inoculating millions of children by a government, by a regime -- >> you shouldn't answer that. there's an exception to every -- >> ambiguous. >> thank you for being here. make sure you join us tomorrow. "squawk on the street" begins right now. good monday morning. welcome to "squawk on the street." i'm carl quintanilla with melissa lee live at the nyse. david faber will join us in just a moment. jim cramer has this week off. the dow is less than 50 points away from a multi-year high. moderate weakness this morning. europe in focus as well ahead of a very big week. the jobs number on friday, big ecb meeting and a whole lot more as we begin to talk about a story that begins with the book business. >> microsoft investing big in barnes & noble's textbook and nook business.

can two old-timers get together and pose a real challenge to apple? barnes & noble's stock appears to be saying, yes. >> lots of m&a action today. energy transfer partners buys sunoco. >> and spain now the eighth eurozone country officially in recession as this week brings an ecb meeting, a french election and the first spanish auction since that s&p downgrade just last week. we should know as we mentioned, david faber joins us from the active/passive investor summit in new york city. david, what's the buzz so far? >> you know, a lot of talk, as you might imagine, about barnes & noble. in fact, a number of people from jana partners -- people may remember they bought a 12% position, looking pretty good

when it comes to barnes & noble. don't forget, that company's stock is so closely held between riggio, birk l, jana partner, liberal media, that there's not a lot out there. it's a complex deal as you guys know. they put in the college business, one of the keys for them. and the nook and valued at $1.8 billion with microsoft contributing $300 million of this will be very interesting to see what develop there is. >> yes. 17.6% stake out of the e-reader is what microsoft gebarnes & no of there. for microsoft maybe it's a little bit more questionable. it's a small investment to move the needle -- to think it would move the needle for the microsoft market cap. but at the same time, it does give microsoft an e-reading component when it releases windows 8. >> exactly.

as you point out, melissa, it is a very small amount of money as was the facebook investment they made many years ago, although that's paid off quite well in terms of at least an investment. but even now, doesn't mean much to the overall for microsoft given how enormous it is. but it puts microsoft in a position to compete in this important and emerging area. you have to believe that's important to them. for barnes & noble, it gives valuation to these businesses that was more than the market anticipat anticipated. the stock up rather sharply this morning. >> 91% pre-market. interesting some of these old-time leaders are getting together to compete in a world that's changed very quickly. the ceo of barnes & noble was on "squawk" earlier this morning and talked a bit about this very interesting deal. >> we think microsoft's the ideal partner. if you look at how people are

consuming content nowadays, more and more that is happening on screens. in fact, e-books will go from 5% of the overall book market to 30% globally within the next two to three years and no one will own more screens in portable form factors than microsoft. >> not to mention that, david, $300 million gives the nook time to compete, right? this is the degree to which apple is under threat this morning will be a very lively topic of discussion. >> no doubt. and thises aimed squarely, it would seem, at the likes of apple and amazon. barnes & noble did announce that it was considering separating its digital business back at the beginning of this year. and this is the result of that. and i think few shareholders at least at that time anticipated it would result in such an enormous increase in the stock price. again, let's not forget, there are not a lot of shares out

there that aren't already held by the likes of, as i said, riggio, burkle, liberty and janna partners. i don't have return, so to speak, so i can't see our programming. you said 91%, is that correct? >> 91%. >> wow, okay. >> the question is what happened to the old-fashioned books business, the bricks and mortar side of the business. the new business is valued at $1.7 billion. what is the old business worth? is it more akin to a borders group and you know what happened to borders group, went bankrupt. >> you do. i haven't talked to mr. lynch that recently. but i interviewed him when they announced the plan to potentially spin off the digital business. and he was the first to say, listen, we're still growing that, part of our business is still grooi growing. it's not in any sort of a death spiral, that the old business can hold its own. time will tell what the real end game is there. but as for now, they say, it

actually is a profitable and still relatively stable business. >> it's not the only bit of merger activity we have going on today. sunoco was bought by energy transfer partners. it expands their footprint in the northeast. even in a year in which who knows what kind of jobs number we're going to get on friday, a lot of companies are comfortable enough -- not very comfortable as we've talked about in the past, but when the opportunity is there, they're going to strike. >> yeah, let's not make any mistake. m&a is still at incredibly low levels. but we have seen a bit of an uptick over the last couple of weeks. nothing transformational. that may be a good thing.

those type of deals carry a lot of risk ft and risk is something most ceos are unwilling to take a venture on at least in this environment. but it's a sign of confidence. the hologic situation indicated other buyers were interested. trying to find out whether there was an actual auction or not. creates a huge company. synergies right off the bat. we'll keep an eye -- we know genprobe is going to be up. borrowing costs extraordinarily low, cash at highs. typically buyer stocks do go up after a lot of these deals are announced. let's remember, it's been extraordinarily slow.

but at least we have a little bit of a merger monday. >> hologic said the deal will be accretive to earnings, add to earnings in the first fiscal of the year and significantly thereafter. there is the latest deal in a long string of deals in this particular space. we had thermafisher not too long ago. maybe this is a space where there is interest and this deal is an all-cash deal. more pain in spain. the country's economy slipping back into recession in the first quarter with deep government spending cuts to reduce a massive public deficit and troubles in the banking sector likely delaying any return to growth. s&p downgrading the credit rating of 16 spanish banks ahead of the announcement of spain's gdp figure this is morning. we'll watch the yields here. >> going to be an interesting

week. the ecb meeting on thursday, french elections on sunday. i think also this week, david, the first spanish auction since the downgrade by s&p last week and we'll see if it's going to have that six handle on their benchmark bond. and then summers today saying that they've misdiagnosed the problem. austerity, the worst of that debate. getting etch more heated. >> it is. and you'd expect it would get more heated when you have a youth unemployment rate that's above 50%. no surprise that spain's in a recession. we know that. i sound like a broken record, but it comes up time and again particularly when i talk to a lot of hedge funds. many of them are very concerned about spain, continue to be very concerned about europe and therefore are not fully invested. and yet if they're trailing the

benchmarks as this year moves along, one has to wonder whether they will start to put more money to work here in the u.s. even though there continues to be a real concern among so many of the people i speak to who don't know how spain gets out of this problem. perhaps it moves along this year and they manage through it. but over the time, the solvency issue, not the liquidity issue, is the one that concerns so many market participants. >> let's move on here, scholastsclas scholastic expecting a profit of $3.40, a share. up from its previous forecast. the stock is up more than 7% pre-market on that news. there had been a huge pop in the stock along with a lot of the other companies ride "the hunger games" waves. and the stock lost it prior to

today's earnings forecast hike. stock futures pointing to a mixed open on weaker-than-expected gdp numbers last week. some of the european concerns we've already talked about. how will all this impact the markets going forward? let's bring in mark lushini. good to see you, mark. welcome back. >> thank you, carl. >> interesting week setting up in that we're so close to these multi-year highs, nasdaq up 18% year to date and yet outflows continue to be worrisome. sentiment, the lowest levels we've seen since late last year. do you think this sell in may phenomenon is really taking hold even before the month of may begins? >> well, the low levels of sentiment is actually contrarily positive if you look at it from the point of pessimism being high is generally good for creating the wall of worry for equity prices. but i am a little worried about what we're approaching over the next several weeks. equity prices have charged out of the block this is year.

and more recently over the last four or five, six weeks or so, we've seen sequentially slowing economic data points here in the united states, not indicative, in my opinion, of necessarily us entering a recessionary-like snair scenario. but not overly encouraging, especially what is necessary to support elevated equity prices or enough to continue to bid up earnings such that it should require an advance in equity prices on the back of earnings as we go through the next quarter. as a consequence, i have a guarded level of optimism as we sit here today. >> and then you have the fed which plays on this as well. one of my favorite tweets says, i hope the chicago pmi is bad so stocks soar. given what bernanke said last week, if jobs are 125,000, like goldman sees, do stocks rally on the hopes of easing coming back? >> because we have been teased so often by the fed coming to the rescue, that may be the

case. that said, i think the hurdle rate for another infusion of an asset purchase program on the part of the fed is quite high. i don't know if one more data point is necessarily going to be sufficient to bring the fed in off the sidelines, particularly when operation twist is set to expire at the end of june. i'm more likely of the opinion that we're going to see the fed pause for some time just to see where the data points run before necessarily they'd be inclined to come to the rescue. but the market continues to be teased by the idea of the hopes that we're going to see that. we put a floor under equity prices when the reaction to a soft employment number which would make last month's number look more like a pattern than an aberration. >> if the market is teased by the fact that perhaps more easing could be on the way walk-off weaker-than-expected data points, you expect the fed will be on pause for a long time.

stlnt isn't there a reversion there? you mentioned a floor but how low is that floor? >> well, melissa, obviously we're packaging a bunch of concerns here, not just the domestic economic activity but obviously the woes that continue to come from europe. and we don't know for sure where china ultimately is going to land here. an 8.1% reading in the last number indicates their economy continues to slow. so i'm not necessarily thinking we have to be down in the low 1,100 range. but to support 1,400 in the s&p 500 is going to require an acceleration of economic data which is going to pinnests for earnings that analysts have raised in the second half of 2012 to something that is achievable. if we haven't going to see the manifestation of faster economic growth, i think those expectations are set a little bit too high.

i could see equity prices sag back down into the low 1,300s before we resume any kind of advance, if we see a quickening of economic activity. >> so potentially 100 points from here on the s&p? >> correct. >> mark, thanks a lot for your time. appreciate it. >> thank you, melissa. when we come back this morning, online travel stocks on the move. we'll see how these stocks can pack your portfolio with profits, especially if you were in expedia last week. later, an exclusive interview with the chairman and ceo of dominion resources, how his company is dealing with the roller coaster that is natural gas. one more look at future, what a week we have ahead. a quarter of the s&p reporting earnings, the likes of gm, time warner, viacom, as well as a slew of data as well as big meetings. we're back in a moment. this is $100,000. we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back.

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welcome back to "squawk on the street." i'm rick santelli on the floor of the krm meshgs group. as you look at the intraday and longer-term charts of our ten, concern about the issues of europe. our ten-year note yield hasn't pushed back much. but hovering close to 1.90. you've heard all the issues, spain being in recession a group of other countries. we'll have the chicago purchasing managers' survey. will it follow the same

better-than-expected income number by a bit that we saw this morning? melissa lee, back to you. >> thank you, rick santelli. microsoft's investing big money in barnes & noble's e-reader business. that brings us to this morning's "squawk on the tweet." barnes & noble spinning off its nook business in what could be one of the last nails in the coffin for the big box book retailer. if barnes & noble were to go by the wayside, what should be done with all that retail real estate? tweet us. we'd love to know what you have to say. we have your responses throughout the morning. certainly should be a very interesting in terms of what more apple stores could be -- >> yeah. >> seems to be a natural -- >> i think it's fascinating how these company that is we think are out of the game are starting to lean on each other. we'll see if it gets them back in the game. >> see if they can float? we'll see. we have your responses throughout the show. coming up next, the one and

only art cashin joins us with his outlook for the week ahead. taking a look at the futures, we are looking at a lower open as we start this trading week. the dow looking to lose about 21 points at the open. s&p down about 3.5. much more "squawk on the street" straight ahead. with hertz gold plus rewards, 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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the jobs number, though, how do traders want that to go? >> looks like it could be a problem. the worst of both world would be for the non-farm payrolls to come in light, at 125,000 or so. and have the unemployment rate go down with people stepping how of the pool. that would present a little bit of a paradox for the fed and for everybody else. >> is the trouble in spain -- we've got eight eurozone countries now in recession. is it changing the way people think about austerity? are we going to undo the few austerity moves they have into place? >> i think it is already, yes. i think the fact that sarkozy was behind the eight ball. the electoral results are showing people that austerity's not going to work. there are several radical parties showing up in athens. they're worried about trouble in the streets there. they're worried about trouble in the streets in spain. all pain is no gain. they have to find an alternative

to austerity. >> it needs the all-clear from europe -- what's the hurdle this week from europe so we can focus on some of the decent numbers we've been putting together in this country? >> i think you're going to start to get some late polls as we get closer to both the greek parliamentary and the french election. but there will be some hurdles over here. we have a saloon full of fed speakers this week. everybody's going to look for what nuance there is to say whether q.e. 3 is still out there, what's available, will the market get into this paradoxical mode that bad news is good news? this has become unfortunately like a patient in a recovery on a morphine drip. he's just become too comfortable with it and they don't want it taken away. >> at the end of the day, what do you think the market reaction is on friday -- we might be entering that paradox mode where bad news is good news.

are we there yet? are we going to see that starting on friday? >> i don't think we'll have that luxury for too long because not only is europe continuing to be a problem, but across the other pond, over in asia, some things are popping up. luckily, tokyo's closed today. but they're having some real problems. the demography is there and difficult in trying to get that yen to weaken, it's not going to happen easily. >> one of the comments from jack applan said as we get closer to 1,450, how many managers from that mindset, that we can lock in the year here and what does it mean for the last six months of 2012? >> we have a very critical hurdle first before 1,450. that is getting past the more recent highs which were around 1,420, 1,425. if we look like we're stuttering

and sputtering, the temptation to lock in victory will be very difficult to push down. >> art, on that note, thanks so much. opening bell about four and a half minutes away. a lot more "squawk on the street." don't go away.

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you're watching cnbc's "squawk on the street" live from the financial capital of the world where the opening bell set to ring in less than a minute's time. a lot going on today. talking about microsoft and barnes & noble at the top. that will be one of the key corporate stories. in terms of the banks, keep an eye on the morgan stanleys, the goldmans, the bank of americas. a lot of them closing below their 20-day moving average. report this is week they will be meeting with the new york fed govern to talk about the stress tests. mary thompson will be all over that story. >> and you layer in the whole notion about europe and spain specifically, banks getting downgrades. these are some of the banks that have been most correlated to the european banking sector.

we could see weakness there because of the weakness expected at the european banks this morning, a couple showing really significant losses there. >> there's the opening bell. the s&p 500 at the big board today, senior vp of human resources. and global payments listing on the nyse. over at the nasdaq, the co-founder and ceo of honest tea. jonathan soo sicking off the great recycle which will aim to boost recycling rates in this country which are pretty low. >> there is apparently a giant recycling bin in times square to mark the occasion where people can toss in bottles. >> the hard part is making it cost efficient. it's so labor intensive. >> think of all the new york city apartment buildings. that's amazing. in terms of the pre-market moves, watching shares of the gap. this is an interesting one

because janneys. you're watching here so far early on in the session a fresh 52-week high on the gap 29.01. that's the level on this price target raise out of janney. also watching the reaction in co some of the competitors out there. apple as well as amazon. amazon, jeffries raising the price target today. amazon trading slightly lower at this point. we should note that amazon had a huge run off the back of its earnings. this pullback of .8%, let's put it into perspective here, who knows if it's really the looming threat of the nook. >> and then there's "the times" piece over the weekend about apple's tax rate. "the times" arguing that they are extremely adept at putting

various facilities and various states or country that is lower their overall tax rate, 9.8%, "the times" says, $3.9 billion in profits. you would think the stock would go up on a report like that if a company is that skilled. doing things listen the law that minimize its tax burden. >> the question is, how often do you see a newspaper headline touting the fact that a company is legally doing something. somehow it is news that a company is legally doing something. >> we went to the airport and a plane landed safely and we're going to put it on the front page. >> breaking news. >> second weekend in a row that "the times" has taken aim at a big company. bob pisani is on the floor with what's moving this morning. going to be a heck of a week, bob. >> yeah. i know the jobs report is going to be the focus. but over in euro land, it's the ecb meeting on thursday that's going to be the big thing. the spanish banks are going to need help. spain's in recession, not

surprising a lot of people. but there's already talk about creating a bad bank situation in spain just like ireland did to essentially create a ring fence around some of the bad bank loans that are out there. the problem is they're going to need a lot of help. they need to recapitalize the spanish banks and they don't know how to do it. that's where the ecb and the eu are going to step in. you won't hear a lot from mr. draghi. he's going to argue the ball's in the court of the national governments to step up to theplay plate and do structural reforms now. on the other hand, backdoor, i can assure you, there's discussions about how to get money to the spanish banks right now. probably going to come from the efsf, the european financial stability facility or the esm, european stability mechanism, created to make loans essentially to banks and other organizations that needed help. this is supposed to come into effect in july, the esm.

the first loans are probably going to go to those spanish banks. that's what i'm hearing this morning. here in the united states, two comments on the earnings situation. did you see what's going on with the hmos? first it was aetna, then coventry and today humana. all reporting higher medical cost ratios. that's the percentage of the premium being used to pay medical bills. they've been going up. more people have been going to the doctor. it's that simple. this has created problems with some of the earnings here. again today, we're seeing a situation with another hmo, this time, of course, humana, to the downside. 234 building material land, similar trend. armstrong world industries. they make ceiling, floors. not a very good number. but the residential, the remodeling, the do-it-yourself business is continuing to do well. that's why companies like home depot and lowe's continuing to do well as the d.i.y. business is doing well.

spain, japan, not so well. the united states, we're just down fractionally. s&p 500 down 0.4%. >> want to check in with courtney reagan over at the nasdaq. we're watching apple shares down by 1.25% so far. >> certainly. that will likely weigh on the greater nasdaq and even the greater market today because we know what a heavyweight apple does have. i want to bring our attention to shares of warner chilcott. i want to alert our viewers to this. moving on to meft, getting a slight bump-up on the news that it is acquiring that stake for $300 million in barnes & noble shares of just slightly there on microsoft, much higher for barnes & noble over ant nyse. take a look at hologic, a deal going on between gen-probe and hologic. hologic buying this company. the acquiree is up. the acquirer is down a little

bit. we'll see if the balance shifted at all throughout the day. and allscripts, after losing 36% on friday, they have a lot of shifts in the executive board, looks as if they do now have a new lead guy. shares are recovering just a little bit. >> thank you very much, courtney reagan. shifting to bonds and the dollar, check in with rick santelli at the cme group in chicago. hi, rick. >> i guess the best way to summarize today, melissa lee, is cnbc's pretty popular down here, big jumbotron is up in the background. bob said they need to create a bad bank in spain and the whole place had a little jump of noise. they already have -- the last thing we need to do in europe is teach them how to create bad banks. i think it's the one skill that they have down best. but we understand the logic there. i really think if you looked at the preopen positives is

equities, if you look at how they're hovering unchanged to lower now, the credit markets to many are giving you a clue as to how the day and maybe the week may turn out. whether it was the gdp quarter over quarter, year over year in spain. not as bad as some of the worst expectation or current account deficit was rather large as well. in about seven minutes, we'll see the april rendition of the chicago purchasing managers' survey. we'll have one of the people from the organization that does that survey with us when we release the numbers to get some insights. back to you. >> thank you very much for that. want to get back to david who's in new york, tracking activist investor plays with a very special guest this morning. david? >> thanks very much, carl. we are at an activist investor conference. ken joins us now. thanks for letting us be here. later today, we'll talk to carl

ica icahn. what have we be seeing in terms of activity? >> let's step back to 2011, from 2010 to 2011, while the number of activist situations stayed relatively the same, the average market cap that activists are investing in doubled -- more than doubled from $1.3 billion to $2.8 billion. that meant that activists pours $20 billion in 2011 into new activist campaigns and around $9 billion in 2010. first quarter of 2012 seems very similar to the first quarter of -- >> there's been a doubling almost in terms of the allocation of capital, going after bigger companies. >> yes. the average market cap was $2.8 billion, just over $3 billion was poured in. although it felt a little bit like a slow quarter because there wasn't a lot of m&a. >> do you think it's going to increase? >> we're in annual meeting

season but we're a long way from filing a proxy -- >>well see a lot more activism in the remainder of 2012. both in new filings and in creating catalysts for current filin filings. so as m&a activity increases -- >> it's been decidedly slow. but the big names are out there. carl is out there. ackman, trian guys. >> janna, starboard's been big lately. >> they target mid to smaller cap. >> around $1 billion, a little less, a little more. but the guys that are targeting the big companies are the ones you mentioned. >> you also have a mutual fund, trying to get off the ground that tracks some of this as well because you found that -- and this kind of surprised me.

even after the first day bump -- we hear carl's filed on a new name or ackman or dan lobe even. there's still a lot more upside behind it. >> absolutely. we looked at the over 100 situation that is we covered in the last six years of $1 billion-plus market cap companies and top activists. the average one-day bump after the 13-d filing was 2.65%. after that, the average holding period of the activist is 15 months and during that 15-month period, the average return is 16% higher than the s&p. so it outperformed by 16% over that 15-month period. >> i think that's surprising. historical performance is not indicative of future performance -- >> exactly. no indication of future performance. but when you look at people like bill ackman and carl icahn and trian, these guys hold their

investments for a long time. >> carl is in and out of a lot of different things. >> there's always so much focus on the bump. and there is a big bump. and these guys capture that bump. but after that is really -- >> any area or any industry that you think or has been particularly active that will continue? >> well, technology's always the top in activism for the last three years. activists are value guys. they're looking where the value is. financials have increased. it used to be biotech. that's gone down. oil and gas has been in this quarter -- there's not a lot of oil and gas with marathon petroleum. it's where the value is. >> ken, appreciate it. >> thank you, david. >> ken squire from 13-d monitor. and later today, we'll have carl icahn. back to you guys in the studio. >> never know what's going to come out of carl's mouth. thank you, david.

keep the tweets coming. barnes & noble, this is the question -- barnes & noble spinning off its nook business in what could be one of the last nails in the coffin. if they were to go by the wayside, what should be done with all that retail real estate? tweet us. we have some of your ideas after the break. but first, breaking news out of the cme group. we'll get chicago pmi data right after this break. suno sunoco, top of the list being acquired by etp. aspirin is just old school.

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welcome back to "squawk on the street." rick santelli here. we have april chicago purchasing managers' survey out. down six to 56.2. much weaker than the 60 we were expecting. i have alice andres frans with me. alice, are you a little surprised at the weakness on the headline number? >> no. we were looking for a little bit of weakness. we've had a period where we've seen weak regional reports here in the united states, a

weakening in china and a weakening in the eu. putting the data into perspective a little bit here we had the production dimension down to the lowest levels in 29 months, the barometer down to the lowest levels since 2009. we had new orders down big for the second month in a row. both down 5.9 this month and 5.9 last month. two big drops in a row. inventories showing they're not being replenished. and we're seeing lead times from suppliers coming at a faster rate signalling a little bit of slowing. also, you want to take a look at the prices paid. it's coming off a little bit. but you have to remember, we had that big spike last month. i think the prices coming off is a direct reflection of energy. >> what was the prices paid -- that was 68.6. and that was down 1.5. very close to 70. employment index is important because wednesday we have adp, friday, the bls report.

the employment side was up a little more than 2%. you consider that a positive? >> i do. two positives in this report, employment being one of them. also the reason that employment is so important is because it came on the heels of a big decline last month. we see a push-up -- >> we had 120,000 jobs report. one could say that the organization did pretty well picking up. let me interrupt you for a second. we were talking about there's a survey attached to this. i want you to tell me about that briefly. you said it was optimistic. i say purchasing managers have been optimism. gdp report showed a rise in inventories. tell us about inventories. >> inventories have been coming off for six of the last seven months. and what that's showing is that inventories are just not being replenished. so it really reflects the caution that these purchasing managers are having moving forward. >> but they surveyed fairly optimistic. can you tell me about that? >> they did.

we have a portion on our survey where we allow the respondents to our survey to give comments and feedback. what they're telling me and the purchasing managers i meet with to help compile this report are telling me, we've seen this before, this is just a little bit of a setback. we're gearing up for a big summer. i have not talked to one purchasing manager that told me that their business is slow and they are all gearing up for a very strong summer. >> gearing up for a strong summer. we have lots of inventory out there. the key issue is, will it be consumed? >> rick, any comment on a number that was clearly -- at least available to those who follow twitter before it hit the tape? >> well, subscribers get the number a bit early. i believe it's a quarter till that subscribers get the number, is that correct? >> the number comes out at three minutes before the public release. so new york time, it would come out at 9:42.

to our subscribers, you can get it online or via conference call. then it is released to the general public. >> seems odd, doesn't it? there are some numbers where subscribers get them early and i would think early is as a former trader e it bugs me a bit. but it's a free country -- >> you can always subscribe. but it raised a lot of eyebrow this is morning. the market reaction did come ahead of the number itself. rick, thank you for that, rick santelli, joining us from the cme. time for "squawk on the tweet." microsoft's investing big money in barnes & noble, its e-reader business in what could be one of the last nails in the coffin for the big box retailer. we're asking, if barnes & noble were to go away, what should be done with all that retail real estate? jeff writes, make them starbucks super centers. keep the starbucks already in the stores for a new starbucks within a starbucks concept. halloween stores. and another says, with real

estate in cyberspace being unlimited, real real estate will probably get a lot cheaper, green space? and another tweet says, make one an amazon store in maryland so the governor can collect more internet taxes. he probably thought the same idea. >> good responses. coming up, david faber talks with the former chairman of martha stewart on the media. jeffrey ubben will be live in new york with us. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus. tdd# 1-800-345-2550 i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones to help me find tdd# 1-800-345-2550 possible trading opportunities quickly. tdd# 1-800-345-2550 i can also bounce my ideas off their trading specialists -

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simon hobbs with a look at what's coming up in the next hour of quk sq"squawk." >> we have a good show lining up. microsoft making a big bet on barnes & noble. two analysts will weigh in on that. a merrill lynch analyst will join us. we'll also talk to jeff ubben, the activist investor and a former colleague of martha

stewart. and fidelity will be here to explain why there should be no more regulation of money market funds. back to you guys. >> see you soon, simon. time for this morning's stocks to watch. kraft foods upgraded. it's up .5% right now. research in motion estimates lowered at rbc. apple and samsung continue to gain market share at the expense of others, including research in motion. that stock is up by 1.5%. chesapeake energy upgraded from market perform, citing valuation. procter & gamble downgraded to a market perform from outperform over at oppenheimer. that is down by 1% right now. and anheuser-busch, the company is cautious on the second quarter. seeing a decline of .8%. and ppg industries upgraded from neutral. that's about flat on the session.

when we come back, we're going to prep you for all the data set to move the markets this week, jobs numbers, manufacturing data, plus the head of u.s. equity at bank of america/merrill lynch will tell us why earnings expectations for this year might be too optimism. a lot more "squawk on the street" coming up after the break. people with a machine.

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as we get into the second hour of "squawk on the street" this monday morning, other corporate news we're watching, humana missing the street. the health insurer reporting a 21% decline in first-quarter profits to $1.49 a share. four cents below forecasts. humana says high medical benefit costs weighed on its bottom line. let's have a look at where we are on the stock. you'll see that there is a reaction clearly to that. down nearly 6%. >> the chicago purchasing managers' index coming in worse than expecting, falling to its worst level since november of 2009. an april read of 56.2% from

63.3%. >> and anheuser-busch, beer sales increased in the u.s. for the first time in three years. despite the news, they missed analyst forecasts. shares trading lower so far in today's session. we've been talking about the $300 million partnership between barnes & noble and microsoft all morning today. to weigh in on the deal, john ting ser an analyst at maxim group and peter wallstrom join us. peter, looking at your note from february, your price target was $20. obviously the stock has blown through that this morning. at the time, you said the main negative argument is that the rate of nook sales is slowing. did the world change over the past few hours? >> you know, the landscape has changed. domestically and

internationally. it's going to be a big push for barnes & noble. >> what's the future? how much time does it buy them? to what degree does it give them a leg-up over apple? >> i think in our estimation, barnes & noble is going to generate an operating loss of $80 this year and $80 million next year. it buys them a year to a year and a half. they get $60 million in upfront, non nonrefundable cash. it is an important step for barnes & noble which we viewed as having an uphill battle if it were to go against apple, google, amazon on its own. >> john, what happened to the bricks-and-mortar business? if it is by itself -- the last time we spoke to the ceo on this program prior to the announcement of this partnership, he said the book business in and of itself is in

good shape, not in a death spiral. he tried to stamp out those thoughts out there in the marketplace. what's your assessment of the business? >> it's very tricky to assess because the numbers are so confusing with what's lost and this move is going to help clarify that. but the book business itself is actually quite profitable and obviously benefited from borders going out of business. they really now are the only national book seller in the game. >> we saw that with best buy and circuit city. and now look at best buy. how long is that bump going to last, john? >> and the large stores do have a problem. but on the other hand, the best technology company in the world, apple, has tremendous retail strategy. even amazon is rumored to be opening a store. microsoft has half a dozen stores. google's filed to open a store in dublin, ireland. everyone's trying to figure out how to get a digital bricks-and-mortar strategy to work together. you can't just go digital today.

>> peter, stock last check was $26. previous price target was $20. where do you take it now? >> that's a good question. the stock is still under reeve. we're taking into consideration everything that was released not only this morning but then on the conference call. but we do like that it does buy barnes & noble some additional time to get the digital strategy. hopefully trending towards profitability. and the increased distribution and assess both on the windows 8 platform as well as being top of mind with consumers will have some value. >> we should note, barnes & noble shares are up about 64% on the back of this news. john, what's your recommendation for investors at this point? >> we're still reviewing it. but we had a break-up price target of $27 a share. and this really is a game changer. on the short term, though, there are 57 million shares outstanding, primary shares, of which at least 60% are held by insiders or strong players like

burkle. they're 19 million shares short. this stock could fluctuate for many different reasons. but on a fundamental basis, to say this is a game changer and there's huge upside to this market as barnes & noble going from being seen as a little book sell tore a major player. >> giese, thanks for your time. coming up on the program, a mutual fund giant is battling a regulatory push in the money mark markets. we'll weigh in on where we are with retail confidence. also ahead, a look at the one world trade center, surpassing the empire state building as new york city's tallest skyscraper. we'll take you there live in the next hour of "squawk on the street." tomorrow, we're putting this show to fed, federal reserve,

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♪ we're watching shares of

apple this morning. had broken the $590, approaching its 50-day moving average which had been broken earlier this month. decline of 2% here, certainly weighing on the s&p 500 as well as the nasdaq as we are down by two full percentage points so far on the session. carl, you mentioned "the new york times" article saying that apple uses all sorts of legal ways to avoid paying as high taxes as perhaps they should if they simply kept their money here in the u.s. >> yeah. it reads like a criticism of the company. it's not the only company that falls into that group. >> i did read it. you know what amazes me about the tax discussion in this country is how wrong people are allowed to be for such a protracted period of time about the taxes that companies actually pay, the cbot had a discussion.

apple is below that at 8%. that's the reality of where we are with the tax breaks that obama put on the table, particularly for r & d. it's nowhere near the statutory 35%. they're not paying 35%. and tech is paying far less. i think apple is probably one of the tech companies maying the most actually. >> it's interesting to see where the anger is directed. the anger is drekirected at corporations when it's the government who's passed all the lays. the loopholes are there for a reason. >> think about every tax season when you talk to your tax adviser who asks you if you're in television what you spent on clothes or did you have your teeth whitened or something? >> right. >> you claim your teeth whitening? >> i never have. but that was asked. the point is, people work very hard when it comes to their own taxes and then --

>> there's a difference between paying 35%, 40%, tax if you live in manhattan or 8% than if you live in nevada. it is on a different scale. >> if you're in a small business and your tax adviser says, i think we can get you a lower rate if you open a safe deposit box in nevada, you would say, no -- >> but that's the point. most small businesses have to physically be in place that is they can't claim those sorts of tax breaks. it is only international companies that can move capital around, which is what apple is doing in this situation. it is only they -- >> the other side of it is is for all the apple maniacs out there who love apple, this is all for them. >> i'm not saying it -- i would on that note say one of the reasons we're down today on apple may be because we had that extraordinary bounce on the results last week. let's not forget that we had a great week for the markets last

week with the s&p up 1.8%. >> the trading pattern in apple, it hasn't been strong. not strong at all. it's already below the 20-day moving average. >> that depends on how you frame it. >> this is from a technical perspective. >> if i show you a year's chart, it looks extremely chart. >> some say, you want to look at the monthly close before you start drawing broad conclusion. we're going to talk to "the times" correspondent who wrote the story. >> it is a very interesting piece on the mechanics. >> it is. >> of how they actually do it, fascinating. >> yes. i think we're heading to a debate that is brewing over money market funds. regulators critical of money market funds saying the retail investor is not made fully aware of the risks involved. but fidelity, the biggest fund player in the world, filed the results of a new surveillance to the s.e.c. saying, quote, investors today are generally quite aware of the investment

risks of mutual funds and there is ample, robust disclosure of money market mutual fund risks available. nancy joins us for a "squawk on the street" exclusive. great to have you with us. no surprise, fidelity would not like to see further regulation of its own business. i want to go to some of the survey results. one of them in particular, 75% of fidelity customers -- this is of fidelity customers who own, who have a money market fund, know that the money market mutual funds they invest in are not guaranteed by the government. shouldn't that number be a whole lot higher if you're talking specifically to retail customers with money market funds? >> good morning. i'm dlagtelighted to be with yo. i think the survey results are actually quite powerful. as you noted, money market funds are not guaranteed. some of the additional regulatory reforms being discussed are premised on the notion that investors do not know what they own. we are frequently in conversations with our

shareholders talking to them about the markets and about money market mutual funds in general. and what we did this time was go out and ask our shareholders, what do you understand about money market funds and what do you believe? and as you note, over 75% of our retail shareholders recognize that money market funds are not guaranteed by the government. >> you also asked them the question presumably whether they understand that funds fluctuate up and down daily with the market. >> we did indeed. if you think about it, money market mutual funds are one of the simplest investment product that is there are. money market funds buy very short-dated, very high-quality u.s. dollar denominated securities and then pay out the income that those securities produce to its shareholders. and when you look at those securities and we've asked your shareholders, the price of those securities does fluctuate up and down, small amounts. over 80% of our shareholders recognize that. >> when you ask them that question, maybe you should have asked them in the event of a

lehman-style catastrophe again, you could have redemptions up to $123 billion, 16% of the assets under management and they'll only get those back as the fed intervened as happened in 2008. >> what we need to recognize is since 2008 when there was the financial crisis, the s.e.c.'s done a great deal to change money market funds and make them far more resilient. in the week after lehman, money market funds experienced significant outfalls. >> they changed the rules in 2010. in 2011 when dexia was going down, the dutch belgium currency, the perception is that it's safe and it's dollar denominated. and actually it isn't. in the race of yield, they're taking on a huge amount of risk which people who are invested in them don't understand, as your survey demonstrates.

>> i think that investors do understand that. again, if you look at some of the changes that the s.e.c. put in place, money market funds now are required to have 10% of their assets in daily liquidity. in 30 oers of their assets in seven-day lickety. if you look at the experience over the last summer, the summer of 2011, the markets were in extreme volatility. the potential downgrade of the u.s., the potential debt ceiling issue and the continued volatility in europe. in an eight-week period in the summer of 2011, money market funds lost $170 billion in assets. but when you look at the amount of liquidity in those funds, all of those redemptions were able to be met with no disruption in the short-term markets. >> nancy, did you ask your customers whether or not they were aware of the fact that some of your money market funds were exposed to european debt? >> one of the other reforms that the s.e.c. did was require us to put our holdings on our website. so today any shareholder in any

of our funds could go to our website and see down to the level. our exposure to europe banks has come down dramatically since the beginning of 2010. we're always trying to position our funds three, six, nine months prior to any sort of market event. i think our customers realize what our european bank exposure was in the past and how that exposure has come down in response to events in europe. >> i'm sure fidelity is always pro-customer and fidelity will always want to make sure the customer is aware of all risks out there. why are you against the regulation -- what would the cost be to the consumer invested in these funds? >> that's a great point. back in february, we also filed another comment letter with the s.e.c. where we went out to our shareholders and we asked them, what is it that makes money market funds such an important investment for you? and we heard from them that the most important characteristics

of the fund are the preservation of principal, so the $1 stable nav and liquidity. 5z we think about money market reform and changes to those products, reforms that are aimed at changing the stable $1 nav or the liquidties that these provide will make the funds less useful and lose their utility for our customers. those are reforms that we cannot accept. >> it may not be yours to accept or not. i understand that you worry that customers may flee. isn't the question and the survey that you need to have with the rest of the american public, as the s.e.c. chairman, shapiro, is suggesting, we need to ensure the next time around, they are not too big to fail. doesn't the rest of america have a right to say to you, you need capital buffers or you need nav so that we don't have to come to your assistance for your customers in the future? isn't that the where the debate now is and that's why the s.e.c. is acting as it is?

>> as you noted before, the u.s. treasury did step in in 2008 and provide a guarantee for money market funds. no fund collected on that guarantee in the united states government earned over $1 billion in premiums. since that time, as part of the 2010 amendments, the s.e.c. has addressed the issue of money market funds being too big to fail. part of the 2010 amendments include a pre-ordained structure for an orderly liquidation of the funds so the american taxpayer will not be on the hook. that is the mechanism that financial regulators across the board are trying to put into place. >> clearly, mary shapiro thinks that more needs to be done with the best -- she believes the -- the s.e.c. believes, a lot of congress believe it's not enough. of the two, which would you prefer, the additional capital requirements or the nav? >> again, there's no proposal on the table at this point in time. these are just continuing discussions that the s.e.c. is

having with the industry and with other regulators. when we look back at our customer surveys from february of 2012 and we look at the survey that is we just did today, our customers have told us that neither the floating nav nor redemption restrictions are ast aspects of the new proposal that is they would find acceptable. we do not support either one. >> nancy, thanks for your time. we appreciate it. toil to come this morning, expedia and priceline shares flying high this year. we'll see how far the rally can go. a lot more "squawk on the street" is straight ahead. so, how was school today ?

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♪ welcome back to "squawk on the street." mary thompson with the market flash. we want to bring to your attention shares of warner chilcott. halt for trading earlier. shares moving higher on the news that the company says it is starting a strategic review and is in talks with potential suitors. the company up 19% after being halted for trading. this is a company that makes dermatological products and women's health care products as well. there's talk that there was a target of possible takeover from bayer a.g. it comes at a time when it's struggling with the run-off of its actonel, an osteoporosis target. but it is holding a strategic

review and is in talks with potential suitors. there you have it. up 19%. back to you. >> thank you, mary. let's zero in on online travel stocks now. the group has been surging lately. expedia had a great run in the wake of its results last week, up 24%. do these stocks are more room to the upside as we get closer to memorial day and driving season and traveling everywhere? jake fuller is an analyst at lazard and mark mahayny join us. why was the market so badly positioned for what expedia had to say? clearly priceline was the favorite going into earnings. >> a couple of things. their results clearly answered a lot of the doubts in the marketplace. they showed topline growth and market expansion. they were in the market buying back stack, all things the market wasn't expecting there.

the reality is there are really legitimately two companies competing here, not just priceline. expedia is a global leader and have proven things can turn around. >> you both have virtually the same price target. for you, jake, it's a neutral. >> that's been one of our top picks for several months. >> talk me through -- is that your favorite stock or would price lin -- price lin, the price performance on priceline is still phenomenal for the year. would that be your top pick? >> both companies are very well-positioned. in the short term, i'd focus on exped expedia, trades at 12 times earnings. it's turning business around, showing topline growth. they are still the leader in online travel. >> mark, priceline for quite some time, there was a big pop in shares on the back of the expedia earnings. >> priceline has four

differentiating factors. they have the lowest cost structure in the industry and they go to market with the lowest prices. they charge the lowest commissions to hotels. it's a pretty good track record they have. we have stuck with price lin for some time. we still see a path to $850, which is about 15% upside from here. not dramatic upside. but enough to continue warranting it as one of our top buys. >> jake, what about orbitz? are they the contrarian play? that stock is down 5%. if they were here, they'd say, we've sorted out our technical issues, we've got our ducks in a row. we're going to move in like priceline has done. is there any hope or orbitz, in your view, jake? >> bottom line, in the short term, i don't think so. all our data continues to show they're losing market share. what's happening on a global

basis is market share is consolidating with expedia and priceline. it's hard for the smaller regionally focused companies to compete. they're heavily weighted to the u.s. and the airline ticket category. those are tough businesses. i see them losing share. >> if you overlaid priceline's chart over apple's chart, be tough to tell the two apart. we know some of the momentum in apple appears to be flattening out a little bit here over the last couple of weeks. can rev par advances make up for a flattening in momentum for priceline? >> probably. but melissa made a point earlier about priceline's european exposure. that's been the issue that's taken this stock up. if there's a 10% -- if priceline were to trade off 10% later on this week, some nasty european headline news would do it lt they've got about 50% to 60% of the bookings that come out of that region. turns out europeans view travel as something of a fixed

expenditure, not a discretionary expenditure. that's an advantage for priceline. but european currency moves and macro moves affect priceline more than any other stock i look at. >> jake, mark, thank you very much for your time. >> a lot of buzz this morning surrounding apple and the steps it's taking to shelter billions from the tax man. big piece in "the times" over the weekend. after the break, we'll speak with the pulitzer prize winning reporter from "the times" who co-wrote that story, straight ahead. our science teacher helped us build it. ♪ now i'm a geologist at chevron, and i get to help science teachers. it has four servo motors and a wireless microcontroller. over the last three years we've put nearly 100 million dollars into american education. that's thousands of kids learning to love science. ♪ isn't that cool? and that's pretty cool. ♪ at bank of america, we're lending an

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some of the stories we're squawking about. data harvesting at google not a rogue act. it was actually a program that supervisors knew about according to details from a regulatory report. shares of demand media soaring 25% today. and another negative indicator for the housing market, the u.s. homeownership rate has fallen to 65.4 persistence. down from 66% in the previous quarter. the headlines on the markets don't look spectacular but it may be almost good enough, provided we close out flat on the session overall, certainly on the dow. that will be the seventh consecutive monthly advance. this is the last day of trading clearly for april. that would be the best advance that we've had in five years. a lot of that had to do with the

movement we had on apple in the middle of last week. nasdaq rose 2.3% last week. let's have a look at the advance/decline line. seems to be weighted to the downside. 20 to 1, more decliners to advancers. and at the nasdaq, one hour into trade, it's 2 to 1. apple on track to bag over $46 billion in praofit this is year. but "the times" takes a look at how apple uses legal loopholes and operates in low-tax locations to avoid paying billions in taxes each year. david kochineski joins us with more on his reporting. pleasure to have you with us. it's interesting you choose apple. apple is a much-loved company when it comes to shareholders because of the run in the stock. but here apple is a much-hated company because of the amount of taxes they are not paying. did you find that apple's any worse than any other company out there in reality?

>> you know, there are a lot of companies that try to lower their taxes. every company does. but apple's been very innovative. a lot of the techniques have become popular that apple devised. their tax strategies have broken new ground. >> in terms of the new ways, walk us through a couple of them. they're actually being followed by a lot of other companies out there at this point. >> sure. one of the most common is using offshore shell companies to move profits and hold the intellectual property rights to some of their -- the breakthrough technology. every apple device is run by internal software and all the processes and programs can have trademarks and patents. those trademarks and patents, apple can lower their tax rates by shifting those around.

one is called the double irish. two companies in ireland assign all the revenues from the international operations, so one of the companies ship the money back and forth and through a place in -- a holding company in the netherlands. it's called a double irish. with a dutch sandwich, allowing apple to lower etc. taxes. they have some holding companies in tax havens with very low rates. in the end, apple pays 3% or 4% overseas tax rate, which is pretty low by any standards. >> david, as someone who's covered taxes so well for the "the times," is it your view that this is fair? in the course of your reporting, are you agnostic about their strategies? to what degree are they in the right or in the wrong? >> what they're doing is totally legal. apple certainly has a fiduciary responsibility to its shareholder to try to maximize profit. fair is in the eye of the beholder.

writing about corporate tax, i've tried to look at the inequities between different companies and different industries. you get tech companies like apple or pharma companies that use a lot of offshore tax havens to get their tax rates low. you have retailers like walmart or target and they're paying up close to 30% or close to 35%, which is the sticker price, the official rate. so to me i think one of the conundrums of the u.s. tax system is there's such a big difference between what different industries pay. in washington when there's talks of closing loopholes or changing the system, they want to end some of the hope loopholes but also help even it out a little bit and lower the rates so everyone pays a closer amount of profit. >> but it's a global economy, not a tech company? it's more a function of them being a tech company than a global company? >> it's both. tech companies because so much

of what they do depends on intellectual property which is easy to shift, it gives them the advantages that a big retailer couldn't. it's easy to -- you can shift your rights on a patent with the click of a button. moving a car or a foundry is a lot harder. that gives them an advantage. more and more other companies are doing this. some companies put trademarks on processes they use to manufacture goods and move those offshore. but the tech companies and the pharma companies have led the way in terms of tax avoidance. >> were you surprised at the lack of criticism there was broadly for this? i find it interesting that you chose to frame the criticism, a lot of which is in the article, at the very local level, that it was apple employees who were passing a school that had to suffering cutbacks because there wasn't enough money at the state level, for example n california. were you surprised at the lack of criticism of apple? >> this is my first time writing about apple. my co-author on this story has

been writing about apple all along. i had never written for it. obviously their products are very popular and they've got a lot of fans who really are loyal to the company. i also think that they've got -- because of some of the tax strategy that is we talked about that hadn't been written before involve their state tax, we thought it was a way to really show how it contributed to california's problems. apple has a subsidiary in nevada. by showing what it does in california, it could help people understand what's the impact. when the taxes aren't paid, it has consequences. >> what's the reaction you've gotten from either the local level or the federal level? do you think there could be a

movement to close some of these innovative ways in which apple is skirting taxes? >> this talk about it in washington -- the important thing to remember is one person's loophole is another person's deduction they consider to be legitimate. and there's a lot of lobbyists. i wrote last year about je electric. they spent $77,000 per year per member of congress on lobbying. and there's one code in the 2004 jobs creation bill that was actually a tax break for ge that saved the company $1.2 billion in its first three years. so i think while there is a lot of concern about we need to lower the tax rate for everyone to keep our companies competitive. i think there's concern about the budget deficit. there's a lot of pressure and a lot of institutional resistance. >> before we let you go, is this going to be the form now for "the new york times" on a sunday, to have a big business article? last week, it was walmart. this week, it was yours. is this what "the new york

times" is going to do? >> tough keep reading to find out. but we're trying to take on the big major issues of the economy. i can't speak for every week. but there's a lot in there. >> you've been rewarded for it. congratulations on the pulitzer and for coming on the show. when we come back this morning, still to come, activist shareholders taking aim at companies. should you be along with them or against them? the activist performance report cards next. [ male announcer ] how do you trade?

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yeehaw! ♪ activist investors looking to shake up xhaens in the name of boosting shareholder value. what's the track record for these giese and should you invest alongside them?

kayla tausche is back at h.q. with a look at this. >> reporter: when these activists aim to shake up strategy, they definite ri don't win them all. but we have some of the most successful of these so-called activist investors, talking about the current boardroom wars they're raging. bill ackman lacks optimism. >> we're in the end game. may 17th is a shareholder meeting. votes are coming in as we speak. independent group, we have 94% for management change, an enormous margin. never been involved in a proxy contest with this grade "a" lead, i would say. >> reporter: canadian pacific has already notched 39% in returns just since ackman filed his 13-d. that's 76% on an annualized basis. but the gains pale in comparison

to some of his other investments, including one at general growth properties when it emerged from bankruptcy. he was given the title of winningest activist. valueact has returned 82% on the names it's filed for 13-d or active stakes in and more than 300% on those names. valueact pushed for a sara lee break-up and is gunning for board break-up. david faber will interview jeff ubben coming up. and carl icahn has seen big wins and big losses cancel each other out after failed bids for clorox and commercial metals. icahn finally bought cbr energy. but deal's gone awry at webmd

and dynegy. icahn's returned 35% on situations like emelin, still ongoing. but only 2.5% they've made on situations that icahn has exited. with the stock market going up, companies are going to find it easier to stave off these activists meaning they might have to get creative. this is something david faber, i'm sure, will bring to the table when he interviews icahn and ubben later today. >> thank you for that. let's reinforce the point. up next, a former chairman of martha luther living. we're talking about jeffrey ubben. david faber's exclusive interview with him is just minutes away. meantime, in chicago, rick santelli is feverishly working on the third hour of "squawk on the street." good morning, rick. >> good morning. austerity has now become a political football. we're going to talk about jobs growth and less debt. but what we're really going to

do is try to break down how austerity's now a football? if you don't think it is for politicians, there's an election on sunday in france. and my guess is the outcome is going to move them quickly to the left. and that's going to impact jobs and growth. top of the hour. and it's very affordable. it was very delicious. could you please taste car insurance y? this one is much more expensive. ugh. it's really bad. let's see what you picked. oh, geico! over their competitor. you are a magician right? no., oh. you're not?, no., oh, well, give it a shot. i am so, so sorry. it was this close.

let's go back to david faber at the active/passive investor summit who joins us with a very special guest. >> i'm joined by jeffrey ubben, the man behind valueact. not activist the way we typically think of them, whether they be carl icahn or bill ak mack. you invest for a very long period of time. and you're more of an operational activist, fair to say? >> well, back up even further, for 12 dwreeryears, we've been the same thing, looking for high-quality businesses that need valuation discipline. we knew we'd have a constructive dialogue with management and the board. i've been surprised at how many boards we've ended up on, to be honest with you. it's been 30 out of 60 core

investments. >> why is it a surprise, then, that you end up on so many boards or have? >> because the role we can play is so powerful. it really is a profitable combination, this idea of somebody that's in the boardroom that really understands the business that has all the information and is kind of a driver of the capital allocation process. >> now, you typically are happy to take one board seat. why is that when so often we see a key activist situation being going after a slate, whether it be three directors or five or even sometimes an entire board? >> it might be temperament to a certain extent. but i think we probably are more patient than your typical activist hedge fund. our capital is long term, it's mostly locked-up money. and our goal is to not come in with an agenda and to lead a

fact-based decision-making process in the boardroom. surprisingly, boards will respond really positively to non-emotional conversation where there's more information being delivered than just information that comes from the ceo, you know? basically, most boards end up getting all their information from the ceo because they've been told not to talk to shareholders. so, now they have somebody in the room who -- >> by the way, that doesn't really speak well for sort of shareholder power, to a certain extent, if you have boards that are told not to speak to shareholders, and then the guy in the room who can only do that is the ceo. >> well, that's right. and you know, it kind of works for the lawyers, and i think they still have their claws in this process, and they quickly try to create conflict and drive wedges between shareholders and directors, frankly. and so, we're trying to chip away at that slowly but surely. >> but one person on the board can change that -- >> by the way, we are chipping at it because it's been increasingly easier for us to

engage in a dialogue about valueact going on on their board. >> it is. over the years, you've found that they are more receptive to the idea of it? >> that's right. >> nobody's stiff-arming you? i'm sure there still are some. >> there's a little bit of thank god you showed up. that doesn't really happen. there's a little bit of, oh, my god, i am little more accountable as a ceo to my board because i've got somebody in the room that, you know, has a lot of money invested and has kind of a different sense of urgency. but you know, we don't come in guns blazing. we basically are rooting for the ceo. and if he's missing budgets for three or four straight quarters, you know, then we might lead a discussion more aggressively than otherwise would have occurred. >> right. i mean, you're almost quasi private equity, it seems in a way. i know you're not taking over companies, typically, but you are investing for much longer periods of time than a typical hedge fund, certainly, and given

your locked-up money, it would seem you have kind of a dual profile. >> in the perfect world, you know, we get the buy from the marginal selling shareholder, who i think we know more about the company than they do, as sellers. and then we get very involved with the company. we become very influential as a board member and we get a control premium on the exit. >> there you go. that's the way it's supposed to work. now of course, when it comes to the marginal seller, carl icahn recently a seller to you. i don't know that he didn't have pretty good information when it came to motorola solutions, but i did want to get your take on it. why is valueact gotten and perhaps even getting better? you bought directly from mr. icahn as he has taken his position down. >> it's our biggest position. it's kind of the -- it's multiple ways to win, when you think about it. the state and local government revenues are improving, which was a little bit of an overhang. you've got a big product cycle ahead with the move toward 4g.

you've got the balance sheet that's way overcapitalized. and you've got a company that's gotten spun out and it comes heavy in cost, and so the margin opportunity is there. the key is to get the cash off the balance sheet as quickly as possible so that -- >> how much cash does motorola solutions have right now? >> well, they've whittled it down from $7 billion to $3 billion and change. >> but that's still overcapitalized in your opinion? >> relative to the stability of the business, it is. they get that. i mean, the company went to carl and bought back more than 20 million shares. >> right. >> then we shortly went to him and bought some stock from him as well. so, there is a natural handoff that's occurring from carl, who's been there for five years, and i thought the split was -- he did a great job in that. but now we can take over with our five-year time horizon and work with management and the board to create, you know, a 20% return. >> and if you go on that board, are we going to know it's not going as well as you had hoped?

>> no. no, it's -- again, we don't know what we don't know -- we know we don't know. we know there's a lot of things about the business that we could -- that would make us better as insiders. and the stock price is still pretty attractive, relative to the earnings power. so you know, when we go on a board, it means we're basically locking ourselves up, we're getting married. and we see a five-year opportunity to grow our capital at 20%, and we think that we could be partners with management. >> jeff, we've got to leave it there. thank you for being with us. >> thank you for having me. good to see you. >> finally having you, i don't think you've ever been on. kept a low profile. >> low profile, yes. >> well, nice to have you in person. jeffrey ubben from valueact. back to you. >> thank you, david. coming up, it is tweet time. if barnes & noble were to become extinct, what should be done with all the retail real estate out there? tweet us. we've got your answers coming up next.

plus, the new king of new york skyscrapers. take a look at this. 1 world trade center. we'll take you there in the next hour.

if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this.

♪ let's get the "squawk on the tweet" for this monday morning. as we've said, microsoft is investing big money in barnes & noble's ereader businesses in what could be one of the last nails in the coffin for the big retailer. if barnes & noble were to go extinct, what should be done with the actual real estate they have? tory writes "assign their issues to amazon to use as package pickup and drop-off centers." probably not far from reality. and "barnes & noble should sell all its real estate assets to walmart, but not until they have been thoroughly bribend catered to" and "merge with best buy and equip space for sustainable indoor agriculture. the food brand would be best barnes." >> creative responses. a lot of them involve amazon, which is fascinating, seen as one of the greatest competitors to barnes. >> the nook and kindle, going to be interesting to watch.

when i walked in this morning, i didn't think we'd be talking so much about ereaders. was that surprising to you? >> you never know what's going to come up. >> that's the joy of working down here. and look at the money people have made in response to it. that's the joy. >> you've got that right. what's coming up on "fast money"? >> we'll talk to leo de bever, ceo and cio alberta investment management. we'll delve deeper into the barnes/microsoft story, looking specifically at the real estate and what can be done to monetize the real estate there. meanwhile, we've got a big week shaping up in europe. we'll talk about it during the close, simon. the spanish auction, the ecb. >> yes and a couple of elections! who knew? >> we'll discuss whether or not sarkozy's truly done or whether or not he's got a chance on sunday. >> he's still trying, 6.5 million former supporters of the pent gram. >> and we are seeing some accelerated declines in the european banking stocks making some impact on some of the u.s.

banks, like bank of america, which is down 2%. >> what's the interesting revelation overnight is that the french and spanish banks have increased their exposure to their sovereign debt by 150 billion euros over the past three or four months. >> wow. >> that is a fast impact. >> yeah. thank you, guys. see you tonight, melissa. if you're just joining us, here's what you might have missed if you're just tuning in. welcome to hour three of "squawk on the street." here's what's happening so far. >> we can bring substantial value to windows 8 with our expansive and vast econtent catalog and our nook digital book store platform. so, we think microsoft's the ideal partner. >> people still love book stores, right? we thought there was always room for one book store, but we got it wrong. barnes & noble i think is on a better track. expectations were a little on the light side. it's a little better than expected on the income, up 0.4. on spending, up 0.3%.

>> for barnes & noble it gives valuation to those that were higher than the market anticipated. hence, the stock is going to be up rather sharply. >> looking at a chart, 93%. >> wow. >> there's the opening bell on the s&p 500. >> april chicago purchasing managers survey out, down 6% to 56.2%, much weaker than the 60 we were expecting. >> on a fundamental basis, to say this is a game-changer and there's huge up side to this market is barnes & noble going from being seen as a little bookseller to a major player. >> in an eight-week period in the summer of 2011, money market funds lost $170 billion in assets. but when you look at the amount of liquidity in those funds, all of those redemptions were able to be met with no disruption in the short-term markets. >> good monday morning. welcome to the third hour of "squawk on the street." let's check on the markets today, a day after we got the

weaker-than-expected gdp number last week and weaker chicago pmi. dow down about 31 points. nasdaq is the bigger victim, especially given the fact that apple is not trading too well today. s&p's down almost seven to 1396, back below 1400. checking on two specific stocks. first up, warner chill cot shares surging after the company confirmed it's in preliminary talks with possible buyers about a buyout deal. the company adding negotiations may or may not lead to a deal. and merger back as sonoco is bought for $5.3 billion to create one of the largest and most diversified energy partnerships in this country. get to the roadmap as well here for the next hour. news of the day. microsoft agreeing to invest $300 million in barnes & noble's nook and college businesses. what does that mean for microsoft shares? we're going to break down the deeflt day in just a moment. plus, slowing earnings growth and the qe-3 debate top of mind

for investors as we head into friday's jobs number. we'll talk markets with abby joseph cohen of goldman sachs. and 1 world trade center officially becoming new york's tallest skyscraper today. we'll take you live to the scene and talk to the man behind that project in just a moment. microsoft/barnes & noble's team-up top of the headlines. why is microsoft jumping in now? jon fortt has more on an interesting deal that we'll truly be talking about for a long time. good morning, jon. >> we saw hints last week in amazon's earnings. turns out the kindle fire, just thought to be a break-even or even money-losing proposition is already yielding some dividends for amazon. they said that the growth in their north american media business, which helped the revenue out-performance they turned in largely came from the kindle fire. so, you take a look, take a step back. apple sells 12 million ipads in the most recent quarter.

amazon really getting traction with the kindle fire. if there's no sense that amazon's actually going to do a lot of kindle work for microsoft's platform, they need to make some kind of side bet to help their ecosystem. barnes & noble definitely needed a partner. they don't have the deep pockets to both invest in the retail business and build up the digital business. $300 million will help them do that, but that will not alone guarantee they will continue to be a player, carl. >> the money's one thing. is the next step this nook application on windows 8 tablets? there must be a second leg of this story, right? it can't just be about a one-time cash infusion. >> yeah. they definitely are going to do the nook application for windows 8, but i think the question beyond that is what is their hardware strategy? apple is profitable on its ipad hardware, very profitable. amazon has a huge ecosystem to support the kindle fire. but you know, $300 million will help barnes & noble continue

what it's done up to this point with the nook, but does it stay using a variant of android? do they somehow try to switch over to using a windows operating system but on a tablet that size? that might be difficult. or do they eventually just dump the hardware strategy altogether, go with software, which is something that obviously microsoft cares about. lots of unanswered questions here, but this keeps barnes & noble in the game for at least several more quarters. >> and then, of course, there's just the bks stock move today. i mean it was up 90% premarket. now, jon, it's only up 60-some odd percent, but people talking a lot about malone, talking about some of the key players that were involved in multiple parties. greg mafet used to be with microsoft, had some board experience as well. some said it's a lesson not to bet against malone, plain and simple. >> i mean, it's a crucial deal, and i'll be interested in hearing more about exactly how it came together. but barnes & noble is in a tough position of having to figure out where to invest.

i mean, we've seen this story many times before. it's a core business whose prospects are iffy. you've got this digital business that needs a lot of investment. they couldn't really afford to do both. now they get some time to make some choices. but you know, microsoft could have afforded to put a lot more than $300 million into this. i think, you know, the question is what's the next step in this strategy? i think we're probably going to have to see that in a few quarters, because it's a big deal for microsoft. it's the future for barnes & noble, but this is just one step. >> yeah. you've got to go on a few dates before you start living together, that's for sure. jon, thank you very much. talk to you in a little while. we should note that david faber has an exclusive with barry rosenstein, founding manager of jana partners, a major player in this story, in just a moment. want to get to the cme group. rick santelli with the santelli exchange, has already brought us the chicago pmi and a lot more still to come this week. rick? >> absolutely. i'll tell you, i know austerity, it's such a buzz word, but we're

going to do something. we're going to show, to really put austerity into perspective, you need to turn austerity into prosperity. we need to make it into prosperity. and how are you going to do that? growth. and growth will create jobs, jobs, jobs. but you have to remember, france is about ready to take a step to the left on sunday the 6th as the socialists look to be displacing mr. sarkozy. it's going to be about spending. this is a huge issue. austerity, well, it's going to move into a keynesian mode based on the outlook of that party. but remember, spending comes in two forms, the government side and the private side. and this is the key, because what we see in this country, just to give an example with reference to europe, is corporations are sitting on boatloads with a "t," trillions of dollars. we need to put it to work, and it will go to work. we just need to create a fertile environment for them to put the seeds of capital in to make

jobs, jobs, jobs grow. another issue is regulations. regs are a big deal. now, in this country, of course, we'll put that to the side. in europe, whether it's greece, spain, there are so many regulations. you look at germany. and many years ago, they really kind of put things back into the private sector, tore up a lot of regulations, and job growth benefited. they're one of the few countries in the group who's obviously running on all eight cylinders. but when regulations move into the structure reform area, the united states is affected, too, and it's affected by the tax code. you heard that wonderful guest with carl today talking about apple. i found it fascinating. i did a spot on this very board about a month ago, saying why do they yell at exxon when apple makes as much, if not more money? well, they underscores. young people out there, you probably spend more money on apple and your cell phone and the service and tweets and the computers than you do on energy. so, the real issue is let's not lose sight of this. these corporations are good.

the way the young are hooked on the devices, the rest of us are hooked on energy, and they're provided by corporations. change the tax code. and if you do all of this, you will get less debt and we won't have to use the horrible buzz word of austerity. carl, back to you. >> rick, thank you for that. talk to you in a few moments. rick santelli in chicago. the news corp. drama raging on today. a new report shows the u.s. department of justice is looking into allegations of bribery in russia and china. rupert murdoch, of course, testifying last week, expressing regret over the uk phone-hacking scandal, but there was something else in his testimony that did not get much attention. our investigative correspondent michael isikoff has more on that. michael, good morning. >> good morning, carl. and you're exactly right. while all the media attention was on the mea culpas by rupert murdoch last week, there was a line in his written testimony that was not made public but may have been the most significant. murdoch said that the company's lawyers were cooperating not just with the metropolitan

police in the uk but as well with the united states department of justice, turning over evidence of alleged or suspected illegality. now, that's the most explicit acknowledgement by murdoch yet that the company is facing problems in the united states with the justice department. what's it about? first and foremost, foreign corrupt practices act. starting with the allegations in the u.s. it's not so much the phone hacking, per se. the fbi has found no evidence so far that any phones were hacked inside the united states. but those payments to scotland yard police officers, over $100,000, that is being examined as to whether that's a violation of the foreign corrupt practices act, the anti-u.s. bribery law. in addition, in addition, there's a former news corp. subsidiary in russia called news outdoor russia that is being investigated by the fbi for whether they paid bribes to russian officials for the placement of billboards in

russia. and finally, and this is also pretty significant, there is now an industry-wide inquiry by the securities and exchange commission and the justice department into hollywood firms that may have paid bribes to officials in china. twentieth century fox is one of the companies that's the focus of that investigation. so, what we have now is, essentially, a worldwide inquiry into the operations of news corp. by the u.s. department of justice. >> wow. someone who is not long news corp. may say they now have a two-front war here, michael. but more broadly, you look at walmart, the allegations there, avon. is it your sense that justice is turning up the heat or that behavior has just deteriorated around the globe? what do you think's behind the fact that so many alleged cases now are cropping up? >> well, look, the justice department has been very aggressive in prosecuting foreign corrupt practices act violations. it's been probably the growth

industry within doj over the last several years. now, they're not batting 100%, but they've got a pretty successful batting average. they've brought in a lot of -- charged a lot of companies with fines. and this is being taken seriously by a lot of companies. walmart, obviously, being one, but news corp. as well. one little interesting wrinkle to the news corp. issue -- they've retained brendan sullivan, the dean of washington criminal defense lawyers at williams & connelly to help represent them on this. they are, we are being told, turning over a lot of documents. so, while it's still too early to say whether this is going to lead to criminal charges, there's every indication this is being taken very seriously within news corp., and it's occupying a lot of attention among the top corporate brass. one thing to look for tomorrow, by the way, the british house of commons cultural and media committee is due to release its report, long-awaited report. it's going to, everybody

expects, make very specific findings about whether james murdoch, who remains the chief operating officer of news corp., told the truth about his lack of knowledge of the phone-hacking. so, that's another thing to look for tomorrow in where this stands with news corp. >> michael isikoff in washington with an interesting development on news corp. thank you very much, michael. >> thank you. want to get back to david faber, in new york at the active passive investor summit in new york city. he has an exclusive interview now with barry rosenstein, founder and managing partner of jana partners. of course, took a 12% stake in barnes & noble last week. david? >> thanks very much, carl. that's right, barry rosenstein joins us now. look at the smile on his face. why wouldn't you be smiling when one of your stocks is up 90%? >> which stock are you talking about, david? >> i'm talking about barnes & noble, barry. >> we own that? >> yeah, i think you do. and in fact, actually, you own a lot of it, 12% of the company. you filed on it only a few weeks back. why -- first of all, what attracted you about it? and of course, the other question, i guess, is are you

going to sell now that you're up so much? >> right. the initial motivation, david, really had to do with you. >> oh, good. i'm glad. >> yeah, yeah. it had to do with, i've always been influenced by the quote of your grandfather, great grandfather, who founded faber college in "animal house," knowledge is good. >> yeah. >> so, that was the initial premise. and then we liked -- >> one of my favorite movies, 1979. >> of course, absolutely. and we -- but seriously, we, you know, the price we got in at, the question is, why was anybody short that stock? i mean, that was a company that when you value the retail at three times ebitda, which is very conservative valuation, we got the nook business for nothing. so, we figured we had very little down side. we thought there was a very high probability that some sort of strategic transaction like this would occur. >> they had said earlier in the year that they were considering spinning it off. >> yes, they said they were considering separating it, and we felt that there was a chance

they were going to do something strategic. there were a number of players we thought could participate. and you know, it just played out, frankly, as we had hoped and expected. >> certainly didn't need to get active in it. >> no. >> i guess at this point, with the stock up as much as it is, with them now valuing the spun-off portion, being the college business and the digital business, at about $1.7 billion with $300 million coming in from microsoft, do you look for an exit? >> you know, one, i don't want to comment on our trading. but two, i think there's a lot of -- a long way to go with this stock. >> you do? you think there's more value, even after this move? >> absolutely. it doesn't fully factor in, you know, the real growth prospects of nook and some of the opportunities that that will provide. and by the way, the bricks-and-mortar business is still quite valuable, you know? >> well, some see it as a dinosaur, clearly, but i know -- we've had bill lynch on. he was on this morning with the "squawk box" gang, but i've had the ceo of barnes & noble on as well, and he does counter that

by saying, hey, you know what, it's still a stable, and even growing a bit business. >> yeah. it's a real cash flow cow. and you know, it no longer has its number one competitor, borders. and so, i think it's, you know, you're going to see significant cash flow from that company for many years to come. >> so, you do think even with the move today -- and part of this move's got to be the fact that you've got so little float. i mean, you own 12%, liberty's in there, berkel's in there. there's not a lot of stock left. >> something like 35% of the stock is free floating, that's it, and the short interest was a big part of that. but on a fundamental basis, i think where it's trading today is warranted. you know, if you think about it, the whole market cap was $700 million and change, and this values their nook business at $1.7 billion, you know, leaving aside the bricks-and-mortar business. >> now, you know, we think of

you as an activist, but the fact is you fuel actually haven't be involved, and i could be wrong, in a high proxy fight in some time. is that because companies are kind of doing what you want them to do? why mcgraw-hill, you didn't actually go to a proxy fight. looked like you might. you know, nothing in el paso, marathon. i mean, a number of situations that have worked out well. so, is there a changing dynamic in activism? >> we find there is. you know, ten years ago, when i would file a 13d, you know, the first thing a company would do is they'd sue us and they'd call the s.e.c. and the justice department. they'd put it in, you know, poison pill and the staggered board. and you know, it never accomplished anything. the end result would always be the same -- shareholders would support change if it made sense. and i think there's been an evolution. i think companies realize, and certainly, their advisers, both

investment bankers and lawyers, most of whom we face time and time again, you know, they recognize, at least in our case and in many others, that you know, when we show up, our ideas are well thought out, they're grounded in deep research. we don't show up, they know we don't show up unless we have significant shareholder support. so, there's no point to fighting us. and you're right, we don't get the fights today that we used to get. companies pretty much do what we ask them to do. and you know, frankly, it's, i mean, that's the best outcome. >> right. >> it's the best outcome from everybody's perspective. it's not scratching -- >> so it's good, old-fashioned stock picking in a way, figuring out -- >> well, you've got to be willing to stand up and take a stand and make your case, and it's got to be really well thought out and you've got to make sure you have the shareholder support. and you know, ultimately, companies realize there's no

point to fighting. all they're going to do is alienate their shareholders. >> now, we've seen some institution stuff up as well, ontario teachers, for example, and mcgraw-hill, at least was there kind of with you in a sense, also arguing. is that a trend you think will pick up? >> you know, that was a co-investment with ontario teachers who -- >> and listen, they've been private equity. they've always been more aggressive than most. >> and i think they're very entrepreneurial. i think they're different than most. they're very smart. and i don't think you'll see a lot of institutions, necessarily, you know, standing up and being a co-filer. but i think you're seeing a lot more institutional capital go into this space, you know, because frankly, it's an attractive space today, right? i mean, the opportunity -- >> $3.5 billion's not enough? i know you were once a picker. >> it's not even close. we've got a long way to go. but if you think about it, activism is the one and only strategy that does better with more capital, right?

when you can take bigger positions in companies, you could go after larger companies. so, it really does work to your benefit, and i can't think of another strategy that -- >> that's true. i've seen many hedge funds get way too big and ultimately not be able to return. >> i'll tell you one more thing. >> we're out of time. quickly, one last thought. >> we've never considered ourselves to be an activist-only fund, and it's only about a third of our exposure. and the reality is, i've never wanted it to be an activist-only fund because i think activist-only hedge funds are a mistake waiting to happen, because then you're forced to push for change that may not be warranted, which is why we formed another fund, jana strategic investment, which is a drawdown facility. >> right. >> and therefore, we draw down when we need it but we're not compelled to when we don't. and so, the combination of that with the main funds works pretty well. >> barry rosenstein. again, i'm having a couple new guys on today. i mean, guys i've talked to. >> he was my neighbor. >> there you go.

barry rosenstein, jana partners, having a good day. still smiling, of course you would be if your stock was up 90%. >> good thing you had him on. thank you, david faber in new york. it's year two of the conference in los angeles. abby joseph cohen will speak on the future of equity investing. abby is joining us for an exclusive cnbc interview. abby, always good to talk to you. good morning. >> good morning, carl. >> i know year end, you've been talking s&p 1500, 1600, but clearly, the last few weeks have been troublesome. sentiment, flows, some of the generals like apple beginning to lose some momentum. has any part of you -- are you wavering at all on some of your year-end targets? >> let's be clear, i did not provide a year-end target. that's done by the u.s. portfolio strategy team, and their view has been that the second half of this year is going to be more difficult than the first half. those higher numbers that you

cite really relate to the way we look at an estimate of fair value, that is looking at economic and profit growth. and if one assumes that investor risk tolerance moves back to normal levels, you can get to those higher levels, but we think there are some impediments in the way. this includes the fiscal cliff in the united states at the end of the year, the expiration of tax cuts bumping into another deficit ceiling, but also, of course, the problems ongoing in europe. >> yeah. i know jan has had a widely circulating call for this friday's jobs number of 125 and argues that the sledding is going to get tougher in terms of economic growth as we work our way into the summer. do you agree with that? and how long of a dynamic do you think that will be? >> we certainly have seen some deceleration in economic activity. keep in mind the fact that we had such a mild winter means that from the normal seasonal adjustment process, the numbers

were probably puffed up a little bit. for example, construction, which normally gets hard hit because of the winter, did not get so hard hit this year. so, what we're looking at is a slower rate of economic growth, but economic growth nonetheless. and for those investors who take the longer-term view, the sense basically is the path of economic growth is still very much to the upside, and shall we say longer economic growth, more durable economic growth will be the most important thing for equity investors. >> i know you're talking on the future of equity investing, which a lot of people are wondering about their own future in equity investing. demographically, if i'm a retiree, do i really need the headache of dealing with the stock market day to day, the volatility? what's the crux behind your talk today? do you think that the marginal buyer of stock is becoming antiquated or extinct in any

way? >> the fact that we're asking those sorts of questions suggests to me that we need to take a step back and think about things more closely. for the last 30 years, we have been in a bond bull market. interest rates are now exceedingly low. and so, when we ask the question about are equities a good place to be, we have to say, well, what might be better? and on an intermediate to long-term basis, fixed income is not likely to be it. what we have to recognize is that with interest rates as low as they are on so many bonds and so many other fixed income instruments, there may, in fact, be risk there. the returns may not be very good. and there is the risk of capital loss, that is, actual price declines in bonds if interest rates begin to move higher. now, that's not part of our forecast in the short term, but intermediate to long, it's hard to see how interest rates go down much from these levels and stay there. so, when we look at the relative valuation of equities, it looks quite appealing, even with a

rise in share prices over the last year or so. the pe ratio for the s&p 500 is about 14 times earnings. normally, with inflation at about these levels, you'd be seeing pe ratios of 18 times earnings. equities, therefore, look inexpensive to us. and when we think, again, intermediate to long term, equity is likely to generate better returns than fixed income. i think that individual investors have learned a lesson, perhaps, too well. >> yes. >> that equities are extremely volatile. what we have to think about is that going forward, fixed income may prove to be a very volatile asset category. >> goldman had a very fascinating call not too long ago, basically riding a generational call. they called it the long good-bye to bonds. then of course, the way bonds have been trading, some of these yields have come down. everybody loves to snark about a goldman call now and then. would you argue that call was early? how much work was done in advance of it? and are you nervous at all about

making -- as a firm, making such a broad, sweeping comment about instruments like bonds? >> it's important for us to take that step back from the day-to-day market action and say, on the intermediate to long-term basis, what's likely to happen. keep in mind that many of our institutional investors -- pension funds, individual investors and others -- really need to have a sense of what we think will be happening, not between now and next tuesday, but rather, over a longer period of time. and i think that we probably need to recognize that the day-to-day market volatility can give interesting signals for hedge fund investors, for traders and so on. but the long-term view is something that we believe very strongly. it's hard for us to see how bonds can generate the same kind of returns going forward that they have over the last 30 years. and as i mentioned just a few moments ago, equities seem to be a very attractive revalue. all you need to believe is that we will avoid another recession over the next couple of years,

and that is, indeed, our forecast, even though we see that growth has slowed somewhat. >> abby, it's always great having you on. try to catch a dodger game, if you can. we'll see you next time. >> take care, carl. >> abby joseph cohen from goldman sachs. bell's getting ready to sound across europe. we will get that close in a little less than three minutes. do not go away. rture. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz. or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community. at bank of america, we know the impact that local businesses have on communities. that's why we extended $6.4 billion in new credit to small businesses across the country last year.

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we have eight countries now in europe officially in

recession. spain the most recent one to be officially named to that club. simon hobbs here to walk us through what's going to -- not just today's session, but the rest of the week, going to be kind of crazy. >> absolutely. let's look at the map. >> the european markets are closing now. >> actually, some of the markets today have extended their losses through the session, notably spain. fairly broad-based move, not particular to the banks, i think. not necessarily a great end to the month, but this is the major point i want you to take away, as we now shut up in europe for the session, but also for the month of april. and that is that unlike the united states, during the course of april, europe suffered losses on its equity market. this is the dow jones euro stoxx 50, the top 50 blue chip within the eurozone. you can see for the month they've lost almost 7%, whereas here in the united states, the equity markets are broadly flat. now, the implication of that, if you have a look at a year chart, is that europe has, therefore,

erased its gains for the year and is, therefore, net-net flat, as you can see, whereas the united states has, in fact, had gains. currently, we're up about 8% on the dow, and obviously, other markets have done better. so, that's the disconnect. we could debate the degree to which it will continue moving forward, but that's the basis on which we now close out the month. did you see the protesters in spain over the weekend? carl mentioned they've gone back into recession. actually, the figures, the economic figures we got out today, certainly not as bad as we had thought, but the situation is absolutely dire. they have now said they will attempt to auction 2.5 billion euros of sovereign debt on thursday. clearly, there will be a lot of interest in that. what is interesting is we've also learned from the ecb, this kind of pact with the devil, what you now have between the spanish and the italian banks with their respective governments. in order to support their local bond markets, they have increased their exposure, the pair of them together in both countries, buy 150 billion euros

over the last three or four months. and of course, the side story during the course of april is that broadly on spanish debt we have stabilized, presumably because you've got the local banks spying and supporting their local bond markets, and that's obviously in order to extend confidence to their own balance sheets. but it really is a pact with the devil moving forward if the bond markets turn against them. it will turn against both the government and indeed the banks. let's look at where we are on italy. there you can see we're currently on the ten-year yield at 5.5%. again, we've moved down over recent sessions, but the broad theme has been the stabilization. through april, though, clearly, there's a huge amount of concern. incidentally, in the italian press, it might interest you to know that there is talk that marian monty will be angela merkel's new best buddy if sarkozy loses the election in france. and there is talk of a 200 billion euro infrastructure fund

that may be announced at the june summit of leaders. in the meantime, let's have a look at sarkozy campaigning. now, of course, less than a week until we have the second round of the french presidential elections. can the man get 70% of the 6.5 million who voted against him last time around? dozens and dozens of mentions of french boarders in the conversations he's have. remember, for the last 10, 15 years in europe, there have been no physical borders with those within the shenzhen agreement, which arguably leads, therefore, to fears over immigration. one quote that really stuck out for me from sarkozy over the weekend -- "we are not superior to others, but we are different." for those of you that know your european history, comments like that have a resonance for those that perhaps do not know the european history. back to you, carl. >> and that's been talked about a lot in france. if can't use the term merkozy, we'll have to use the term

mermonti or something like that. >> that will keep lots of junior reporters busy trying to keep up with that. i've never used that expression. >> i'm sure you have not. thanks, simon. >> thank you. let's jump to rick santelli in chicago with a special guest. >> absolutely. on a day where we learn that whether it's quarter over quarter, year over year, spain's gdp is in negative territory. our guest, terry dent, has written a book "the great crash ahead." welcome, harry. and as per your notes, you think spain could be the catalyst for as much as a 20% correction in the stock market in the u.s. i really want you to explain, because it certainly isn't going to come because of exports from the u.s. to spain. what do you think? >> yeah, spain has higher unemployment than greece, higher total public and private debt than greece. they had a bigger housing bubble than the united states. they have 50% of their banks were called casas and are unregulated, so they have a high percentage of subprime mortgages likely to hit. they have 13% of their workforce in construction versus 6% in the

united states at the height of the housing bubble. spain's not coming out of this any time soon. they have one of the highest percentages of debt owed to foreigners. spain is going to default. the markets are in total denial on this. and it's a question of whether it happens sooner or later. another thing we noticed, rick, spain's ibbx 35 index broke below a major head-and-shoulders neckline that goes back to 1995, which shows that that market could weaken a lot more in the coming weeks or months. so yes, i think the next phase of this little correction we've had is likely to be deeper. it could be 10%, could be up to 20%. we'll have to see. but spain within the next year i think is going to default. and again, i can't see how the markets cannot see this. it's as obvious as anything out there. >> well, now, let's assume for a moment that everything you said is going to come to pass. in the context of assuming that to be true, can the european union or the ecb do a bailout

that drafewarfs the size of the bailout of greece, portugal, ireland, to remedy the situation you've outlined? >> obviously, they can. they've raised up to $1 trillion kind notify commitments. it's not as solid as people think. i think there's a point. spain, as they say, is too big to fail, too big to bail out. there's a point where germany and some of the stronger nations say, wait a minute, where does this end? yes, we can bail out greece and ireland and portugal, but we can't bail out spain. we can't bail out italy. we can't bail out even france down the road. another thing, rick, very important -- housing is the biggest weakness in spain, way more than other countries in europe. how spain and italy have the fastest falling demographic trends in the 30 to 39-year-olds that buy houses. so again, their housing is way overbilled. they're going to be in a deep recession and unemployment for a long time. so, spain is going to have to default. it's just a matter of whether it happens sooner or later. >> thank you, harry. and you know what? we have the election in france

on sunday. i'm going to have you back next week. if the socialist leader gets in in france, i want you to tell us what you think those ramifications bring to the table. thank you again. carl, bablgt. >> a lot of people here will be watching returns from france on saturday. thank you, rick santelli. bob pisani on the floor, volume down 40%? >> and volume is terrible. this might be one of the lightest days of the year, which is kind of good news because the economic news has not been great. i don't know what's going on with the regional isms, but they've been terrible. dallas was bad today, chicago was bad. i've been trying to tally it up. i think every single regional manufacturing index, except richmond, has disappointed. so, that's kind of important, because tomorrow we get the ism number, and they're calling for just a little bit of a drop in the ism, when all the regional ones have been really kind of crummy. so i'll be interested to see what happens. meantime, what's happening today is all the stuff that was great last week, the hard asset stuff i like to point out? remember, i kept pointing out homebuilders were hitting new highs last week.

they're the group that's down the most. real estate investment trust had been hitting new highs. that sector's down today. gold had a nice little run last week. all the gold stocks had come off of their lows and they've been in terrible condition for a long time. they're down again after rising last week. we had a modest rally in material stocks as well. those are also to the down side. so, the point here is simple -- nobody wants cash last week, recently. there's no return in it. so, real estate's up, hard assets are up, even the art market is supposedly doing a little better and we're seeing a little reversal in that today. the ecb has a big problem. the big discussion this week will be besides the nonfarm payroll number, what's mr. dropby going to say on wednesday? how low can the man pick up when you're in the middle of a recession? look what's happening here. we were trying to see what kind of loan growth there was. here are some numbers. 7 billion euros out in march, 11 billion in february. that means loans out versus repayments. in other words, there is still

no big demand for loans over in europe. and you'd say, well, that's obvious, there's a recession going on. it's a little bit of a circular argument. but the point is here, the money is there. the ecb has made money available to the banks, but the demand is not there right now. that's a major problem. we're still seeing it out in the numbers here. so, they're going to be talking growth. they're going to be trying to figure out how to get growth going. drage and monti will be insisting on structural reforms over financing. here's how we're looking on the month of april here and march. important thing? look, spain, italy, portugal and france all down rather noticeably. the worst months we've seen in a long, long time. take a look at these numbers over here. i just want to say, and again, decoupling is not a word i like to use, but the s&p is only down fractionally so far this month, but i don't use decoupling because i get hate mail whenever we do that. >> although april is usually a good month, right? third best month? >> yes, april is traditionally a good month in the united states. but i just want to point out, we're basically flat in a month

where these guys have had the worse months in several years. so i consider that to be a victory. i don't call it decoupling. >> okay, it's a victory. thanks, bob. talk to you in a bit. the world trade center officially becoming the tallest building in new york city today. there's a live shot, surpassing the empire state building. we're going to talk to the man behind that project after a break. beautiful day here. first, though, some of the winners and losers from the trading day overseas. [ barking ] appears buster's been busy.

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[ scott ] seed your lawn. seed it! ♪ coming up in just a few on "the halftime report," can the nook compete with apple? we're trading the barnes & noble bump with whitney tilson. plus, a list of stocks to consider if you want to buy in may and go away. and the emerging trade with europe's wealthiest man. all that and more at the top of the hour. now back to carl. thanks, scott. today marks an important milestone for new york city. 1 world trade center will lay claim to the city's tallest skyscrap skyscraper, reaching 1,250 feet today, just enough to overreach the empire state bidding's observation deck. we have the man overseeing the

project. joining us from the world trade center site. mike, nice to see you again. good morning and congratulations, because i'm sure you can feel it, the pride of the city is really centered where you are today. >> well, it certainly is. the last few weeks, people have been commenting to us, the building is so visible, the building is so visible. well, it is very visible. it's a very prominent sight in the sky and the skyline, and the location it marks, of course, is very significant. it's good to be here at this day and to be reaching this new milestone. we'll be hitting several milestones going forward. >> yes. >> and we look to continue. >> i was just thinking, the last time you walked us through and took us up high, you were somewhere around the 77th floor, 78th floor, clearly well above that now. can you talk about some of the challenges you faced? i mean, weather's been relatively good, but i know the weather's not everything. >> the weather has looked very well. even on a day like today, which is a magnificently gorgeous day, the winds are interesting. the winds down in the

neighborhood as well as the city where we've been experiencing lately, have been a big determining factor in the pace of the job. we were going a floor a week, and we've maintained that schedule through much of the schedule, and now we're at the difficult stages of the project, the very top, where the floors are much bigger and we're setting much larger pieces of steel. so, it's become a challenge with the wind, but we're doing very well and we're very happy about today. we're topping out in -- sorry. we'll be topping out in late june. >> late june. >> the building. >> my only question was, even though we're obviously dealing with this landmark today of 1,250, you don't feel like you're in the homestretch quite yet? >> as i said, i've said, i think the hurdles we've overcome already are much more significant than the ones we have ahead of us, so i think we're in great shape. >> finally, walk us through. when do you start talking about finishing touches? because we've got a while, obviously, until it actually opens for business. >> well, if you would walk through the building now, you'll see that most of the interior

restrooms and so forth are actually under construction. we're well up into the building. the lobby is being fitted out now. you'll see stone in the building, you'll see metal work going on in the building, and that is all ongoing as we go up. we continue to work on the bottom and follow the trades. as we explain, the trades work up the building as a train. >> mike, it's an engineering marvel and it's amazing to watch it happen in real estate. thanks for being with us. look forward to seeing you again on opening day. >> well, we'll welcome you back at that time. >> if not before. mike mennella from tishman joining us from lower manhattan. dominion plans to begin exporting liquefied natural gas from maryland's terminal and we'll talk to ceo thomas farrell in just a moment. this is $100,000.

we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger, you need an ally. ally bank. no nonsense. just people sense.

welcome back to "squawk on the street." i'm mary thompson with the "market flash." want to bring you up to date on a story reported by the "wall street journal," saying coca-cola is in talks to buy the energy drink-maker monster energy. coca-cola, according to the "wall street journal," could sell some bottling in order to pay for the potential deal. there you see coke stock moving higher -- monster beverage's stock, i should say, moving high higher, just over 4.5%. coca-cola shares little changed on the news. carl, back to you. >> interesting, especially coming off their earnings the other day, mary, and that 2-for-1 stock split. we'll keep an eye on shares of

coke and monster this morning. diminiominion resources pla export liquefied natural gas. there could be challenges ahead. the environmental group the sierra club is taking moves to stop that deal. chairman, ceo and president thomas farrell joins us exclusively here at post 9. thomas, good to have you back. >> good to be here, carl. thank you. >> this is another chapter in the evolution of natural gas in this country. how important is it? >> well, it's a game-changer, no question. it's going to affect a lot of things. it's going to affect the production of electricity. we're going to move from coal to natural gas over the next decade. many companies are doing that now. their coal plants have been shut down all through the mid-atlantic, central part of the united states. combination of epa regulations and low gas prices have put a lot of pressure on coal plants. and right now, gas prices are extremely low. i think unsustainably low. they need to be a little bit higher because the producers are

stopping drilling in conventional gas plays and they're moving to the liquid plays because they're getting -- that piece of the gas stream is priced off of oil, which is obviously much higher. so, need to have a little bit higher gas price to get drilling back. >> what's a little bit? i mean, $2.05? >> i think closer to $3 would be a more sustainable price, which is still an extremely low price. >> do you see it as being likely in the next six to eight months, three months? >> i doubt in the next, that kind of time frame. i think it would be more longer term. you'll be lcloser to $3, which s a much more in-balance price, i think. >> all right. so much of the problem has been storage, yes? do you think -- i mean, we've seen targets closer to $1. do you think that's silly? >> no, it's traded with a $1 in the prop month already this year. we're the largest operators of gas storage in north america, all in the mid-atlantic,

southern part of the united states. storage is over full. it's higher than the rolling five-year average has been in many years. so, it will be an issue. gas prices will continue to be pressured in the next near term. >> so, knowing what an advantage it is for the country to have this resource, despite the price, right? or maybe because of the price. what kind of case can the sierra club make, anything convincing? >> with respect to cove plant. they're trying to stop l&g exporting across the united states. i won't speak for the sierra club. i think their biggest concern is involving the chemicals used in fracking. i think it would be great if we could get through that process. various environmental agencies, state and federal, are looking at the fracking process, and i'm confident when they've been through that whole exercise, the public's confidence will be behind fracking and this production of gas. >> i know probably are loathed to talk about a competitor or anyone else in the space, but chesapeake made news this past

couple of weeks with this program between the board, mcclendon, the board taking a step back in the past few days. but is that practice common? how's it talked about within the industry, what aubrey's done? >> we don't produce natural gas ourselves. we just transport it. and chesapeake is a customer of ours at our processing facility in west virginia. but the technique they've used at chesapeake is fairly common in that part of the oil patch, in oklahoma and other parts of texas, where the owner -- the idea is that the owner will make sure they're picking good wells if he has an investment interest in each of the wells. >> right. >> so, i don't think it's common, but i don't think it's uncommon. >> do you think it's healthy? >> i think i'll have to leave that up to chesapeake and its board. >> well, come back, as we watch the evolution and what prices will do later in the year.

if you say they're unsustainably low, we'll see if they bounce back, thomas. thomas farrell with dominion. microsoft's investing big money in the barnes & nobl ereading business. so, spinning off the business in what could be one of the last nails in the coffin. if barnes & noble were to go away, what should be done with the physical real estate? our twitter handle, we'll get your answers in just a moment. while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. plus, in clinical studies, celebrex is proven to improve daily physical function so moving is easier. and celebrex is not a narcotic. when it comes to relieving your arthritis pain, you and your doctor need to balance the benefits

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take a look. monster beverage is opening for trading after being halted up almost 14%. 16 bucks to $81.09, of course, as coca-cola says it is considering acquiring the company. one more sign that the sparkling beverage, at least in the soda business, is not nearly as important as some of the energy drinks. keep a close eye on monster on the heels of coke's 2 for 1 stock plsplit. made a lot of news the last couple weeks. time for "squawk on the tweet." we've been talking about microsoft investing big money in the barnes & noble ereader business in what could be one of the last nails in the coffin for the big-box retailer. so, we're saying, if barnes & nobles went away, what should be done with all the real estate they have? obviously, big, big stores. gregory writes "offer it to

municipalities with book inventories for conversion to public libraries." very nice. and we have "low-income housing or a park. retail is moving online. just wait until the baby boomers start kicking the bucket." and chub writes "amazon should buy them all to be used as computer hubs for people to shop on their site." you can definitely tell where things are headed. rick santelli, you've got a takeaway on that? big shift in a big business model. >> yeah, i'll tell you what, i would answer the tweet of the day, they should take the exact opposite approach to the gsa and sell the property instead of sit on it. and as far as my final takeaway, carl, i guess what i'd say is we're 191 in r-10, 5.75 on a spanish 10. and with auctions coming out later in the week, those are the yields you want to watch. tale of two different fixed income markets, for sure. >> we had abby joseph cohen on earlier in the show and asked her about the generational call out of goldman, obviously saying good-bye to bonds and hello to stocks.

her argument, i think in her words, she says we're not talking about what's going to happen between now and next tuesday. they feel very strongly about it. what was your takeaway when you first heard it, and do you feel the same now? >> well, i'll tell you, my sense is simple. i agree with her, because i've said many times when we were trying to fix greece, stabilization is completely different than long-term solutions, so i agree. long term, none of these debt issues are going to go away. there's going to be insolvency, there's going to be paper that's going to be in default, and we're going to see new paper generated. >> finally, you know, pisani made a good point about some of these regional surveys -- philly, dallas today, chicago pmi. does it all mean weakness for ism tomorrow? >> you know, it's fascinating because we had alice from the chicago purchasing group on today, and she said there's a two-speed answer by some of these purchasing managers. anything related to auto, they're more optimistic on, what's leftover much less so, and i think th d