china's gdp expanding at a lower than expected rate of 8.1%. it's the fifth straight quarter of growth rate declines for the world's second largest economy. economists were looking for 8.3%. the number down from 8.9% that the country rang up back in the fourth quarter and what you might expect on a friday the 13th. chinese march industrial output rose by nearly 12%. retail sales surged by more than 15%, but again, it is the slowdown that has people concerned today. even slower than so many people had been looking for. if you take a look at some of the early reaction to china's growth story, you'll see right now the futures are indicated slightly lower, down about 27 points because the big question is, is this a bad news or good news scenario for stocks. because if you think that the central bank in china will have to start easing like we've seen other central banks around the globe doing, is that a bubble that then leads to higher stock

prices. >> stock prices in the short term. >> easy. >> easy money? >> easy money. >> we heard yesterday from chanos at that conference where he was where it was all about they said it's so highly correlat correlated, the move up in equities. >> another shot right into the arm. >> of course those guys, you know, they're all looking for chinks in the armor where the fundamentals don't justify the move that we've seen. what were we up, 180 yesterday? >> i think so. not so bad. >> already took his vehicle story lap. >> yes, adam parker. >> unmitigated gall to talk about -- i'm just throwing things out there, i don't have clients depending on me.

>> you have more people -- >> i don't know if i'd stay at morgan stanley. sxwl >> you have more people taking your context probably than he does. >> and probably a better chance of being right than he does. anyway. >> let's take a look at oil prices today. there's a real big question right now as to whether we've seen the peak in oil prices. this morning down 49 cents to $103.15, but this new information from the iea that suggests we've seen will big supply and that raises the question whether we'll see the peak that we've seen in previous years and you get into driving season. take a look at the ten year yields at this point, just before 2%. we'll get numbers coming out at 8:30 including consumer confidence. also -- is that 8:30 or 10:00 number? 9:55 for consumer confidence.

yeah. you were right. you'll see the dollar is up across the board. 1.3155 is where the euro is trading. gold prices, right now at least gold prices are down about $7.40. $1673.20 an ounce. >> and big story of the morning, google providing fireworks after the bell. on the front page here of the financial times. actually most of the papers have on the front page. i'll give you a little bit of light. google is announcing its first quarter profits. two for one stock split. it's complicated. and it's got a lot of people upset this morning. >> really? >> you have a structure that

prevents outside parties from taking over or unduly influencing our management decisions. however, day to day dilution such as stock base the acquisitions will likely undermine the dual class stukt and aspirations for google over the very long term. so they're creating a stock split with a third class with no voting shares. here's the next piece of it. this is what they're splexplain. there's no you areurgency, no b acquisitions planned, just that since we know what we want to do, there's no reason to delay the decision. here are the abcs of google's stock split. there will continue to be crass a shares. those still have one vote. those are the ones that most people have actually. that's the one everybody has.

there are class b shares. those votes come with ten votes and those go to page, brin and schmidt, but only they have them. the new class is class c shares. and those will be under a new ticker. we don't have it yet. and they will have no vote. if you currently have class a shares, you now get two shares. you will continue to own your class a share and you will get a class c share. what this means is that your voting rights have now been cut in half -- will. >> if i buy stock in two months, what do i get, the class a or class c? sgl >> you will be either buying class a or deciding to buy class c share. ultimately what is the value of a class a share with a vote -- >> versus a class c share without a vote. but everybody the class a share, which ostensibly has a vote doesn't really have a vote because it this decision is being made by brin, page and

schmidt. because they have a majority controlling interest in the company, it's unclear whether you have a vote. we invited eric schmidt on the broadcast this morning. >> on the cable show, too, or just on the broadcast? >> on our broadcast. >> we don't broadcast. >> we broadcast over cable. >> so 28, 29 and 9 and they love that. you wouldn't give me any voting power, i won't buy that. even if i only have 100 shares out of how many billion are outstanding now, but i would still like to feel like i -- >> you feel like you have a chance. >> this is the evil. you knew you were buy manage to a structure where they controlled the majority of the voting stock, so you knew that already, but you didn't think they would use this that power to do something like this. >> what could eventually come from this?

>> nothing. here's the thing. there is no issue today. it is clear that within six to eight years, some of the analysts are mapping out depending on how many of the shares they continued in terms of equity based compensation -- >> but here's the way to fix the problem. stop giving away equity based compensation in the form of stock. >> that's part of it. the second component, they say they're not pursuing a big acquisition. if they want to go buy facebook tomorrow with stock, that would have put them in a bad place. >> because they would have diluted themselves down. stop using your stock as currency. >> that's the large issue. >> you're spend lifts. worse than any central bank. stop using your stock as currency to play your employees. if you stop using it, you'll stop diluting yourself instead of then taking away the voting

rights. >> some people are saying this is the equivalent of them taking the company private in the public markets. interestingly, an independent board of directors spent 15 months working on this issue and somehow came to the conclusion to approve it for better or worse. there is a question about the value of the shares. will you be able to arbitrage the spread. very interesting issues around how this ultimately is going to work and of course raises a lot of corporate governance issues and even larger -- >> you're right, the corporate governance issue as an independent board saying this is an okay idea, you say this knowing people who bought google shares always knew the voting majority was going to lie with these three individuals. but you rusted them to not do something like will down the road and if you have the board oversight, you would think it would be even less likely. >> now, this effectively puts them in control of the company in perpetuity.

with the exception of ibm which was more than a one trick pony, an analyst said to me last night if jerry yang had had this opportunity and controlled his company forever, would that have been a good thing. probably not. the r.i.m. founders, you know, technology founders are usually great at creating something once. many twice. google has done it with android. and maybe held do it again. >> steve jobs. >> steve jobs is the exception obviously. it becomes difficult. it's worth pointing out comcast has tul class shares. the "new york times" has dual class shares and that has not worked. "washington post" has had dual class shares. >> this is even worse. >> this is dual class and then sort of taking to the next -- >> to the next even more evil level. >> so there's a lot of issues. >> is eric schmidt the one who

has spread the evil at the company? >> no, no. >> you think they were all evil to start with. >> no, i think this was a decision by larry and sergei probably more than eric. i think hair vi their view is -- >> why don't you just splay along and say they are evil. >> i think this is an evil decision. do i think these people individually are evil people -- >> that he's the politely correct way for -- >> he's trying to book them for the show. >> you are? he doesn't say anything about anyone. can we talk about kevin smith or the goldman guy? >> the guy who wrote -- >> we still have to say he's a good guy, too. >> we'll get ap an analyst's tae on the story in a few minutes and takes big talker this morning. what's going on this earnings central. >> are you a great guy? >> no greg is. please come on. earnings central goes to the bank early this morning. jp more began expexwabegan bega

to -- did you break any of this google stuff? >> they announced it themselves. the second it happened, i can't tell you, my phones were like -- >> is this the value added avon information we got from our other m&a, did we get anything here shall. >> this is like the new m&a. >> jpmorgan will report today first quarter results at 7:00 a.m. eastern are expected and profit supposed to be $1.18 a share on revenue of roughly 24.7 build. investors looking for continued growth in commercial loans and a decline in mortgage related losses which jamie dimon noted in his annual letter take we talked about last week. and wells fargo is expected an hour later at 8:00 a.m. eastern. analysts expect earnings of 73 cents a share. we'll have the result as soon as

the company releases them. south korean defenses officials expect more actions. the multiple stage rocket blew up about two minutes after takeoff. supposed to go ten. parts crashed in to the yellow sea. the act being condemned as a breach of u.n. rules. north korea says also launch was an attempt to send a satellite in to space. some said it was like a washing machine wrapped in tin foil. >> told their own people it was a huge success. >> supposed to go ten minutes, it went would. >> 75 miles and then crashed. >> a little bit of egg on our face because we just tried once again to appease them a month or two al go and we didn't send any of the food yet, but we signed some deal and they just immediately blew us off. >> this is apparently going back

to the united nations at this point to the security council and we'll see what happens. s >> that was one of the things when the new administration came in, we'll negotiate with iran. we can talk to everyone. we can all be friends. and it just hasn't paid off with iran or north korea. last way didn't pay off much better. although there is a-will-it's still possible that this could be two more pseudo democracies in the middle east besides just israel, right? we don't now how afghanistan will eventually turn out or iraq. i wouldn't just immediately say that -- >> you know i'm a worrier, so i'm note hopeful. >> you can see more of it from the arab spring, too. >> exactly. ann's not here, so did you hear him, he's really taking charge. >> he is. >> our producer is taking charge. >> and the director decides not

to -- >> it's february the 13th. friday the 13th. and a lot of thof things going . let's get to the global markets report. ross, how is friday the 13th shaping up for you so far? woah, a lot of red. >> yeah, i'm okay. but stocks are given up all the gains that they had yesterday. once again we're focusing very much in spain. so more than 8:2 decliners outpacing advancers on the stoxx 600. we're down neert session lows. up about a percent in thursday's session here on friday giving up those percentage gains. ftse is relative outperformer down half a percent. ibex down over 2%. once again we've hit flesh record three year lows this morning, banks being sold off. we saw they borrowed a record amount from the ecb if march, over 300 billion euros.

pressuring once again yields in spanish debt going back up to around 5.3%, spreads between that and german bunds just widening out again. and five year credit default swaps hitting a record high of the spread 595 basis points. basically record costs for ensuring spanish debt against default again this morning. so that's where the focus is. in italy, we've got protests this rome against pension reforms, but the story to keep your eye on is monti trying to progress his employment reforms. there's been an about-face from one of the leaders of the italian industry unit who now supports monti's employment reforms. trying to free up the labor rules. italian yields are steadier below 5.5%, so below the higher levels that we hit earlier this year. all of that and the chinese data we had out today, china gdp just above 8% the annual rate for the

first quarter. pressured the aussie dollar a little bit. up against the yen, euro-dollar pretty in those very tight ranges still at 131.57. back to you. >> ross, is that a thing you do over there, friday the 13th, you're familiar with the phenomenon in the uk? >> yeah, i think that's a pretty global thing. that and in the walking under ladders and -- >> not everything is -- you know who jason is? >> jason? jason and the argonauts? >> no, no. >> jason in friday the 13th. >> who is not by the way the serial killer in the first one. it was his mother that was actually doing that. >> right, as in freddie. >> all right. as long as -- and you do do base ten over there, so you know you have the normal counting system. all right. because you have metric and -- >> yeah, not using the greek.

>> art cashin says it's a mild upward bias in stock history. >> you saw my jersey was 13. sx . >> i was always 13 when i was a soccer player. >> solar or lunar eclipse -- >> are we going to show that ad again? i watched it online. >> we'll go to the futures pits and they're calling this guy j.j. he usually saves that name for later in the day when you're on fast money, don't you? i know you as joe kineha this. . >> you were talking about great guys and i was going to say you were a great guy. >> thank you, my friend. both you and your brother are

great. >> speaking of vank moves, what about cybil on friday the 13th. >> can i ask you a question? back to 13. and people like to talk s&p. we can tut about in s&p terms if you want. 1400. or dow jones at 13,000. in your gut, do you feel 14,000 coming on the dow first or 12,000 coming first? because that's what i want to know. can we get 100 point moves again. it seems like something is setting up for the move move one way or the other. what do you think? >> in my gut, i would have to say 14,000. and i'll actually lead that into what's happening today with the earnings. interesting with jpmorgan an wells fargo coming out this morning, if you look at yesterday's activity, we saw a lot of people coming into the xlf which is a financial etf, but as well as pargo and jpmorgan are the two largest components of it and we had big call buyers.

the reason i think we could continue to go up is they bought them in may. if you just thought this was going to be a one day type move, you'd come and buy the weeklies or aprils. the fact that people come in and bought very heavily the may 16 call makes me think that there is a lot of optimism that these bank earnings might be better than people think. we've seen some pretty good earnings so far. and i think this could actually continue to be a good earnings season because let's face it the bar is very, very low. >> does that mean then that we see some of the groups that have moved in tandem with equities? i'd like to know where oil is going, too. we saw that saudi story today. i think they're trying to -- i'm not sure. looks like they're trying to help. but we had all these associations that follow gasoline prices saying that the peak has already been reached and it's only april. i'm wondering if it they know what they're talking about. if oil goes above $110, we haven't seen the peak in gas prices. >> no, we haven't.

and i think most consumers hope we've seen the peak. here in which i, we pin chicago expensive because they tax the crap out of everything. >> because they deserve it. >> oh, joe. because we have a broke state government, right away we have to pay more taxes. >> among other things. >> i thought it was just you were further away from the refining plants or something. >> no, there's a big refinery just over the indiana border here. but every governor here serves two term, one in office and then one in jail. but anyway, going back to that, it does seem hard to believe that oil has reached its peak for the year. and it would make sense of the equity market continues higher, that most of the commodities because they have traded so long step now for a couple years, it does seem that the oil market would tend to go up. >> if we hit 14,000 on the dow, you would think that gas prices are not over. all right, joe, thank you.

j.j. >> happy friday the 13th, guys. and by the way, quick question for you. was the 13th dave concepcion? >> what a great player. big red machine. thank you. thanks for bringing him up, too. there's a difference between the fear of the number 13 and a fear of the day friday the 13th. >> is there a name for a fear of belts? >> i have a fear of belts. >> a definitely fear of belts. >> someone in my ear is going to say move on. is that what you're doing? okay. you're the only person that has ever had that that i know. >> i don't have a fear of belts. i just own suits who -- >> you lad a suit on with loops and you still didn't wear belt. >> it's called fashion, my

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dow would open about 20 points lower right now. let's talk earnings central about if we could. as we've been reporting all morning, the big story, google reporting its first quarterly results after the bell beating the street, but the bigger story, it's splitting its stock with a new class with no voting rights. joining us now with animalysina considered the top google analyst on the street. mark, first let's talk about which is more important,s earnings, the forecast or the new class of shares. >> i think probably the earnings and the forecasts. the super voting rights that google is putting out with the c class shares, they've had that since the beginning. so if you've invested in google, you you knew from the beginning that you were a second class shareholder. they've just made that a little

bit more apparent last night. >> and so being the second class citizen, if you will, doesn't matter. how are the c class share, splitting them, what do you imagine will happen to the shares? will c class be valued differently than the a class? >> i don't think we have the full details yet. probably trade at something of a discounts. we have seen this with a few other companies, particularly some of the traditional media companies have done something like this. liberty media comes to mind. we have to see the fine print. >> going into the open this morning, what do you imagine -- the earnings were good. but people will be recalibrating how they think of the stock. >> i don't know if there that's a major recalorie brace. this was actually one of the least interesting quarters that google has printed in about three years.

revenue was in line with the street. revenues a little lower than expected. but earnings right in line with the street. nothing dramatic in its results. >> looking at the forecast going forward, your estimate of where the stock should be? >> we thought they could do $50 in earnings. pre-split in 2013, still think they can do $50 in earnings, get there the exact same way. we had about 20% revenue and 20% earnings growing here. we think that's worth a market 15 times multiple. gets to you a $750 price target. we like google shares. it's a bit of an oddity the stock split, but we've seen it before from this management team. >> why don't they just if they are see worried about losing control of the company, why don't they just stop using their stock as currency to pay every employee, to buy anything?

>> oh, i think that's part of the culture of silicon valley for right or for wrong. a lot of stock options, so i think it would be hard for help to do that. i guess that leads to the obvious point which is that they need to do this for competitive reasons. it they have to pay up for engineers and engineers got a lot of options now, a lot of other start ups and a lot of successful public companies in the space. they know that. they also probably want to do acquisitions at some point. you'll dilute irs yourself, so you better maintain control. i'm biased toward founders if they do a good job, and i think these two have generally done a very good job, and i like to see a long term commitment by the founders. i'd rather see this than them out in the market selling all of their stock. >> so it has nothing to do with maintaining control so they can continue to spy on my every move and invade my privacy on a daily basis so as to be able to sell all that information for profit

to somebody else? >> oh, no, it has a little bit to do with that. but that's the side story. and by the way, there was one little note -- >> violate me day in and day out in my personal habits, which are personal. >> nobody's forcing to you use google. >> i tried so-to-show him chrome in coming fee toe, but he hasn't learned yet. >> he's got ten of those that cover your tracks. what are you -- it's for your sources and stuff. >> absolutely. >> mark, we have to run. one last quick question if you'd indulge me. is there any acquisition that you would like to see them make? i know that's an issue in terms of using the stock going forward in the future. >> i think the biggest growth areas are the single biggest right now is mobile. so as long as they're all set up there. and we think they are with android. so i don't think there is the necessary have to do acquisition right now. >> mark woorks you b, would yous

c shares? >> i haven't done the work on it yet. got to give me a few more hours. >> fair enough. >> mark, we will see you very soon. thanks for joining us this morning. mark's not evil. that's the good news. >> no, he's not. well -- >> now you're -- >> no but he seems to be an enabler. >> he is the top analyst on google. >> of the evil doers. remember we used to call them the evil doers. not easy being the decision maker. >> when we come back, we'll talk about what's going on in the bond market. and the ceo of sonic will talk to us about how his restaurant chain takes on the challenges of keeping the customer happy.

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welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. we'll be watching shares of the video game makers. npd says that industry sales fell 25% in march from a year earlier. the pourt cfourth consecutive m declines. i need to know more information. there are things we finally andrew figured out how to do

things on the internet. you can get games -- >> you can get them on your ipad and -- >> similar to like not getting a dvd i think anymore. so i don't know how that future plays out either. dow chemical also on our watch list this morning. the company raised its quarterly dividend to 32 cents from 25 cents. that's a 28% increase. that payout, though, if you recall, remains below the pre-crisis level of 42 cents. and apple is rejecting justice department allegations that it conspired to fix prices in the he electronic market, says the and he alsos are simpllegations are not true and the i bookstore was designed to break amazoamazon. you're getting angry about this. you're not angry about google. >> this upsets me because i

think amazon will have a monopoly again. >> you interest itch eswitched yesterday. >> i know. i'm all over the place. >> deep down, i'm with basos. >> and are you willing to pace everybody else out of business? he's dumping the product at below cost so everyone else goes out of business. and then the costs will go up. >> it all goes back to dallas. mob gives you power, bobby. you have to take it. does basos does it -- does he it until they say don't do it. >> publishers are getting killed by this. do you need a middle man. >> i love amazon in that -- boxes outside high offimy offic day. every time i read -- >> it's your content you're worried about. >> not my own. i believe in books and writing

and what will happen to the -- >> i like newspapers, too, but you der where it's going to be. i like the feel after a newspaper in my hand rather than reading it online. >> i guess it depends on the newspaper. >> futures indicated slightly lower. you can see the dow is down about 18 1/2 points. also if you take a look at oil prices, those have been coming down, as well. down by about 39 cents. $103.25. a lead sorry in the wall street journal today that takes a look at the iea saying that we could be nearing some sort of a peak for oil prices. at least the pressure is expected to come up. a little bit after there's a huge oil supply that's come on board. also the ten year just above 2%. we see 2.014%. we'll talk more about rates in a moment. before we do, let's take a look at the dollar which has been stronger across the board. right now euro at 1.3164.

and gold prices have been down just over $7. $1674.20 an ounce. let's turn our attention to some of the opportunities that might be out there in the fixed income market. joining us on set is mike pont, barclays company head of u.s. rate strategy. and you look at what's happening with the treasury market and you think things have been overplayed on the up side and down side. >> we were sort of stuck around these levels for about five months from september until early march. and all of a sudden the market finally started reacting to the data and the ten year shot up from 2% up to $2.4. we thought that was a bit of an overreaction. a switch of guarantee of qe-3 to guarantee of fed hikes as early as next year. too much of a switch. we've come all the way back on a slightly weaker than expected payroll data and at unemployment rate dropped.

so again the market is overreacting here and very sensitive to whether the fed will or won't come within a additional stimulus program. >> does that volatility tell you that we are at an inflection point and something will happen? >> we think we will be stuck at rates at will level in quite a while. ten year forecast is 2%. we're at 2%. we expect volatility in the meantime and for rates to rise as the data continues to come in a bit stronger, but one of the things we're concerned about and we think the market will be later this year is the potential for huge fiscal drag at the end of this year. >> does it even make sense when you're at 2% to look at -- i know that it's -- what's 40% point on 2%? a big move at 2%, but remember when rates were 6%, 7% and we would move in a whole point in a day. does it really make sense to try to micro analyze something?

>> when investors are -- when we don't have volatility will in the markets and we're stuck at 2% for as long as we were, investors got very complacent and overly long assuming that we weren't going to move at all. so once we started to move, that's when a bit of a -- >> but the percentage moves are so smaufl. it's like a $2 stock. it moves five cents and that's like -- >> i agree. we're getting excited about the front of the market, the two year, because it's rallied from 35 to 28. we think it goes to 25 and again, so we're recommending longs in the front end. because there's just not that much activity in the fixed income market. >> at least you can calibrate what's significant and what's not. >> you have to look at the treasury market and try to pick up pennies and nickels. >> did anyone really think we were coming back -- democridn't

think 2.4, we were on our way. it's like what's wrong with the world. >> i can't tell you how many people pushed back on our forecasts when we held at 2%, when we were at 2.4. just saying you're crazy, we're going to 3%. and now we're right back to where we're forecasting for the end of the year. >> and you position the fiscal drag in terms of what will happen with taxes, no matter what happens that will keep us -- >> if congress does nothing and we get about a 650 billion drag, we don't expect congress to allow all the bush tax cuts to expire. but we probably get some fiscal drag and growth may not be as positive next year as we're forecasting for this to be this year. >> so the fed 2014 thing is probably right? >> investors are sort of saying well, if they don't go this april or june, then they're not going to go. and we think they have that wrong in that the fed can go plenty of meetings after june. obviously the closer will he get to the election, the more sense

tifr it sensitives i it is. >> mike, thank you very much for coming in. >> comments or questions about anything you see here, e-mail us at squawk@cnbc.com. becky will see those. and still ahead, the ceo of sonic. they're in a food fight with its peers. so how does the company stay competitive? >> love sonic. >> i love them, too. cherry limeade. >> and monday fred smith and bob lu lutz join the show. >> big show.

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you you can see u.s. equity futures on this friday the 13th are indicated lower. down by just about 14 points. if you really look at friday the 13th, though, 55% to 60% of the time, stock close higher. so we'll see what happens by the end of the day. >> economists will pick apart the cpi report for the bottom line on inflation, but before the 8:30 release, we're going to the front line of the real story on price pressures, the food industry. cliff hudson is the ceo of sonic. unanimous here that we all wish there was a sonic around. it's a nostalgia thing.

roller skates and drive-in restaurants. not enough of that any more. but let's talk serious and talk about cost pressures that i think in your view we've seen the worst, right? and it will actually improve? >> yeah, 2011 was a tougher stretch for us. one of the things that makes it i think different for our concept is we have a much more diversified menu and we operate more fully across a variety of day parts versus our competition. so one of the things that sets us apart is almost 40% of our sales come from drinks and ice cream as opposed to our competitors, lunch and dinner, we have a much more diversified product offering and gives us a natural hedge as other products rise or fall on their menus and our menus. so as we move into spring and summer, we'll be offering as an example this tuesday on tax day, we'll have half priced drinks all day on tax day. and then heading in to the summer, big promotion of ice cream throughout the summer.

so it's a bit of a hedge in some of these costs and some of our competitors probably have to suffer a little bit more than we do. >> all restaurants when i think about it, you drive to all of them. but because you're a drive-in, is sonic even more sensitive to gas prices than another chain? >> well, throughout our region, i think it's fair to say that most americans kind of move around heavily in their cars regardless. and much of our competition gets their business through drive-through windows in the regions where we're most heavy penetrated. so i think we're all kind of tied to consumers moving around in automobiles. in the recent past, though, even as we've seen gasoline prices move up somewhat, we've not really experienced -- not seen any indication of that hitting our business. we've had positive comps for a number of months. last fiscal year, this fiscal year. so we're moving in a positive direction. challenging environment, but we

in-to see positive sales growth. >> you talk about drinks and i saw the ice cream. this thing out of san francisco, the happy meals just just -- everybody's got to eat broccoli all the time. do you -- do you worry about the nanny state eventually making your whole idea, your whole franchise less profitable or less -- i mean, is that something to worry about in the future? >> well, you know, it is a concern on an ongoing basis in terms of the degree of regulation or scope of focus on our business. we've always focused on choice and the customer drives that. one of the points of our business that perhaps leaves us the plexibility is all of our food is made to order. the customer is able to come in and order customization. of course our drink flavor is a huge variety.

even as we modify or are required to mod fight, we're set up for customization. it allows us to get there anyway. >> can franchisees get financing to buy one of your stores now? is it better than it was? >> franchisees can get financing. we're 87% franchise system. >> how much does one cost if i want to do that? >> the all-in costs are just over $1.2 million. the largest part of that is finance. >> cliff, thank you very much. next time we are open for receiving food here. >> i'd love to share a cherry limeaid with you. our primary product is

breakfast. >> you could be the official sponsor of the "squawk box" breakfast menu. coming up, we get numbers before the opening bell rings. more than 150 million professionals are connecting here. linkedin connects with the big board.

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. when we come back, jpmorgan is set to post quarterly results. we have the numbers and instant analysis trait ahead. and anne mulcahy sits on a number of boards. she'll be here for the next two hours. stay tuned.

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where did we get that 44.51? it had been up to 45.20. i don't believe that 44.51.

that's going to change in a second. it's going to probably be higher. i've seen as high as 45.10, 45.20 on the bid after the company beat expectations earning $1.31 versus expectations of $1.18. there it is. now you can see it's a 45 bid now and a 45.80 ask on jpmorgan. chris whalen is here. we're going to talk about all these metrics like nonperforming assets, $11.7 billion march 31st, 2012. that's up from the choir quarter -- prior quarter. we have to decide whether that's a lot. and depending on how much information you want, you can look at retail financial services revenue, $7.6 billion,

commercial banking revenue, $1.66 billion, investment banking revenue, $7.32 billion, tier one capital ratio was 12.6%, tier one common equity ratio, 10.4%. this is 26.7 billion. i'm seeing that, too. >> they're both above the $24.68 billion that was the estimate. jamie dimon points out they did have real estate with the portfolios. >> now it's back up $1. and we might see -- since it is a dow component, you might see the futures improve for the dow. >> the headline on the $15 billion buyback number, that was already in the marketplace?

do you know? >> it's not really the key thing for the call today. everybody is going to want to talk about whether or not these mortgage issues, bear stearns -- it says tier one combination, bosniale three tier one. >> we should withdraw from bosniale. it's going to chase all the commercial -- >> you're serious. >> most of the kond u its owned by nonbanks. they demonize real estate lending. when our negotiators went to europe to deal, they had no brief. nobody had even talked about this and the europeans said real estate is bad, mortgage servicing rates are bad. >> what's the unintended consequences? >> you'll see less credit it available for the u.s. real estate market. >> that's bad. >> that's bad.

bad. >> expects to see elevated losses on mortgage-related issues for a while longer. >> well, we've been going side ways for a year. if you think of the first quarter last year, that was the best warfor all u.s. banks. my feeling is we're going to continue to go side ways on credit costs and revenue, much like the 90 but it's going to take longer. >> assets under management net inflows of $45 billion in the last 12 month ps. >> that's not incredible. they're a monopoly. that's where everyone is going. >> q1 asset net revenue was $2.4 billion, which was is decrease from last year. how do you square that? >> they're making less money on -- >> on a lot more assets. >> there's a lot of pressure on asset managers today.

there's enormous pressure on spreads. 2-20 is gone. you're talking 1.5-15 or 110. if you look at the fund i've been working on, it's almost all income. we're going to stay away from the alpha because that's what the clients want. they are so afraid of market risk, they don't even want to see comments in the mix. >> our guest host is anne mulcahy. up sit on a lot of boards. what do you think of these numbers? >> i think there's unanswered questions about the numbers that would be really interesting to know, things like on the mortgage side how much of that is refinancing versus new mortgages, kind of get a sense for, you know, what do we see about consumer trends here? what does it mean in terms of the some of the consumer banking trends that would give us

indications of the general health of the market for sure. everybody knows the investment banks side is going to be done. >> that's unfortunately the case. >> mortgage loan originations, 38.4 billion, up 6% from the prior year, relatively flat when compared to prior quarter. mortgage loan applications up 33% from the prior year and 1.4% from a quarter earlier. third party mortgage lon service was $184.2 billion, down 7% from the prior year. >> if you look at the top four today, wells fargo is the only bank that's really aggressively out there writing new loans. >> did go over the nonperforming as sfets. >> $11.7 billion was a march 1st. >> i did say that. we talked about it. whether that was a big move or

not. >> just a question. how much would jpmorgan, share kind of the premium place to go, how much do they benefit from european funds coming this side because of the risk in european banks? >> well, i think europeans view the u.s. as somewhat of a safe haven right now. you certainly don't want to invest in european banks, compared to u.s. banks. u.s. banks are much better capitalized. the large institutions probably still have as many problems in process as they're showing you on their balance sheets. looking at real estate owned number, i always tell my clients double the reo number and that's closer to the reality reality. >> the financials is not going to tell you a lot about the rest of corporate earnings. >> i don't think there's a lot of analog that will tell you

about the -- >> is this a relative to what you'll see about these other firms that have other issues? >> it's pretty typical. the revenue number is about what has been expected. so this could be the best quarter forjp for the year. >> do you like at jp and say we're going to get a wells number, it means morgue and stanley and the numbers are going to be good as well because they have totally -- you just talked about -- $45 billion influx, they're going to jp, they're not going to other things. >> jp does everything except they're not big in mortgages. when you look at them you say have i the huge derivatives business and broker deal and asset management. but morgan stanley and goldman, they're much more of a pure

broker dealer model and you'll see the investment banking as most significant -- >> you've reard for the past week there's been a lot of buzz about the so-called london whale, a trader at jpmorgan in london who has been putting on huge positions in the derivatives market. what do you make of that? >> they've been doing it for a long time. >> what do you make of it in context of the rules -- >> he's the last of the moheekans. these guys were the treasury of the bank. i expect they're going to let this go. >> is that a good thing or bad thing? >> i think it's taking liquidity out of the bank. this is the law of unintended consequences. we have to fix it. if you want to go back to glass

steegle, let's go back to glass steegle. you can't say you can't do any kind of tactical trading around your book. you want to separate the bank and broker rules, fine. >> we have set our market up for another systemic event because we're taking the biggest players out. if you have a position, becky, that's say long in cds and you'd like to square it off, with the voker rule, you can't do it. you have to -- if. >> to the, tent in this london whale is somehow manipulating, there's an argument because they're so big in the market that they unto themselves that -- i was trying to be polite and tell cat. >> be nasty. the point is -- if the loan side is doing dip financing for somebody who is getting ready to

file bankruptcy and the guys on the other side are looking the other way, that's a big problem. let's have the lender take the client interest only and have the broker dealer trade the speculative side of the house. if that cds triener and they know what day. >> so you don't believe the chinese walls are -- >> there is no chinese walls. come on, this is wall street. >> you meant to insinuate that. >> i don't think paul voker anticipated what's going on. when the lawyers read the statute, they're telling all the banks in new york, including foreigners, you can't adjust for risk. europeans with the big branches here, they're going to go back to europe. >> is there any bank out there,

including jpmorgan, you'd buy stock in right now? >> not the large banks. they're fully valued. i don't think you can make a valuation case for the top 10, 15 banks. >> is there a small bank you would buy? >> i love the small banks. don't buy the common. look at the preferred. you get 3% dividend on a common. the proo ferds are giving you twice, three-time the yield. there's no alpha. >> chris whalen, thank you for being here. if you do the work, where the value is in the market today. >> there is a reporter call this morning, mary thompson will bring us anything of note. google beat willing estimates by earnings, $10.08 for the first

quarter. the company also announcing a two-for-one stock split that creates a whole new class of stock and solidifies the count p co-founder. and china's economy grew at the slowest growth rate in nearly three years. it's the fifth consecutive quarter the rate of expansion was declining and is much lower than had been anticipated. a controversial rocket launch by north korea ended in failure early this morning. it may it about 75 miles and then kerplunk. north korea says it was for peaceful purposes. >> the dow futures still down, down by about 11 1/2 points. it is friday the 13th.

we'll see how things go as we get toward the open. >> we need some music or something. up next, we'll talk business strategy and the economy with our guest host. and laet the in ter the iin the duff & phelps financial advisory and investment banking services. [ technician ] are you busy?

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zets >> let's talk business with our guest host anne mulcahy. you did work a day in your life running a fortune 500 company, to get away from your hard job at home with the kids, right? >> becomy and i were talking, it's the hardest part of the day. >> i need to send her a thank you note, lots of candy. that went right all the way up to the top.

that went right through. >> the big issue is she's a lobbyist and people buy her services as a consultant because she's supposedly has these connections. now she's upset with some of these connections. >> i saw the huff post and it was no, wasted day talking about things that don't matter. but the contraception matter, they can be on that for three weeks but when it cuts the other way, it's like get to something else. >> i think it's an issue, that these comments can get so amplifi amplified. it took a life of its own. it really wasn't very important. b >> but it is an issue that resonates with women, if you

choose to stay home, if you choose to work. hillary clinton made comments back in the early 90s about how i didn't stay at home and bake cookies and she -- >> the day before there was a front page article in the "usa today" that romney's camp has put together a strategy to narrow the gender gap and this like lands in their lap. it's like raining from heaven. >> it's such a touchy subject. as a mom you carry around guilt no matter what you do. >> i actually think -- not to defend but the point should have been more of an economic point than it was a working or nonworking point. the fact is that women at a lower economic strata have a lot more challenges in terms of implications of some of these discussions and unfortunately it got conveyed into the battle of working or not working. >> what board are you on now? how often are you hearing

anecdotal evidence about the current stay of hiring or business in america? >> well, the boards are sit on are "the washington post," j&j, target. i'm chairman of save the children. >> it's going to be a bumpy road but is there a -- i'm trying to figure out if corporations are doing so well and the dow is doing so well, it still seems like people aren't or are hesitant to respond that's there or is the demand not there for hire sfg. >> i think we all know that the hiring curve has not followed the earnings growth curve at all. i think it's more indicative of the fact that we have seen what i would say a best sputtering demand. there's been a good month, a down month. there's not been the systemic positive many improvement that

gives up the sense that now i'm ready to make some more bullish investments. when you've gone through the process of laying people off and feel the pain of it, you've going to think carefully before hiring. i totally get it. >> we're back to trying to figure out why and connect the dots. anyway, that's music i hear playing now. we've got a lot to do today. >> anne is going to be with us the rest of the morning. we also have jpmorgan's numbers and a preview of wells fargo. then senator john coker joins us to talk about the state of the economy and jobs. we'll be right back. >> time for today's aflac trivia question. the world's most remotte weather station is located in what country? huh! no! who's gonna help cover the holes in their plans?

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welcome back, everybody. jpmorgan reporting its first quarter results just minutes ago. on the line is jeff harte. it looks like the numbers came in above expectations. what do you find the most interesting out of the numbers? >> well, actually, not that these numbers are ever clean with such a big company but there as a lot more moving parts and noise than i was expecting. i mean, there's a wamu bankruptcy settlement gain in there we didn't really know was coming and they took over $2 billion, almost $2.5 billion of litigation reserves in the corporate segment. it seems to be mortgage related. i'm not sure what's going on with that. there's a lot more moving parts than we're used to seeing. >> is that good news that would reserve almost $250 billion?

>> the good news is they put up good bottom line numbers, despite taking big reserves. that shows some of the core stuff was a lot better. the concern is what is jpmorgan able to put up a -- >> could they be overreserving? >> they've been pretty conservative in the past with some of this stuff owe maybe that's not out of pattern with them. >> they tend to be conservative with it. i think specific with jamie at the helm, they're going to be more conservative than aggressive. they've clearly got the earnings to offset it this quarter so they may be being conservative. es $2.5 billion is a bigger number than we were expecting. so it quite a better if you

strip all of this out? >> yeah. if you strip the stuff out, they would be -- it subtracted 8% or 9%. >> that sounds like a good idea when you're already beating expectations anyway, right? >> yeah. if you're already going to be ahead. they do have to have some rationale for building the reserve. something has happened that we need to get more information. the stock should react positively. this evenings that you look at, trading, we're all at least as good aspected, if not a little better. >> the market is not performing loansin creased this quarter. it the those that are growing it could be a financial of that. that's within thing to be concerned about or maybe pay attention to. >> jeff, thanks foch joining us

this morning. >> always fun. >> at 11:00 a.m. eastern, the cfo doug braunstein will be with us. >> and then check this out, gold right here. it is a kilo of the shiny stuff. >> drop it. heavy. at today's prices it's worth over $53,000. the world gold council is here. we'll be back with that after the break. >> i love gold! to get you into your car. it's just another way you'll be traveling at the speed of hertz. is to take you from where you are... to where you need to be. and we're not just talking about points on a map. with a more intuitive delta website and mobile app... and the most wifi equipped planes. we let you be everywhere at once.

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welcome back to "squawk box," everybody. let's get to your morning headlines. jpmorgan chase reporting quarterly profits 13 cents better than estimates. you see the 13 theme going here? jpmorgan said its investment banking business was particularly strong but said cost and losses related to mortgages may continue for a while longer. next up wells fargo. they'll be out with their

quarterly numbers at the top of the hour. analysts think the banks earns 73 cents a share. and investors withdrew $57 million from junk bond funds last week. >> should the government be incentivizing taxpayers to stop paying their mortgages? senator bob corcoran says no. senator, it's always a pleasure to have you. i'd almost, you know, divide the world or at least the country into two camps, those that want to do something big to help forgive a lot of principle and those who say we got to -- we're never going to hit bottom until we let it all just play out. and both sides are absolutely firm in their resolve. explain your side. is there a program that could be

designed that wouldn't incentivize people that are current but would help people that need help? >> sure. i think what you can do is if you wanted to do principle reductions, do it with those people who are current. if you look at what ed demarco has done as the conservator of fannie and freddie, they've done a tremendous amount of modifications. they're holding a portion of the principle in abeyance until down the road. there's been a lot of mortgage modifications. i applaud those efforts. one of the thing, we get into when we set these programs up, they end up being one size fits all kinds of programs where you're checking all these boxes and they really don't work well in a very tailored we for individual homeowners. so there's been a lot that's

happened. i applaud those efforts. treasury has about $20 billion, which is burning a hole in their pocket and they're now sort of forcing fannie and freddie to do some things i do fear will cause people to act in ways they're now not exacting approximately nine out of ten mortgages in our country are current. what i fear is we're going to end up with a principle reduction program that really causes people to begin to default and then you look at the moral as hard that is created there. if fannie and gred oo, it would be a loss for us. we open as they move along with this, we hope what they've doing is not incent people to move in

a bad direction. >> how would it work? you're trying to urge fannie and freddie not to do that. how would it play out? would the treasury department tell them to do something that they think is not -- >> they're already doing that. >> and how do you stop it? just through the bully pulpit or do you actually want to do something? >> it's really through the bully pulpit. what's happening right now is there's numbers of comments coming, as you mentioned, from lots of different camps. again, i'll all for aggressive loan modifications. i think that's been occurring, it's been occurring in a good way. but what's happened is ed demarco has calculated if he does principle reductions on his own, it's going to cost taxpayers more money through more losses at fannie and freddie. so the treasury is saying we'll

take the $20 billion that we have and force it upon you and therefore you cannot as conservator then say that it's costing your port foal money. so they're basically taking money out of one pocket and putting it into demarco's pocket and saying look, you can't now say you caused your portfolio to diminish. i think it's a slight of hand. i don't like it. but maybe what happens with my input, your input, others avenue input, maybe they end up designing something that isn't counterproductive for our country. i hope that's the case. >> nor, did you endorse romney? >> i did not. obviously i will right now. he's going to be our nominee. we had a primary in tennessee, i think most of you know. i race -- i just wanted the

endorsements to play out. he's a great nominee. i do hope that he will talk greatly about the free enterprise system, which has made this nation great. but -- and i think he's going to do that. i think he's going to be a great nominee. >> who would you suggest for veep? give me a couple or -- >> there a a lot of great folks. i have the opportunity to see people up close and personal and see how they really act on a daily basis and i think there's probably 15 outstanding people for that position. i'm not going -- i know he's going to have an opportunity to wick someone that has great substantial and we try to move

our country. there's only one person who is going to decide that and that's governor romney. i think very soon this is going to become a 50/50 race. i actually am very bullish on his campaign and think he has a wonderful chance winning and think it important for our country that he does. >> we had deval patrick on, the governor. we talked about health care. you weighed in on your worries about how obamacare -- i should say both. what's the other name? >> health care bill. >> can't say it with a straight face. obamacare. you're worried about how that would affect tennessee.

someone had a nice birthday party for romneycare, for the anniversary of that. what's your view on how it worked in massachusetts? from what we herd yesterday, that was the own thing that romney had done. >> it think it 6% -- >> the federal government picks up half the tab. >> so it's really 12%. has it been a disaster in massachusetts? >> i read articles that said they went after coverage first than the cost issues. i guess it raises the questions of what could go wrong in terms of these ballooning cost if doesn't find wa way to find out how the rang structured.

i've soon that posited defin tich there -- >> it my belief that state do have the ability to do that. we do not that that, in my opinion, the ability at the federal level. let's talk about the health care bill. the fact is i do not know a thinking person in washington on either side of the aisle that believes this health care bill can work as it's been laid out. if you just look at the incentives, in a free enterprise system, people act if their own self-interest. if you look at the penalties companies pay, look at the subsidies that their employees get, up to 399% of poverty, in the $80,000 range, if you look at that, what's going to happen is over time almost no company will be in the heck business, when you look at the subs du

dues -- regardless of what happens, this country has to change dramatically or this country will become further insolvent. it cannot work the way it's laid out. this is heavy on the access and coverage side also. there's almost no containment in these bills. >> there's a lot of changes that happens of the both sides of the i'll are going to pay or. right? >> this is the bad bill because we should have had the government do all health care, right if you believe it isn't constitutional, then the question is how do you get there? >> or do you create a catastrophic cover?

>> some form of -- >> cat strofgs care, preexisting conditions. >> would you be okay with that, senator? is that a good alternative? >> what was that? >> single payor. >> i like what we have working right no with medicare, a solution that paul ryan and paul widen have come together, and that is a duel track where you have premium support in medicare and you have the choice between fee for service and premium support. i believe over time premium support is going to win out. it's the way that we make med car alent them solvent and john turn that in a single system. weep need to be moving in the other direction of our health care products. >> do you think that united states government will ever have

a budget again? >> what year do you wee might? will it be three, four presidents than now? >> it will certainly not be reid. he appeared to miss he is own poll yarn keep the big issue in our economy, we're stating along with can and i want americans to do well. i'm bullish, i do think we're going to address it over the next 24 months. >> that last white house budget a couple of votes short. >> well, it will not receive a single vote on the senate floor. >> that's not good either. >> zero in the house, zero in,.

that is bipartisan san. thanks. >> we'll have the latest survey on gold. what is going on? what that just stole i don't know? that is $53,000 worth of gold. quake" returns. we'll try to get that gold when we come back. coming up, david walker, taxes rangers. plus grover norquist of americans for tax reform. and citigroup expected to return

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>> a couple of things we saw from jpmorgan, the cfo, they are operating within the spirit of the volcker rule. and the stock is up -- >> we have jeff harte who raised questions about litigation reserves. it was greater than what he had been expect big quite a margin. the question is does jpmorgan know something or is it jamie dimon being conservative -- >> i see other notes suggesting if you backed all that out, all of these reserves, that not only would ne have beat it, there would be another 9 cents -- >> what do you man?

if it was 13 and you back out things -- >> no, it would have been higher. >> some people are trying to look at that number as opposed to the reserve number. >> revenue was good. >> yeah, revenue was good. >> that gold that was just stolen before, those of us with us before the break, what fundamentals are driving grow's human market. >> sitting here, not doing anything. >> ton the set, he has $53,000 worth of gold. >> $54,000. >> the price has gone up. >> and i also brought an extra $3 worth of gold. 50 milligrams of edible gold leaf. >> it's edible? >> gold is in general edible in

the sense it doesn't react in your body the relevance of this small container of gold, electronic, computers, typically have been 50 milligrams worth of gold. >> how many milligrams is that? >> 50 milligrams. >> when you were the head of xerox, you were probably a huge gold purchaser. >> could have been a cost reduction opportunity for us had we known. that is surprising how much gold is used in industrial i mean versus the jewelry market, how much is consumed in industry. >> technology reports roughly for 10% in a given year. that's 400 tons of gold. jewelry is the largest component. >> what percentage is jewelry? >> about 45%. >> break it down. >> jewelry is 45% is the largest. then you have investment, which was about 35%. >> speculators.

>> not really. so you have jewelry, investment and technology and now central bank has become buyers, another 10%. most gold investors tend to be long-term buyers. when you break down the investment component, it's not only a story in western market and what is happening in the u.s. and economy. it's also economic growth that is happening in american markets. you have india, china, the middle east, a lot of consumers of gold in all forms. >> india has the largest amount? is that a function of the jewelry being produced? india? >> it's a function of the cultural and religious affinity of the gold in indian it provides a way to go through a

trial -- >> the amount of consumed -- both carl and i have eaten bold on a hamburger. >> it says these edible part expires. why does it expire? >> it we eat it right now in. >> you can. you it put it on a cake or some paint -- >> can we grab a little muff snn. >> we were talking earlier that's $54,000 worth of gold. is that a liquid investment? >> very liquid. it's amazing how liquid gold is. when you think about gold in the context of a portfolio, which is very interesting, gold provides diversification, risk management in terms of the portfolio, one of the aspects of management is liquidity.

there was a survey last year that found any r there are $19 billion -- >> i'm going to be eating gold. >> that's a fancier muffin. >>, oh my, goodness. >> andrew, i mean, you don't digest it, right? it won't stay in you but will you report back if you like see some twinkling -- just u.s. jre back if you ever see it. >> i want to nope what's making the muffin hang check. >> we'll have to run. we concentrate on -- in china and india.

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china's growth, the slowest in three years. >> food fight? >> food fight! >> we're going to talk beef prices with jean welch. >> there's nothing like bringing in a herd. >> and inside google's earnings and planned stock split. >> and breaking economic data on inflation. it's friday the 13th.

the third hour of b"squawk box" begins right now. welcome back to "squawk box" here on cnbc. along with becky quick and andrew ross sorkin. our guest host is anne mulcahy. sits on some big-time boards. >> target, johnson & johnson, "washington post" company. >> yes. >> another lousy j&j news yesterday, the risperdal thing? >> it's on appeal. it's a jury.

most think it won't stick. >> looking at the headlines now. they also say first quarter net 4.25 billion and -- >> 21.64 versus estimates of 25.50. >> they're beating across the way. >> anything on reverves? >> no, i have the bazle number. >> i can give you the nonpore terming assets, 26.6 versus 26 a year ago. both went up a little bit for nonperformers but you would think that it's still headed that way but probably not at the pace that is used to be. quarterly net chargeoff, 2.4 billion. that is a decline at wells fargo

of 245 million. >> and reserve release of $400 million pretax improved portfolio. >> so they're reserving a lot less. >> and they're continuing reserve releases given there's no significant deterioration in the economy. future reserve releases are seen in 2012, absent deterioration. >> the chairman and ceo says performance for shale holders through a variety of economic challenges is a testament to their portfolio. they increased revenue. they continue to grow capital. the biggest issue facing the

banks, which i don't know that we got to talk with this about chris whalen is the low interest rate environment. it really the biggest thing holding them back at this point is being able to get a little bit ahead of that curve, too. >> it has a higher market cap. i think it number one. higher than jp morgue and, like by $8 balance. and much higher than bank of america, which is 108 billion and all those metrics of valuation are much higher. because they are able to have a better turn around on those assets. >> jpmorgan chase just reported quarterly profit of $1.31 per share, 13 cents above estimates. revenue beating analyst forecasts. its investment banking system was particularly strong but said

costs related to mortgage issue may continue a while longer. mary has news for it. >> the concluder called, focused on just the whale, which could be perceived as a charity ceo. what the company manages is the difference, a security invested in high-grade securities. that does earn money for -- they say it's done in the spirit of the volcker rool and done in a transparent matter that regulators are aware of those operations. also a question that they were asked about is the $2.5 billion legal reserve that they took. braunstein saying the company is

conservatively and comprehensively reserving for expected legal issues linked to mortgage. he doesn't expect any significant reserves in the immediate future but given the change in environment, this is something that could of course change in the future. lastly jp morg murgan appears to be strongest, the housing appears to the -- >> okay, thank you. >> and joining us now is peter novaro, the author of "death by china" and john rutledge.

both are cnbc contributors. peter, we know the numbers are weaker than had been anticipated. does that mean the soft landing china had been hoping for is going to be tougher at this point? >> that's right. i think it's going to be a hard landing for all of us. the problem is that china has a structural issue. it's too heavily export dependent. it grows over the last decade by flooding u.s. and european and other markets with illegally subsidized programs. you get a shaving off points of the china gdp. the bad news here for retail investors is it augurs slower growth globally and a slide ways for down market. it listens the possible ability that china will engage in that it needs to address the

structural imbalance. that's going to create tensions between the obama administration and china. >> and, john, you agree this is something that could make the chinese say forget about it? >> well, chinese reserves have not increased in the last six months. the reason you've seen reserve requirements decreasing in china isn't monetary policy. it's because that's the tool they used to stop foreign exchange reserves from speculators and money is not coming in right now. this report is consistent -- last night's report is consistent with a 8.5% gdp growth throughout the year. it's a gradual change. there is a structural change under way as peter talks about. they're trying to get more consumer spending. obviously there's less exports, especially with europe being soft. fixed asset investment is cool being somewhat. there's a housing boom that's

come off and is declining prices. all in all, this is probably the lowest quarter of the year. usual probably looking to 8 to 8.5 is the zone i would expect snp. >> why is that? is china going to be making some easier liquidity motions? >> well, you know, the old saw is trees don't go to the sky. china's to the going to draw to ten%. chinese growth to slow to this year 8.5 or so. the big story in china is the export of capital. they're changing the rules to allow chinese companies to invest overseas. it also is a way of changing the structure of chinese companies

from being low margin assemblers to hopefully for them one day being -- >> i'm anne mulcahy. why isn't this a good thing? why isn't this the definition of a soft landing, which says that, you know, 8.1% growth with a less pro bust export, which is certainly expected based upon the global economies -- >> that's a good question but it goes to the structural underpinnings of the problem. the reason why china's slowing done is because europe's in recession and the united states economy itself is slower than it should be and so what that indicates is that china has not been able to break the cycle of export dependency and its currency manipulation and illegal export subsidies. >> it also means fixed assets cooling as well. so exports is dropping and the

trade deficit -- >> the elephant in the room is the real estate bubble. it's not just residential in china. it's the office building, it's the ghost towns that have sprung ul all around china and that's deflating now. and what it means is it's going to be very difficult for consumers to spend china's way out into faster growth. this is not good. if you look at the chess board as a retail investor, you're really looking at a year or more of a sideawaways to down down market. i think this will be the issue of the 2012 campaign once everybody figures this out. we lost 6 million manufacturing jobs and china over the last ten years has cost us over 20 million jobs in slow growth. one of these days we're going to

get that. >> you say it's bad news for the retail investors but there are others who say this guarantees that central banks around the globe continue to really pump money out into the system and that will boost the stock market. >> how has that been working, becky? >> any time you talk about qe3, it does push stocks higher. not for the right reasons you could argue. >> we had a little bump here for a couple of months but going back to february of 2011, it's ban side ways market. the on people who make opinion there are the hedge funds and the big boys who can play the daily volatility. the small investor suffers >> the early death of the commodities and metals market everybody has been whining about is not happen. in this market own xcf, own bhp, own the other copper and steel producers and the like. this is not a time to boat that

it's going to kill the growth, it's a time for rear bound in the market. >> i want to thank you both for your time, gentlemen. >> take care. >> coming up, we're going to take a look at the google stock split and the way it was split. and we're going to get a report on jane wells on the price of beef. we'll be right back. but first, the future of business. >> the transportational logistics industry today is poised for growth. we're now entering what i view as the third wave change. we're seeing a handful of companies emerge as big winners. ten years from now we see the top 50 share rising to 80%. we're seeing warehousing companies expanding to transportation, transportation companies expanding to warehousing. lines are blurring and companies are combining what they will do.

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we're back. google beating earnings expectations. but the real story is a two for one stock split in which new shares are being issued that doesn't have a vote that comes with them. steve levy has been following google closely. he's the author of "in the

plex."

when you think about the decision and the corporate governance issues that relate to it, how do you explain this decision, which i will tell you our good friend joe here and some others are suggesting might be evil. >> the ceo tried to explain it to the shareholders. he referred to the original ipo where he then explained why google was doing this struct la the middle of a selloff of some of their shares, which will dilute their power by the end of the five-year period of the selloff and google wants to have shares to give to new employees or make an acquisition. he says we have to be in charge to run our company for the long term. >> i want to get to anne as well. have 70% of the voting there. so basically anything that happens in google happens because larry and sergei and perhaps erika all agree on it. if you talk about independence of boards, google's is less independent than some others. >> anne's here.

>> i think there is something to be said for the fact that people who invested invested in a controlled environment. they knew what they were getting into. this takes it to a different level but it doesn't change the dynamics of what they invested in. i think this kind of tidy group of investors. -- >> if you were on the board, do but i do think that board was composed with darch orientation of how that company works. >> do you think google has more tricks in their hat, if you will? i ask it in the con telecommunication we were talking earlier, bill gates, obviously windows, office, they've done some other things along the way, yahoo! has -- gary yang had control of the company, that could have been a problem. the fonders of rim on the other end of things but then you have a steve jobs that comes in. he didn't have control of the company, structural control bush he controlled it. >> i think google is trying to send a message. yes week do have tricks. in the last couple weeks you've seen something interesting

happening at google. it's the anniversary of larry taking over as ceo, saying i'm notty imand i'm thinking about this. google rolled out it's plans to do a project with virtual reality, augustmented reality glasses where can you basically have a heads-up display to give you everything you can do in a smart phone, just built into these glasses you're going to wear. you're going to walk around in that environment. that's the new, innovative thing people hoped for for google when they talk about is it going to be more than a one-trick upony? go -- pony. >> i should say "in the plex" is an awesome, awesome book. >> most companies don't have in their charter, "we will do no evil." but i understand what ethis want to do. they want to have control so they can spy on every facet of my life and get away with it.

that's fine. >> are you being cynical and fantastic? >> no but i'm sure they'll get away with it but i'm not an investor. if you don't want to invest, don't invest. if you do, know what you're getting into. >> but don't say do no evil. >> the more i think about the shares, they'll probably be worth of same because that's what the vote in the class a share was worthless to begin with. >> i think that's true. >> just drop the bs. >> when we come back, breaking economic numbers on inflation, consumer price index numbers are due at 8:30 eastern toime. but first a report on beef prices. jane is our boots on the ground for this one. >> beef prices are high. you steal a tv and fence it, you don't get full value. you steal one of these and you do. we'll talk about it after the break. break. clrz

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. we're just a few minutes away from the consumer price data but before we get the official number on prices, we went right to the source for some raw information. cnbc's jane wells is down on the farm. where are beef prices? tell us. >> you need to go to the store, joe. when things get expensive, people want to steal them.

in 2011 consumer beef prices jumped 10%, they're projected to jump another 4 to 5%. the highest of any category. live cattle, there's already less supply after ranchers lost herds because of the drought. old time cattle wrestling making a huge comeback. i asked this rancher if he'd never seen it like this before. >> no, ma'am. never have before in my life. >> he has about a hundred head of mother cows, plus cavs outside dallas. 17 were stole in february right out of pen with an area of houses and business. he's literally asking where's the beef as neither the cows nor

the rustleers can be found. >> they came right in. the way they stole my cattle, they was watching them more than i was. >> some of his cattle was branded but sometimes branding doesn't matter in terms of the law man hunting down the bad guy. >> some of these cattle are so valuable, they'll just put them in a pasture and start your own herd. you're using somebody else's cattle and building your own herd up. >> the special ranger says cattle cases are up 50% this year. the penalty is not what it used to be but they still face up to 20 years in the state penitentiary. back to you. >> are you in moo park? >> moore park. oh, they should call this moo park.

moo! hey! >> we had a little thing of gold worth this big worth $53,000. i will take 30 or 40 head of cattle instead of that little piece of -- you couldn't eat it. jane, thanks a lot. good work out there. we got to mooove on. ♪ why tell the trees what ain't so? ♪ [ male announcer ] dow solutions use vibration reduction technology to help reduce track noise so trains move quieter through urban areas all over the world. together, the elements of science and the human element can solve anything. [ all ] shh! [ male announcer ] solutionism. the new optimism.

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welcome back to an uncomfortable moment. we're just seconds away from the consumer price data. rick santelli, what is it? >> here we go. up 3 cents on headlines. food and energy up 2 cents. these are pretty much exactly masking expectations. we look at the year-over-year headline, up 2.7. that's a bit lower than our last look but does match expectations and year over year on food-energy, it stands at 2.3 and it's a little higher than expectations. you know, these numbers aren't moving the market in a big fashion. we are coming in a bit lower in equities, down about 64. now we're down about 65 in dow

futures. interest rate, ten-year hovering, one basis point above 6%. we've been here, not in recent months but we've been there. rumors about data, especially somebody the likes of china in this point in history, there's going to be rumors everywhere. but what wasn't a rumor is talk about reserve requirement ratios being altered. there is talk about that, though maybe not nationalwide for every institution. >> we had a talk earlier, rick, about 2% ten-year, goes to 2.4, goes back to 2. those do seem like volatile, huge moves that can really cost people a lot of money. is that the way to view it? 2 to 2.4 when we were at 5, 6, 7% on the yield curve, you

wouldn't really get that excited about a 40 basis point move but it's not the relative move, it the percentage move now. are those -- are those big moves we need to pay attention to? >> it's a big move when you are in a range from 185 to 210 for four months. that really started back in november. that, you know, that range. but, no, 35, 40 basis point move really isn't a lot. i don't think you should look at interest rates in terms of percentages. just because historically i don't say it's a lot. i'm not trying to dismiss it. it's important. you went from a contract that whether it's management to the fed, the twist, a contract hovering in a very low rate, the lowest it closed is around 170 and you got it up due to uncertainty the fed's statement on the 13th was the catalyst so i think it's important.

what's more important is the fact that we're back here and why we're back here. there's always going to be talk about qe but the reason we're here is because global growth and i'll underscore it today, this is going to be out there. listen, when you have insolvency through institution that go back to the times of greece, spain, italy, these things aren't small. maybe you can dismiss how they affect things like u.s. export, but in the grand scheme, this is a big issue, they'll be writing about this for decades and it impacts growth. >> looking through these numbers, it looks like gasoline is the biggest reason it was up 1.7%. that's the biggest gainer. that's why you see the 0.3%. >> we've seen the peak according to the pundits. i don't know. for more on the data, let's go to michael of mkm partners. he is there somewhere.

where are you there? >> there you are! >> where are you, steve? >> no, no, you want to guess again, joe? i'm in new york. a financial crisis seminar they're going to have here. >> well, well, well, look at you. >> you know i don't belong here, though. >> no, i know. >> should we go to or our special guest. >> i'd like to hear mike. >> i'll just get one thing real quick, which is real weekly average earnings palling 0.4%. that inflation that's out there ends up on a real base entity down 0.4. >> i guess, mike, what i'd ask you is you heard rick talking about 2% and so many times i've heard, well, that's an orchestrated rate from the fed to keep it at 2 but rick implies it's global growth or lack

thereof makes 2% make sense and maybe for the near intermediate maybe even long term. is that where you are? >> i think that makes sense, joe. i think rates are going be relatively depressed, as long as gdp is relatively weak. i don't think we're going to be in a surging rate environment any time soon. rick mentioned china so 8% gdp growth in china usually would be associated with about a flat commodity price environment for industrial commodity prices. crude oil has jumped a lot in the last few months but overall industrial commodity prices really haven't gone anywhere. so china just sit hearing at closer to trend growth and that is closer to trend for them, should take some pressure off there and obviously we have the european concerns, which are hurting financial markets. so all in i think that's an environment where the rates stay

relatively low. >> steve, you want to ask mike a question or you got a comment in. >> yeah. mike's done some really interesting work but one of the first guys i've seen write it, basically that the stock market seems to rally on inflation. if this cycle is so different from every other one we've seen, every time we get a whiff of inflation, that's when stocks really. when we get a whiff of deflags, it goes the other way. where are we? >> this market has been highly coral rated to break even spreads in a way that looks quite different from what we saw before that. there's been other academic research that showed going back to the 1970s the quite different response of inflation coming in above expectations. the reason for that and there are different views out there probably is because of the depth of the crash that we had in 2008/2009 and how depressed the

economy is. if rising inflation can be a problem at some point if it start to create expectations of tight money from the fed but that's not the environment we're in now. >> so gdp for the next couple of quarters and the unemployment rate at the end of the year, what do you think, mike? >> joe, i think we're going to be modestly above trend this year, knock on wood. so around 3% for real gdp, 5% for nominal. that's a bit above the consensus expectations. i think in that environment the fed doesn't do anything, they just sit there. but the concern is that the recovery could falter as we did last year and in 2010 after a string of strong data. that's why i think you've seen the fed out there saying that they want the flexibility to do more if need be. but if our forecasts are close to the mark, i think they'll probably just sit on the sidelines. >> so there will be not a spoon. >> just one more for mike.

mike, the headline number a year-over-year rate has fall i don't know -- fallen for seven straight months and the core number has been up two in a row. how will the fed read that? will it take its queue from headline inflation or will it be concerned core inflation is above 2% now? >> if you look at the six-month growth rate, they're right around the 2% threshold. that's about consistent. they are concerned about the labor market. so less inflation at the core level really takes off from here, in their view it's probably a better barometer as to where inflation ends up a few years down the road, they're going to stay focused on the economy. >> great. thank you. rick and mike and steve liesman. and good luck down there. >> i'll be back in a minute,

guys. >> okay. >> bernanke is a princeton man. >> when we come back, all this week we've been checking um on the performance of some companies that have recently gone company. up next, another company that made the grade. the ceo of mattress firm will join us. we'll be right back. on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.

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welcome back. mattress firm is springing and reporting record results. it announced it will buy competitor mattress giant. the shares in the mattress firm are up over 120% since going public in 2011. joining us now is the ceo of mattress firm. good morning to you, steve. thank you for being here. >> thank you for being here. >> we've been doing series all week, looking at ipos and the impact on you as a company. the going public experience has been a good one given where the stock has gone. what's been the biggest change just on the day to day for you? >> that's a great question. we remain highly focused on running our business and trying to stay focused on thing a which signatures that we had and the day-to-day keep in the comp sales increases. we've had a very long nine

consecutive quarters of comp sales increases so we focused on that. the biggest change, however, is certainly having to prepare all the reporting and speaking to quite a few new consistent >> first of all, what kind of bed do you sleep in? >> what do you think? >> what kind of beds do we sell? >> no, no, what are you sleeping in? >> why are you a hot ipo, you make mattresses. >> sell mattress pees. >> i want to know what steve is sleeping in. the ceo would be sleeping in the best bed out there and i need a good sleep. >> being a mattress firm i've had a benefit of trying out a lot of different beds. today i sleep on a tempurpedic

and that is good and i've slept on a lot of models that are very good. >> i imagine a lot of people do want to come in and test the bed but then aren't they playing the price card? >> the internet certainly has been historically used for research. we see that today, over three-fourths of consumers use the internet for research. the majority due to the tactile nature of the purchase and it's about a $1,000 ticket, it's really a touch-and-feel product you're going to keep for probably eight to ten years and you sleep on it a third of your life. so it's not something that is

easily sold like a book on the internet. >> steve, it's anne. it almost seems counterintuitive to me you've got this great growth when you think about what's happening with household formation and the housing market in general. is this -- are you taking market share or is this market growth for your industry? >> anne, that's a great question. our industry has been growing coming out of the recession the last two years at about 4% to 7%. and we've posted, as i mentioned, nine consecutive quarters of positive comps. coming off of last quarter, 24%. we certainly believe we're taking market share. and the drivers behind that are we're feel like we have a best in class model in a very fragmented industry and we're supporting it with an increase in advertising, certainly, you know, frequency and what's happening is consumers are resonating with our story. >> do you plan to use your stock to do more acquisitions?

>> in is a fractured industry. is this the kind of thing you're going to pick up and bolt on throughout the country? >> our growth plan is focused on -- today we're approaching roughly a thousand stores. and we certainly believe that the u.s. can hold about 2,500 stores conservatively. we are very confident that we can add two-thirds -- we can add about a hundred stores a year, two-thirds in existing markets, and one-third in new markets because we have a very fast cash-on-cash payback of less than one year for our new stores. we've proven over time we've been able to fund it with cash flow. >> we have to run. i own a simmons bed and they at the end of every ten yearsu you're supposed to replace your bed. do i have to do that? >> you can keep your mattress

for a long time mechanically. however, we're suggesting that you replace your mattress after eight years and the reason why is you certainly wouldn't wear your suit for ten years or even keep your sheets for ten years. there's health reasons why you might want to consider replacing your mattress sooner. >> bed bugs. >> not just bed bugs but more importantly dust mites and allergens. we call it replace every eight. >> you sold people around the table. >> totally. >> you've sold some of our viewers as well. we appreciate it. good luck. >> thank you. >> what happens if you pull the tag off? >> the mattress police come and get you. >> they say you can't take that tag off. that tag is very important. >> now i itch. >> the whole bed bug idea just got you? >> yeah. >> dust bites -- what is it? >> mites. >> you're supposed to replace your pillows, by the way.

>> steve liesman will join us again from the princeton club in new york. we're going to kick off a busy week. former gm vice chair, bob lutz and former fedex -- no, he is chairman. fred smith. and citigroup, coca-cola, bank of america, ge and a lot more. "squawk" is coming right back. u, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz.

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welcome back to "squawk box". the futures this morning are down about 45 points right now. they weakened throughout morning. we'll continue to keep an eye on it. cpi came in at up 0.3%. ben bernanke will be speaking this morning. and steve liesman is here. >> i'm here with author of "a random walk down wall street"

published in 1973 and in january the 10th edition came out. >> that's correct. >> i'm going to go right after you. the financial crisis, one of the criticisms was that the markets didn't work. an emerging body of work saying you're wrong, markets are not efficient as you posit. >> what it means is information gets reflected quickly. you get a tabloid of prices that are very hard to beat. in fact, most active managers don't beat the index and those that do in one year aren't usually the same ones that do in the next year. what the efficient market hypothesis does not mean is that markets are always correct. markets are always wrong. the point is nobody knows at any one time -- the price is wrong but nobody knows whether it's too high or too low and the market is unbeatable, but that doesn't mean it's right. and clearly, during the dot-com

bubble, prices were wrong. during the recent runup of real estate prices, prices were wrong. sure, there are some people who shorted the market and made money. but nobody can consistently beat the market, that's the idea of the efficient market. >> same thing as over time the market is the only one that gets it right? >> over time the market gets it more right than anybody else. >> so, does that make you concerned about, for example, some actions by the federal reserve that try to go in and essentially artificially pump up markets? >> i don't think the federal reserve is necessarily trying to pump up markets. the federal reserve is doing the kind of thing that central banks should do. when you have an enormous amount of unemployment, what you want to do is keep interest rates low and hopefully at some point women are going to start buying houses because, frankly, one of

the bits of investment advice i give now, one of the best investments you can make now is to buy a single family house. >> wow. >> absolutely. mortgage rates -- housing has never been more affordable. mortgage rates are the lowest it's ever been. ten years from now that's going to be a good deal. >> we don't have a lot of time today. you are not really changing the advice that you have give into investors for over 40 years. let's go through your four major points beginning with don't time the market. >> don't time the market, it's not that you won't get it right but invariably you'll get it wrong. you'll buy when everybody is optimistic. you tend to sell -- when did people pull most of their money out. third quarter of 2008. at the bottom. >> average and index we know. tell us the rebalance. that's the hardest one for people to follow. >> it is. suppose you're going to have some relatively safe money funds, i mean they earn nothing

now, they are not terribly good investments but you're going to have some very safe investments. what happens that people -- what people do is they tend to pull their equity money out at the bottom, what you want to do is you pull your money out when that asset class has done particularly well and put it in the other. it's the opposite of what people do. >> an honor to have you, to talk to you. we'll have you back again. guys, back to you. a little taste of his investment advice. >> have fun down there. coming up, some final thoughts from our guest host. "squawk box" is coming right back after this. that powers sound decisions. duff & phelps financial advisory and investment banking services. this is my grandson. and if it wasn't for a screening i got, i might have missed being here to meet him.

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the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. our guest host this morning has been ann mulcahy, former chairman of xerox. we were talking about google earlier. but brian dunn, the ceo of best buy. when you look at this particular situation do you think that best buy did it right? did they do it wrong? put it in the context of mark herd at hp. an interesting year or two.

>> these things are happening more often than they did in the past but obviously transparency and corporate environments. >> do you think you as a board member takes it more seriously. >> definitely. when boards get the information which they probably didn't in the past but i think, you know, you have cultures that are much more used to now, whether it's whistle blowing or getting the information to a board, once the board gets that information they have to deal with it. they don't have a choice. maybe choices as to what they do with it. but the whole disclosure issue. >> as a board how much do you think should be disclosed to shareholders? >> you know, i don't think we need to be into detailed disclosures about, you know, whatever kind of behavioral issues, but the market needs to understand the ceo is in jeopardy based upon an investigation. i think they did it right. >> do you think that earnings