conference and talk about the footprint, so you know, we have a lot of problems in this country, and we're not addressing them. >> if we have $2 natural gas and everything else cost the same for btus, how does that make any sense at all for your economy? >> it's inconceivable and we

have so much, i mean i've heard for the last couple of years it's a great expression, we're the saudi arabia of natural gas, and more so, and yet we don't do anything about it. >> doesn't fit with the far left's environmental. >> don, should we be investing in green energy? >> we should be, andrew but it will never take the place of other things and whether you're talking nuclear, whether you're talking natural gas or whether you're talking good old-fashioned oil that comes, it just doesn't -- it's interesting, a friend of mine is a great environmental guy and he said "donald i'm so proud --" this is two years ago, just moved into a green building. i said are you wearing glasses? no, i don't wear glasses. i said get used to it because you will be someday because your eyes will go bad. you won't have enough light and by the way in the winter you're going to be extremely cold and in the summer you're going to be sweating at your desk. he said no, no, i'm so proud, this is great. he called me up yesterday and said it's the dumbest thing he

ever did, he moved into a green building, he said i'm freezing because it's winter. he said the summers are miserable and you're right i'm starting to lose my vision. i said it's green because they don't give you enough energy. >> green energy you're involved with is doral and other places. >> that's real green energy. >> it's called greens energy. did you close or what happened? >> i bought doral country club in miami beach, hundreds of acres right until the middle of miami. i'm not sure how mohammed feels about this but when you look at a $16 trillion because it will be there very soon, debt of this country, i think the greatest thing you can own is real estate, to be honest with you. real estate to me is the greatest thing, unless they really straighten it out the old-fashioned way and the proper way, the best thing you can own is real estate. >> so donald, on this point, yesterday on "squawk" warren buffett pointed to housing as the one problem area still in the u.s. >> right. >> you are incredibly well

connected, you see this at both a microand macro level. how long are we going to worry about housing? >> i think mohammed that house something one of the great investments right now. i tell people all the time when they come up to me, what should i do? go buy a house. you can only buy it if it's owned by the banks but the banks will loan money if they have to get rid of something from inventory. the banks have not been nice. they took in billions and billions of subsidies and if you go for a mortgage for a house you don't get it. when the banks have taken back houses and they own millions of them, i mean beyond, you can make an unbelievable deal and i tell people, they ask what do i do? go out, buy a house and tell the bank to take back, you want 30 years -- you want like a 30-year mortgage and you'll get it at a low interest rate. >> that's the same thing buffett said yesterday. >> the 30-year, lock it down. >> the problem is you can't buy from an individual because for the most part an individual will not take back financing but the banks will but if you go to a bank and say i've been a great,

great credit for years, and i want to borrow $3 to buy a house, they won't give it to you which is very sad. but i do believe house lg come back, just to answer your question. >> just to circle back around energy one more time senator chuck schumer will be on later and he's of the opinion we need to tell saudi arabia they need to pump oil to bring down higher prices? >> he's right 100% but we should be pumping our own oil and everything. what do we need saudi arabia for? we don't need them. i have many friends in saudi arabia and other countries and can't believe what they're getting away with, can't believe how stupid we are. we don't need saudi arabia. the canadian pipeline, the pipeline that so many people are talking about, that's wonderful but we don't need canada either. we have everything right under our feet. we have to go get it. >> donald, one more issue, we mentioned that we had warren

buffett on yesterday and talked about tax policy. i was wondering if you'd listen to the sound bite and let us know what you think about it, too. >> they've gotten to favor the extremely wealthy and the wealthy have seen their net worth of the forbes 400 since 1992, has gone from 300 billion to a trillion five, five for one, so we have a system that has drifted toward favoring the ultra rich. >> donald, what do you think of that? >> i've listened to him for a long time and one of a few in that position that really say that but this is a very, very fragile time and a very, very fragile time to raise taxes on people that do produce jobs. you know the bigger problem i hear from so many people when i talk to wealthy people and we talk about tax policy is where is our money going? is it going to be thrown down the drain in afghanistan? are we going to build schools in afghanistan to get blown up within a year after they open

and roadways in afghanistan and we can't build anything? we can't build a school in this country and yet we're building schools and roadways all over afghanistan and the people hate us and they riot. so you know, i really hear it from everybody, where is the money going? why can't they do cutting? why do they have to raise that? why can't they cut? there are trillions of dollars that could be cut ander this' n they're not cutting, and that's what i hear and i'm a believer, too. >> donald, wanted to get you to handicap the auction for the dodgers. your son-in-law and my friend jared cushner involved. are you going to get involved? >> i won't be involved. these prices are going up for these teams i've never understood it. i look at the teemsz aams and b lines and say how do you figure this one. >> you were involved in the football league a years ago. >> i had a team, just sort of a minor league team but you know i'm watching what's going on, the dodgers are a great franchise and jared is a great guy, let's see what happens,

andrew, who knows. >> dodgers are, you know -- >> it is a great franchise and magic johnson is involved, steve cohen at sec. >> i hope he gets it, that way i get good seats for the dodger games which would be nice. the team needs a lot of work. it's not a very good team and not easy to build a good team up so fast. >> you always have trouble getting good seats at sporting events, donald. that's what i notice. you're not actually sitting in the goal at the hockey game. >> i was with jim dolan last night, a great guy and we watched the rangers and the rangers have become an amazing team and they did it the old-fashioned way, they went out and built a great team and i loved the game, they won 2-1, and jim dolan has to be given a lot of credit and the knicks looks like they're on their way maybe, we hope. >> lin-sanity, got to love it. >> lin-sanity is right.

>> donald we're excited about this new segment. thank you for calling in today. >> i look forward to it and speak to you next tuesday. thank you very much. >> sounds good. coming up stocks on the move and mo are from guest host mohammed el-erian, does he fix pothole? what was the pothole thing? >> he had a phrase. >> no spare tires? >> we are on a bumpy journey to an unerdestination with few spare tires on the car. >> and potholes. >> that's the bumpy bit. do i have to explain everything to you joe? >> our executive producer, matt quayle tweeted send us your new phrases describing the markets for mohammed, if you have a phrase shoot it to u us @squawkcnbc is the handle. still to come, how high will prices go at the pump? gulf ceo joe petrowski tells us

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throughout the country. joining success gulf oil ceo joe petrowski. this morning i don't know what it is in the new york area i'm still seeing where it's been for six months. is this a quantum move, building up and eventually going to move? >> i think prices are going to go much higher probably into, especially on the east coast, where we've lost 50% of our refining capacity in the last year between the close of the st. croix refinery, three refineries in philadelphia and some bankruptcies in europe. so i think we're going to probably go towards the $4.50 range and what's extraordinary is demand is exceedingly weak, heating oil demand mainly because of the winter is down 14% and driving is less than it was in 2005. >> i noticed a lot of stations have new electronic digital. >> you can flip it without changing it. >> no need to manually do it

anymore. i'm waiting for that to happen. it's confounding for us, for the normal person joe to watch the way retail gas prices are set. no one's explained it. i've seen oil move up about $25 and gas hasn't moved. why haven't they moved it? >> retail prices always lag wholesale, both up and down. they are sticky. essentially most retailers and you've got to understand there's 140,000 of the 165,000 gas stations in the united states are owned and operated by people who own five or less, it really is a small business. they're much more interested in getting you inside their store, for example at our cumberland farms retail store if a customer comes in and spends the average ticket of $10 the margin is three times what we make if you come to the pump so legend has it they like to make money at the pump. the reality is they use

sometimes gasoline as a lost lead to bring you inside the store. >> joe i'm surprised by what i'm hearing, coming from california and just judging from the gas station i see every morning driving to work that has moved 10% in the last two weeks. prices have gone up. the question is why the big difference between the west and east coast and secondly how do you think the consumer reacts from here? >> well great question, mohammed. carb gas lags, the california resource board is much more expensive, there are fewer gas stations in california, real estate taxes are higher, land values are higher, so the cost of regulation is higher more than new york and new jersey and those are tough tax states also. to the second question and that's an important one, we watch closely in the 600 stores we own and operate conversion,

how many people at the pump come in. the average ticket price for consumption and what products they're buying and we're starting to see like '08 some resistance, the average gallons pulled goes down, the conversion rate is down and you see more private label and less branded purchases, the consumer is impacted by higher prices. i still think we can probably go a lot higher before we saw which was in '08 which was extraordinary, in '08, eight gallons pickup, normally it's 12 and that's a sign of distress. >> could we be energy efficient some day? >> donald is right. >> how much of it would be hydrocarbons, 90%, if they were self-sufficient? >> we still have 83%

hydrocarbons in all energy and 49 in transportation. >> joe thank you, with he appreciate it. >> did you drive yourself? >> of course i do. >> do you drive a stick? >> i know how to drive a stick. >> you know how to. i don't have a helicopter if that's what you're asking. a closer look at how gas prices are pushing people mass transit and we'll talk europe, the economy and much more with our special guest, former morgan stanley executive steve crawford and with new york senator schumer who will be calling on saudi arabia to cover any iran related shortfall. "squawk" is coming right back. you're watching "squawk box," where business leaders, investors and politicians turn to get the first word on the markets. it's right here. carfirmation.

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♪ let's take a look at -- not the right part of your song but this is a special question from mohammed, maybe the biggest animal orchestra man on the planet. >> bigger than -- >> au contrare, a handful of

people who like it. >> no, you're wrong about that, too. stocks to watch, auto zone. on the break you said the answer to all our problems is protectionism and tariffs. you said that! you've lost it, sorkin. you have lost it! >> we're going to have a larger conversation about this when we have more time. >> you want mortar i haves, that's your latest answer, you've lost your mind! >> i want negotiating power with other countries but i want to talk about that when we have some time. >> autozone $4.15 a share, office depot earned three cents a share, better than a break even quarter analysts were looking for. tenet health care earned ten cents a share, four cents below estimates. dominos, dpz, three cents above estimates, revenue less than wall street consensus and priceline.com reported fourth quarter profit of $5.37, well

above expectation, and proctor gamble upgraded to buy from neutral. when we come back, former morgan stanley company president steven crawford joins with us his views. and senator schumer joins us. much more when we come back. without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants

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from psychological milestone to psychological barrier? >> what's this? >> a couple of wavy lines. >> sorry, this isn't your lucky day. >> the dow closing shy of 13,000. >> hey, i'm getting a little tired of this! >> steve crawford will talk europe, the economy and the u.s. markets. >> the global politics of oil, senator chuck schumer will tell us why the u.s. relationship with saudi arabia will be critical for the price of crude. and breaking economic data. durable goods numbers for january due out at 8:30 a.m. eastern, the third hour of "squawk box" begins right now. ♪

welcome back to "squawk box" first in business worldwide i'm joe kernen and becky quick and andrew ross sorkin. with us is squawk master mohammed el-erian. we're where we were most of the session yesterday for the final sell-off into the close, only about a third of a percentage point as far as what it's indicated on the open for the dow jones, which may try to reach 13,000. >> the new column on the board. >> that wasn't a sorkin thing. >> no. >> but you're okay with that? >> i don't like taking credit for other people's work, so. >> wow. i've heard it all now. morgan stanley outlining the effects of a possible downgrade, moody's may cut the firm's long-term debt rating by three notches. morgan stanley says it has to post north $6.5 billion in

collateral if moody's follows through on the warning and in news out of europe, greek bonds are no longer eligible for use as collateral at the european central bank, that move is temporary, and comes after s&p downgraded greece's long-term rating to "selective default" part of the bond swap process designed to lighten greece's debt load. look at european equities at this hour, nice green arrows across the board. you can take a look at where the euro is, too, making that trip to paris in about a month. >> all the way up at $134.50. >> more expensive. i have to tell my wife. in the meantime we are looking at an election tonight. gop voters in arizona and michigan headed to the polls one week from today. john harwood joins us from michigan. how close of a race is this at least in michigan? >> very close, becky. we've got genuine suspense as to what's going to happen in this

race. look at the average recent polls from realclearpolitics.com with mitt romney a 1.5 lead over rick santorum, santorum fell significantly behind in polls late last week so both candidates are going directly after one another, yesterday mitt romney was making fun of rick santorum's op-ed in the "wall street journal" on his economic plan. mitt romney suggesting that rick santorum very late to that party. here's romney. >> i'm glad he recognizes this has got to be a campaign about the economy, time to focus on the economy and for to you say if the economy is going to be the issue we focus on who has the experience to get this economy going again? senator santorum is a nice guy but never had a job in the private sector. >> but of course for rick santorum it's not only about the economy. he's counting on votes in the western part of the state from

conservative christians so he's weaving in social issues to his discussion of the economy and the role of government as when he attacked mitt romney yesterday for having supported an obama-like program for health care in massachusetts. here's santorum. >> it's about government control of your economic lives, regulating you, taxing you, forcing you to buy things then forcing their values on you. and your religion, which by the way governor romney did to catholic hospitals in massachusetts by forcing them to distribute the morning after pill. why would we give those issues way at the core of what's at stake in this country? put someone out there uniquely unqualified to make that case? >> you can see it's a very intense battle in the closing days and what it's going to come down to, guys, is the turnout here in the detroit metropolitan area and suburban counties is where mitt romney is strongest

but for rick santorum, he's out in the western and northern parts of the state, more rural and small town parts of the state appealing to the conservative christians and small town voters, teavangelicals they're called. >> john this race tonight, what can we expect headed into this? santorum's people are saying this say close race and that in itself is a victory for them. >> they'll make that argument but if mitt romney can win this primary also win in arizona, he's goingo add to that momentum he has got as the punitive front-runner in the race. even if he loses becky, most republican strategists i think continue to believe that he'll end up as the noment know, but a loss means a longer, bloodier, more difficult race and would

make it more difficult for mitt romney to bounce back on super tuesday when newt gingrich is getting back in the game with infusion of funds in his super pack and got his home state of georgia to fight him on. >> what is the breakdown for how super tuesday is going to fall according to the polls? >> you've got georgia as an advantage gingrich, tennessee he's doing well and targeting gingrich. rick santorum is focused heavily on the state of ohio, and he's confident if he wins michigan he'll do well in ohio where he's been leading in the polls. mitt romney has got his home state of massachusetts and also got a very distinct home field advantage in the state of virginia which is is a significantly sized republican state where rick santorum and newt gingrich didn't qualify for the ballot, another example of the superior organization that mitt romney has that he's going to be banking on once this thing spreads over a broad landscape. >> john, what do you say to people who say there's nothing but upside for the democrat answer for president obama out

of all this? >> i think there is considerable upside, mohammad, for the democrats in this. you have a race in which republicans are trying to appeal ever more urgently to the right of their party, something on issues like immigration, on some of the social issues that make it more difficult for them to come back with independents and suburban women voters in the fall, so the team obama is enjoying this campaign. i think they're clearly hoping that santorum wins in michigan and makes it more difficult for romney to get the republican nomination and consolidate the party. >> john, are you on top of the motor city casino? >> i am on top of wdiv, which is the nbc affiliate here, but i'm in the middle of downtown detroit. >> we had a viewer here -- >> clear weather today, a little bit chilly but nothing will turn out. >> thanks a lot, john harwood. >> if the politics thing doesn't worked out for john he could be a weatherman, a good one at that. >> it is important for the

turnout today, it's a big deal. >> crucial, john explained why it was crucial. joining us now on the set, steve crawford, partner and co-founder of center view partners and former co-president of morgan stanley. given your former role at morgan stanley if you'd indulge me because it's in the news today, morgan stanley announced that it might have to post more collateral up to $6.5 billion, what is the impact on the firm and how we should think about banks broadly in the context? >> first of all, the potential downgrade is news but additional posting of collateral, that's something they've had to disclose for some period of time. so the effects of that aren't, shouldn't be that substantial. it's more profitability than anything else, it's a federally regulated institution with substantial access to fund so

long it could drive up the cost of funds which is a huge part of their profitability. >> are you a bull or bear broadly on wall street firms? are we in a secular or cyclical downturn at the moment? >> if i had to pick between the two i'd say secular. when you look at all of the regulation, the last major redos of the banking system, the legislation ran 30 pages in length. dodd hnk frank is 800 pages and the volcker act on top of it. >> there's an article by francesca guerera suggests what's not only being imposed on them but also what the firms, how they want to reposition going forward. do you buy that? >> i think it's unclear what the

demand for their services is going to be, and there were changes happening on wall street people didn't recognize even before 2007. the investment banking business had for years been, you know, at least the business i came from, not very capital intensive business. that changed dramatically. when you look at what's going to happen -- >> you're saying not capital intensive i.e. the advisory business? >> it was fee oriented business and then when private equities started to be a bigger piece of the m&a business they require a lot of balance sheet and as these firms became bigger financial institutions they had to provide balance sheet to get the mandates as well and on the other side the compensation model didn't adjust. so the compensation ratios were the same, but the capital requirements were gone up long before the crisis. >> we veered off course from where i was originally wanting

to go. you spend a lot of time inside some of the biggest board rooms in america. you saw what warren buffett had to say where we were, yesterday, he seems to be bullish. we had roger altman on earlier. i wouldn't say he's as bullish, say he's a little less bullish. i don't want to misinterpret it. >> he didn't think unemployment would get better than it is here by the end of the year. >> what are you hearing inside the board room? >> people feel a lot better than they did six months, 12 months ago. particularly true for the u.s., less so for europe. joe always gives me a hard time about the razor blades, if i had to step back from my own perspective, we've had 2 trillion and 5 trillion in fiscal and monetary stimulus. >> right. we're still looking at a sluggish recovery, second inning. >> the razor blades are still i'm not putting those away and you wouldn't deny that --

>> no. >> we kick the can sufficiently so we can put the blades away temporarily, six months -- >> no, this has been for a couple of years, right, steve, and it's been borne out so far. >> the u.s., we've had no real progress on the balance sheet or fiscal issues. i was amazed, i was away last week, we've got a potentially explosive geopolitical environment, the two headlines, u.s. markets reach new highs, iran enriching uranium to nuclear weapons and the tools we have available to make changes aren't as powerful as they were before. you'd have to see four things happen for me to get more positive, one, where is the demand coming from, unless there's demand that's not led by increases in leverage, it's hard to get excited about what's going to happen. secondarily, how do we rebalance the global economy. that's difficult to do

politically. can't be once it restarts. it's about additional exports for germany and china. >> you said four things. that's two. >> third, i was going to say unfortunately i think there needs to be a complete redesign of the financial system and a lot of what has been done so far i think is a distraction, and. >> we have to extend the show for five hours to redesign the financial system. >> it's much more simple, it's all about leverage. we talked about this the last time i was on. >> right. >> it's not about 1,000 pages. it's leverage everywhere in the economy. we've learned that lesson kind of repeatedly, and fourth, you know, a return to the roots of capitalism, which is obviously out of favor to talk about at this point, but -- >> so every single one of these are secular issues? >> yes. >> in the middle of this we are in a cyclical balance because of liquidity, people feel better and spirits have gone up.

are you saying the cyclical bounce will wear off and we'll have the hand off to secular or we can go on with the cyclical bounce for a while and the jury is out as to whether we hand off -- >> there's a distinction between the secular and the cyclical. the cyclical can last a while, given the u.s. is predominant and we're in an election year we'll have a dramatic decline in the markets or confidence. the one exception to that if something happens geopolitically. >> how can we return to the roots of capitalism? >> a limited role for the state, substantially limited role than we have. >> the role of the state is still limited, i hear that all the time, these have been thin at the margins, 17% of the health care of the economy is just, you know, it's a little tweak at the margins. >> you don't believe that. >> do i believe it? no, no, i'm with you. i'm with you. >> in europe, one of the largest contributors to global gdp that's beyond argument.

in the u.s. you include the financial sector, the health care sector, the government controls a substantial portion of the xeconomy. >> what do you say to people i buy everything you said but the private sector hasn't deleveraged yet. if you don't bring in the public balance sheet, the central bank or other parts then we'd be looking at a depression. >> that's correct and that's why i think the first reason why it's hard for me to get optimistic that we're beyond is i don't know where the demand is diagnose to come from. in the past you've talk about emerging markets decoupling from some of the developed markets. i'm not a sanguine about that and they're going to be a source of demand for the world going forward. >> you said europe is in the second inning. where is the u.s.? >> i don't know. >> warming up before the game. >> seventh? >> are we past, so we're all right? >> sixth, seventh inning. >> wow, i thought we had

another -- double header or halftime. >> there's so much more going for u.s. in terms of the rule of law, innovation, immigration, there's a lot more fundamentals supporting the u.s. economy. >> we're not quite as far down the socialist path as europe, but we could get there pretty soon. >> well it works until you run out of other people's money. >> exactly. >> steve crawford we'd love to have you back. there's a lot to talk about, we haven't got on it do all of it but that was steve crawford and we'll have you back soon. >> thank you. coming more from our guest host mohammed el ariane and senator schumer will talk to us and our relationship with saudi arabia, "squawk box" will be right back. e the oil we change the filter... tire rotation, suspension, we make suspension checks... what we have here is the multi-point inspection. every time a vehicle comes into a ford dealership you'll be presented with one of these. we check the belts, hoses... brakes. tires and the pressures...

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welcome back to "squawk box" everyone. the futures are hanging in there this morning, the dow futures up by about 45 points which means the dow is going to make another run at 13,000. also general motors is reportedly set to take as much as 7% of a stake in peugeot, part of an alliance negotiated.

gm would invest up to $360 million and an announcement as early as tomorrow according to dow jones. italian borrowing costs falling for a second straight day. the sale of ten-year bonds drew solid demand. yesterday yields fell at a sale of a six-month debt. >> thanks, beck. kind of want to go there, looks nice behind you. coming up, jane takes the train to avoid the pain at the pump. we kick off her journey coming up next and at 8:30 a.m. eastern, we're going to get durable goods data for january, we'll have the number and instant reaction in the markets as we head to a break, check out the price of crude. i was downstairs making coffee, and we heard it. it just came crashing through the roof, out of nowhere. what is it? it's our ira. any idea what coulda caused this? maybe. i just sorta threw a little money here, a little money there.

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welcome back to "squawk" on this tuesday morning. higher prices at the pump driving commuters to mass transit even in los angeles. jane wells is waiting for the train in more park, california. jane? >> hi andrew. we have a bit of a delay because we're using a special system later so we hope to go live from the train. gas prices getting up towards close to $5 a gallon. i did this four years ago the last time they peaked in june 2008 but it took me twice as long to get to work than it did to go by car. the question now, is it more

cost-effective even if it's taking you twice as long. took me two hours to get to work as opposed to an hour by car. so now we're trying it again because we are hearing the trains are starting to get heavier, they are 43,000 riders a day usually in l.a. county on metro link which isn't much when you talk about the millions of people in their cars but they say starting to get tighter. is it more cost-effective? my round trip commute every day is about 76 miles, cost me $13 in gas. i'm going to buy a ticket now here to go from more park down to union station, and from there i'll get a subway then up to universal city, so let me put my credit card in. it cost me $13 a day using gas, it doesn't include wear and tear on the car, it's mostly free-throwly drivi freeway driving so it's not that hard. it can't read the card. maybe it's the corporate card from comcast.

just kidding. you can get a one day pass for $5 to ride the subways and buses, that doesn't work for me living out here in the boonys. it's still not accepting my credit card. i'll blow it and tell you what happens, the train ticket cost $20.50 round trip to go from more park to downtown. i'm already in the hole because it usually costs me $13. i'll see if there are people who are willing to pay that amount and ride the rails every day, when it's still cheaper to drive depending on where you live. guys, back to you. >> jane i saw that old video of you walking, there was no sidewalk once you get there, you have to walk on the street to get there? >> well here's the deal. when i get to universal city -- i'm still trying to buy this stupid ticket here. you have to walk up the hill from the subway station to work, and i learned that day those were the wrong shoes. today i'm wearing these shoes.

these are boring, old lady shoes, but they're going to be a lot better. hey, the ticket finally came through! yeah, here it s $20.50 for round trip as opposed to $13 driving. so the corporate card finally went through, woohoo! i thought i was being rejected. >> we're migrating to a new card. you have to do that eventually away from -- i'm not going to mention names but there is stuff going on with the corporate cards. check your e-mail. >> i just did it. >> i did it so i don't know. >> reporter: yes, we're switching over, yes, we're switching over to visa. >> oops, see i wasn't going to say that. >> away from that expre -- >> hard to say. >> a lot of corporations are moving from amex. minutes away from durable goods numbers for january, as we head to a break, look at the dow futures.

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we are nine, eight, seven seconds -- can't do it, keeps

changing from the durable goods data. rick santelli standing by at the cme in chicago. rick i didn't know the jobs numbers weren't until a week from friday, they messed me up. what are the durable good numbers? give us that to start. >> reporter: the survey says down 4% on headline durable goods, this is much worse than we were anticipating, we were looking for down 1 to 1.5%. transportation down 3.2%, capital goods orders, nondefense x aircraft, a proxy for business spend something down 4.5%, and if you look at instead of the orders at the shipment side, that's down 3.1%. so really around the horn a disappointing set of numbers, now there are some very, very slight positive revisions last month's headline originally released to three, now 3.2 and

if you look at the capital goods orders non-defense x aircraft the proxy for capital spending, business spending, that is 3.4 versus original release of 2.9. so this month's not very good. last month's a little better than originally released. we are seeing what would make sense at this point. you're looking at the pre-opening equities, giving up some ground, looking at interest rates moving down we're now coming back off, the same for boones which looks like they'll test 180. looking for the capital markets to give you a thumbs up or down on various economic global conditions, doctor rates moving down probably is not the type of confidence that we would be looking for. back to you. >> rick a lewded to the jobs number, usually to friday but there's some weird survey week or something didn't fall in the right day.

you knew all this, a week from friday, right? >> reporter: i try to not get too deep in the weeds on some of the employment statistics and why they do things. i don't think it's a good thing. i try to figure out their seasonal revisions and that keeps me busy. >> this is an interesting one coming with some people expecting the possibility that it's not as good a number as we've had for four or five months base on some polling. it will be a week from friday and tomorrow is the -- we have a leap year, too, which we found out rick in case we have an extra day to live this year just so you know. >> reporter: extra day to pay taxes, right? >> that's right. which it's wonderful. our guest host is pimco's mohammad el-erian. in any recovery it's never a straight line. can we view this with durable goods, three steps forward, two steps back?

>> listen what rick said was important. if you look at the equity market, call it the dow 13,000 that prices in a healing of the u.s. economy but if you look at that and say how is that consistent with a ten-year below 2%, oil at 108, 107, gold at almost 1,800, different markets giving you different signals because different markets are pricing in -- >> wait a minute, is the bond market pricing thing in or is the fed pricing the bond market? >> the bond market is pricing in a large non-commercial player with a massive printing press in the basement. >> that's what i mean, yes. >> the bond market is telling you here is an institution that can create a wedge between valuations answer fundamentals. the equity market is not telling thaw. the oil market is telling you that because a lot of the liquidity is spilling over into commodities. >> are you sure the stock market is not telling us anything about the fed? >> this is telling you it can last a very long time. >> that is indirectly the fed, too. >> you'll get the handoff from

temporary to permanent. that's the whole cyclical versus secular discussion. >> how much contributes to the liquid and the economy. if the fed were to come in and say okay it's time to raise rates, say the middle of 2013 or something, what happens to the market? >> if the fed comes in and says time to raise rates or if europe, the ecb says no ltro, the ltro is incredibly powerful, if either of those show any hesitation to continue having the pumps open in a big way, there will be a major pricing of markets. >> are you still with us, rick? >> reporter: i am. yes. >> you're constantly telling us about moves in the ten-year but don't you attribute, don't you think the entire ten year is rigged where it is right now anyway? tell us about these moves based on economic numbers, but how much of it is the fed just orchestrating the low rates?

>> reporter: absolutely, absolutely it's rigged but i think that at the end of the day i was looking at trying to see if the markets would reach a tipping point. the notion for the fed leaving at certain rates for a certain amount of time is useless information. they're brag being a non-strategy but i think if you see interest rates in that environment start to trade up is starts a chain reaction of events that is enlightening so yes it's distorted but even within that distortion there may be a reality, they can only squeeze this water balloon for so long and trust me, when the notion arrives that things are healing on their own ayn rand merit there, is no tral bank on the planet that will be able to keep investors from fleeing what's still today -- >> i got to send you a copy of that book, with we that author on earlier. >> reporter: no, don't waste your time truly.

>> it is a pejorative to say -- >> reporter: it would be like an atheist telling me how to celebrate easter. >> stlthere were the loaded ter in ayn rand. i didn't realize she was a subversive trying to bring down the entire u.s. culture. scared me. >> reporter: atlas shrugged page by page as ayn rand was writing is it? alan greenspan. >> he was a terrible net negative. you might agree with her on that. the bureau of labor statistics, it's not the first friday of the month t is the third friday following the conclusion of the reference week when it conducts the surveys. the reference week must include the 12th of each month that usually means it's the first friday but doesn't always. so it's not the first friday. has nothing to do with that, the third friday after the reference day. >> reporter: >> there's some weeds for you. >> there's going to be a test

and next march, a year from now when will it be, rick, can you come up with that? >> reporter: all's i know is that i believe we're going to have good friday keep people on the floor and probably have early closes, so whatever the rule is, obviously it doesn't have an asterisk for major religious holidays. >> i heard something correctly from rick and mohammad, you said if the fed raises rates people are going to flee the equities market and rick you said if they raise rates -- >> reporter: not the fed. the fed can only control it a certain point. believe me when rates are destined to go up the fed will not be able to keep the genie in the bottle. >> rick if you find any of your teenagers reading ayn rand, you can always try to just lay a saul awlinski book to get them on the right track in case you're wondering. >> reporter: saul alinsky's book is still in my library, only in the major urban centers that it's always taken out. >> the ayn rand is somehow

horrible? i don't understand why you think gary weiss was wrong. >> i read -- why do you think it's wrong because i don't think if ayn rand is a subversive that ruined the economy. >> that's the not necessarily t argument, it's ayn rand was an influence on the tea party movement. >> reporter: there happens to be an intersection between people who quite simply want some fiscal responsibility and people that follow ayn rand, just like there's far right evangelicals in the religious that are a subset of fiscal conservatives, but there are many fiscal conservatives which to me are truly the message of the tea party movement that really aren't going to make it about these social issues that are going to cause the current administration to divide and conquer over little issues that are dwarfed by the fact that we have almost a $16 trillion debt.

that's the main point. put that diagram in to intersect any single group. they need to stay on message, fiscal responsibility is the at the top of the mountain and that will be the undoing of the current administration. >> both sides have their little loaded terms. the right has bill ayers, jeremiah wright, saulg alinsky and the left has sarah palin, ayn rand, glenn beck, if you say glenn beck, people -- >> glenn beck is more of a libertarian. it's a different -- >> i'm not even talking about their philosophy but i'm talking about loaded terms for both sides when you want a pejorative. >> rick let me take you back to something the market is wondering about. tomorrow's ltro two, the range is from 200 billion to a trillion, that's a massive range. what do you think the market has priced in? >> reporter: i think the market has priced in between half a trillion and 1 trillion and i think the higher the number is

within that range, ultimately the more negative it will become, but not after directly the operation tomorrow but in the bigger picture, i think when investors really factor in what this means and where an investor's role in the future probably is going to be smaller, is the ltros get big per. >> we have to leave it there. >> one of the chapter was the first tea bagger, not tea partier. >> you know, people are clever and cute with words. talk to me mad about that. coming up, keeping oil prices under control during diplomacy. senator schumer will join us next on why saudi arabia is critical to avoid pain at the pump when we return. >> if i had a way of buying a couple hundred thousand single family homes and managing them i would load up on them. i will predict our businesses will have more people working for them at the end of this year than at the start of the year.

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welcome back to "squawk box." senator charles schumer calling for saudi arabia to increase oil production so what does this mean for the united states and the sky high gas prices we've been seeing at the pump? senator schumer, democrat from

new york, joins us right now more on this and senator thank you very much for joining us today. >> good morning, nice to see you, hear you all. i can't see you. >> it's nice to see you. we have the advantage here we get to see you. we know that we've been watching oil prices climb and with it prices at the pump and you have a plan for now you'd like toe attack that. you want to tell us about that? >> the number one reason prices have gone up dramatically is justifiable fear on the markets that iran will dramatically decrease or cut off production and there's only one real antidote in the short term, the saudis in the gulf states have about 2.8 million barrels a day of extra, not used capacity they could push a button and start moving. iran produces and sends to the world market 2.2 million barrels. so clearly if the saudis said unequivocally that for every barrel iran takes off the market, they will, the saudis put a barrel on the market, it would immediately calm the

markets, all the fear of an oil shortage would dissipate and have a very, very positive effect. the interesting fact about this is the saudis have every interest in doing this. if there's one country that hates iran more than we do that fears a nuclear iran more than israel it's the saudis so it makes a great deal of sense for them to take away the one weapon the iranians have, which is that if you squeeze us too hard on this economic boycott we're going to wreck the world economy by not sending out any oil, the saudis can basically disarm them. the saudis are cautious, they're part of opec, opec is a dead end because ahmadinejad and chavez are on it. if they did it, it would disarm and affect the iranians. >> senator we've had a saudi prince said on the program in

the past that he does believe that the saudis will, like to continue to pump because he this don't want to see prices sky rocket, it doesn't suit their own interests either. >> the saudis have always had an interest, frankly, in not having the price go too high but they've been extremely cautious about implementing it and the saudis have not made a clear and unequivocal statement that every barrel iran takes off the market they'll put a barrel on the market. if they were to do that, we've talked to experts in the oil market saying it would calm the price of oil and the price of gasoline killing american consumers would come down quickly. >> let's assume that works, we get the saudis to make a definitive statement like that and it takes some of the concern out of the markets in the near term, we talked to people who say even with that you're looking at oil prices at $80, $90, that's the fair price at this point and we don't have a long-term energy policy in this

nation. >> you're right, i agree with what donald trump said earlier on the show this morning. this is a plan for the short term. we need a long-term plan. we should try to become as independent of foreign oil imports as we can. what does that entail? more production here, green power, a small percentage of our energy, but every percentage that we can increase it grows, looking at nuclear, most people are open to be looing at nuclear, non-polluting and more oil and gas production in the united states, highest level in years, we have a huge supply of natural gas and it's going up and one other way people forget about that's more effective than producing more oil, that's conservation. we will import much less oil in five years because of the cafe standards that congress in a bipartisan way implemented a few years ago. the president asked for more

dramatic cafe standards and can he do that by regulation under the legislation. if cars got 50 miles a gallon we wouldn't have to import one barrel of oil and this is working as well. so over the long-term, we need to do more but some things are being done. >> on the middle east the markets are having difficulty pricinging in iran and syria because the status quo is unsustainable, that's clear, the cooperative solution is not going to work because people aren't talking to each other and there's no single player who can impose an outcome. what do you tell them? what is your baseline? >> the baseline is, you know, the markets depend partially on supply and demand and partially on the psychology of what supply and demand will be and as you say the instability in the middle east makes that psychology very important, but i am confident of this. if the saudis were to make the statement and follow through on

replacing any oil that comes off the market because of iranian actions in response to the boycott, it would certainly calm the markets and in the short run bring the price of oil down. >> what is the number for the spr, senator? >> what is the number for what? i couldn't hear you. >> we had huntsman saying we should do the spr 108. i was like 108? we didn't do it at 150, did we? >> the spr is not as good a solution as the saudi solution for a couple of reasons. first it's limited. the saudi could produce an additional 2.8 million barrels of oil, way on into the future. the spr is somewhat limited and the spr works better when there's an immediate crisis caused by a natural disaster, a katrina or something like that. it's something that i would look at if the saudis absolutely said no but it's not close to as good a solution as this. >> i agree.

>> senator thank you very much for your time today. >> nice to talk to you and have a good day in new york. i wish i were there. >> thank you, sir. >> nice to talk to you. i wish you a good day in new york. wish i were there. >> you talk to senator shchume sflchlt. >> i didn't get a chance to. >> squawk box is coming right back. looking for a better place to put your cash? here's one you may not have thought of:

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let's get down to the new york stock exchange. there you are. >> have you been down here? >> i have not been down there. >> you should really check it out. >> yeah. >> what are you guys looking at today on your set? >> a big day expected and analysts have said to expect markets to enter into some kind of post qe hangover if this is the last ease of any substance for a while. but we'll talk about 13,002 and why we can't hold on to any incremental level. >> i think it's because we have to be at a classic vacuum of

news. there's nothing right now in the dow stocks. look, i'm waiting to hear jpmorgan say something, the initial reaction, the markets are fine if we could see a sustained procter & gamble, the stocks can head higher. we don't have it right now. we don't have enough. >> jamie dimon has spoken with relatively frequent of late and i would not imagine that it's going to koor late. >> warren buffett says it's not

personal. it's business. >> and these investors day, the last six years, stock for the following month after the meeting has outperformed the index at least. so it tends to be a bullish stock. that and much more when we begin in six minutes. >> all right. we'll see you in a couple of minutes. when we come back, a final thought from our guest host. "squawk box" will be right back. >> announcer: tomorrow, our guest host will be alan schwartz, former ceo of bear stearns. and we'll talk politics and economics with former chairman of president reagan's economic advisers and master of the market. it all starts tomorrow on "squawk box." e heartbeat of this place, the people on the line. we take pride in what we do. when that refrigerator ships out the door, it's us that work out here. [ michael ] we're on the forefront of revitalizing manufacturing.

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welcome back to "squawk box." we've got a few moments to talk. during the break -- and we've been talking about this forever.

what does the end of the year look like? you have a view that it can go either way. but if it can go either way, what do you do? >> look at europe. i think people recognize they are going to get their act together or it's no longer sustainable. >> the markets will go up either 20% -- >> 20 to 30. >> to the end of the year. >> mine is 10. we're not going to stick to the 0 or 8% range. if you bring together everything we've talked about today, it speaks to not just a revolution but -- >> we have 20 seconds. position yourself in this how? >> by having a claim on the upside and tail hedges on the downside. we can do it wh