is yielding 6.56%. what they sold were much higher than what they had seen at the last auction. euro may have found a new use for its bailout fund. a top ecb official is backing bailout funds to buy euro debt. we'll have more from london. the big hold out is what's happening with germany. meantime china's factory sector shrinking for the eight month. today's private-sector survey suggests the country's trial may extend into third quarter and that's been putting pressure on global markets. the central bank here in the united states extended its operation twist and said that it

stands ready to do more. the fed cutting its growth forecast and warning that the unemployment forecast is dimmer. that put a little bit of a spook on the markets. this is the first time we've seen a fed meeting that the markets didn't react positively. most of the asian markets closing lower. the south korean kospi index down by 14 points. in europe many markets opening in the red as well. right now that the ftse is down by 30 points, france is off by 13 points, greece is the biggest decliner. at 8:30 eastern time we get weekly jobless claims. very important number for the markets. huge market mover in past weeks. then at 10:00 we'll get existing home phillies, philly fed. andrew has the corporate headlines. >> we do have some company news.

let's start with apple this morning. australia fining apriling $2.2 million for misleading customers that its latest ipad was compatible with the next fourth generation broadband network. the tech giant admitted to misleading advertising. those ipads in australia were not compatible. bank of america directors settled a lawsuit over merrill lynch. they suggested a total of $20 million. who is paying those shareholders? shareholders. top toyota executive says the company has been hammered by the strong yen which is putting pressure on the automaker to stay lean. south korean automakers have advantage of weaker currency. now to joe, mr. kudlow, i don't

know what to call you any more. >> i think you need to call me phil connors. did you hear that song at the beginning of the show. we played "hot time in the summer in the city." this is groundhog day. we're reliving yesterday. plus in get no sleep. is it wednesday or thursday. >> it's thursday. you're almost there. >> i can't do wednesday again. >> i have to admit when i heard you say you signed up to do kudlow three days in a row, you're right. there's ten hours from when that show end to this show. >> there should be 24 hours between show. you shouldn't take three showers in a day. >> when you do one and be the next it feels like a ten day week. >> today is wednesday. >> thursday. >> remind me when we come back from break. >> i'm say welcome back to squawk on a thursday morning. >> you requested to do that

twice. >> right. >> how you could forget? >> i thought it was groundhog day. >> i've forgotten. >> shares of bed, bath & beyond do this tuesday night or wednesday night? >> wednesday. >> you're sure? >> i'm sure. >> i didn't read this yesterday. shares of bed, bath and beyond. cramer was talking about it. hit very hard after the close. company giving a weaker than expected profit out look. having to spend money sooner than expected to improve its ecommerce business. part of bed, bath & beyond charm is going in there and spending an afternoon and looking at all the fabrics, looking at all the -- >> swachs. >> i spend a lot of time in there. i was just in there last week. >> i was joking. this is where we talk about foot fungus. yeah, i got that.

how do you know if you have foot fungus. >> saturday night maybe two weeks ago. >> so, you were in bed, bath and beyond. >> left from a bed, bath & beyond. somebody noticed me on the street. i'm so glad you go to bed, bath & beyond on a saturday night. >> if it's a rainy saturday, nothing else to do, why not browse. >> it's dangerous. because when you walk in there they do set up the stores that you buy all sorts of things you don't realize you need. >> you're kidding. okay. you have foot fungus? >> no. >> okay. >> red hat, something happened. also had a rough after session created the world's largest distributor. it's linyx.

it warns current quarter sales will fall shorter. weak economies continue to hurt. let's check out micron. company reported straight fourth quarter of losses. the chip maker's revenues did top expectations. >> let's take a look at the futures. little weaker this morning. yesterday remember they were flat waiting for the fed. there's a little bit of weakness this morning. the dow futures are down by 11 points. not major moves but some disappointment with that fed decision. the markets giving up a little bit of ground. it was mixed. both the dow and s&p was down slightly. oil prices this is the huge story. jim cramer was tweeting about this before 4:00 in the morning, i think. he was talking about how oil prices earlier had touched below $80. you could see some of these things coming down. so pay attention to this. >> that's weird. he has a 6:00 show.

>> 9:00 a.m. show. >> 6:00 p.m., 9:00 a.m. and up at 4:00. >> every time i go online i see tweets from him. >> that sounds like jack in "the shining." >> money never sleeps and he's a true believer. >> that's true. >> oil prices. jim's point with this tweet is that if oil prices come down this could be a great put for the market, this could help things out. take a look at the ten year note. the yield was higher yesterday after the federal reserve made its call. the yield is 1.659%. right now the euro is trading at 1.2681. dollar/yen is 79.88. gold prices are down about $15 to, right at $1600.

>> no qe3. >> let's talk about what's going on in europe. it's now time for our global market support and kelly evans back, by popular demand, standing by in london. kelly. >> hey, andrew, good morning. the tone across europe this morning has been kind of mixed. mixed to the weaker side. this despite the fact that spanish yields are the story and today important the right reason meaning they come down significantly. first take a look what's happening behind me. decliners outpacing advancers by about 7-3 ratio. a lot of headlines that are driving this market are still coming and having to do with spain. first i want to show you what's happened as we evolved here overnight. hang seng was down 1.3. this of course as china's pmi data came out weaker than

expected. eight straight months of contraction. this weight on stocks across europe but we're off our lowest levels of the morning. dax in germany down. ftse 100 down by half of a percent. and reports showing more mortgage lending across britain as well. as i mentioned, bonds the story here. here's the one to watch, spain 6.523%. yes it's helped spain had an auction today. people showed up to buy its debt. as a result while it paid higher yields it auctioned off more than expected. euro group meeting over the next several days will have plans to continue to bolster the banking sector. bond yields across the region. as becky was mentioning, commodities are a focus today

and in particular oil. we have a couple of key levels to watch. what's odd is the juxtaposition where places like spain is doing better but we're seeing this risk off attitude. crude down almost 1% just above the $80 for wti. for brent just above the $90 level, 91.81. ace heard at the opec meetings last week that $90 level where producers get focused on whether they need to ask more aggressive. gold, copper down. strange day overnight, you guys but becky as you said what caught my attention was that report from the investment group that said typically on a fed day since 2008 the stocks have giant 0.74%. they've been higher 72% of the time. yesterday that didn't happen. i'll just let you make what you

want of hat data point. back to you. >> kelly, thank you. that oil price we've been watching closely. your board and the top five is different than what we watched earlier, $80.75 is where that trade is. we'll watch that closely. kelly, thank you. in other news this morning, oracle ceo larry elison is buying 98% of hawaii's pineapple island lanai. i've known for a long time that was murdoch island. he put a couple of beautiful resorts on lanai. and you know who else owns a big part of hawaii. he was on brian's show. no word yet on what he plans to do. i would love to buy that. we don't know what he'll do with a vast majority of the island's 141 square miles. he plans substantial investments

that will create jobs and stimulate tourism to the island. the sale price is expected to be around $600 million if he with get it for that. you know you think of four main islands in hawaii. the big island and maui and oahu and kauai. there's molokai where father damien. i made this up. the worst island in hawaii is great. have you heard that. the worst one is better than any one else. >> i'll take it. hawaii is fantastic. >> it's paradise and, you know, we can use the u.s. dollar and u.s. from your. >> go to hawaii for just a week. >> that's an idea. >> good idea. >> larry ellison with guest

host. >> so much like paris. i'm not sure it qualifies as being born in the united states. >> oh, my gosh. how did you tie that up. >> that was a joke. >> that was a joke. >> joke media matters. is that the name of that ridiculous blog that's out there. msnbc can -- never mind. another channel might be able to completely edit stuff but they never say anything to them. go ahead. how did we get here? >> i don't know. >> no sleep. another story on front page of the "new york times" this morning, ubs wanting its top executive to rein in his golf outings with president obama. robert wolff gofls with president obama. he's one of his biggest supporters, fundraisers. known for emailing photos of himself with the president.

he's now helped him build more than 500,000 or raised $500,000 for his re-election. wolf's relationship with obama is making other executives uneasy of late. there's a second component. there's a battle between him and bob mccain who are battling it out. he's the chairman. the other bob is the ceo. there's something else going on. >> seems like headquarters got uncomfortable with it too. they told him he has to put in his press appearance and put in requests. he said no. >> it's weird to be a fat cat banker and say hit me, hit me. you don't see the president hanging around with health insurance executives, or oil company executives. he doesn't play golf with oil company executives. >> you remember jaime dimon who says i'm barely a democrat and

tries to suggest he's not. >> he's not out there with schwartzman, private equity guys. i'm trying to think some renewable energy guys. other than that i don't think there's too many businesses left. >> car companies. >> but he owns those guys. they have to play with him. good shot mr. president. >> think about the pressure that's on him every day. think how bad it has to be for business. he's a true believer. >> a man of conviction. >> yeah, right. all right. >> i'm just suggesting there's something there. >> a lot more to come this morning including talking about the future of starbucks. what's in the future for them. maybe tea? we'll find out. first we do have some morning sports news. the commissioners hammering out a deal for a playoff system.

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to "squawk"back welcome back to "squawk" on a thursday morning. i'm doing that one for joe. making headlines, starbucks planning to open it's first tazo

tea shop. it will open near its headquarters. it will include a tea bar where customers can blend their own tea mixes. paste pa pastries and other food will be served. now it's time to talk about the weather. alex, it's hot today. >> it's brutal no doubt about it. the good news it's only a brief sort of heat. couple of days and then it's out of here. so maybe one or two more days of this heat and then get a chance to cool off. here's how we're shaping up. new york city 98 degrees. some spots getting into the 100s. that sunshine beaming down and baking you. there's a cold front to the west. here in the middle of the country bringing showers and storms. that's going to be the thing that end up cooling us off later this week friday this to weekend. hang in there while the west

coast we're dry and staying comfortable. 75 in seattle. hot on the highway the southwest. phoenix for you pretty scorching hot 110 degree afternoon there. check out all the heat advisories that we have in place from the mid-atlantic all the way up into portions of new england dealing with those heat index values that are going to get up to the 100 to 105 range. dangerous heat to deal with. we want to make sure we stay hydrated, drinking water, seeking shade and air conditioning is that's your best friend. guys? >> all right. alex, thank you. we'll sweat it out here today. the markets get another message from the fed as well. ben bernanke and company are concerned about the future health of the economy. joining us the chief global economist and strategist with decision economics and alan this is the first time the markets got the message and said whoa maybe this isn't everything we had hoped for even though they got the extension of operation

twist there was no sign of qe3. was this the right move for the markets or what happened? >> right move for the markets. a nothing event. they can't do anything about anything at the moment. if they do anything they might as well do some surveillance. >> bernanke made it pretty clear he still thinks they have ammunition. >> we heard it before. we have a little bit of ammunition. ho hum event. >> you think qe3 is inevitable. >> it's inevitable and coming offshore because the eurozone recession is getting worse, big enough to affect asia. together ineffect our exports. germany and france are headed for recession. that happens, you're 94% of the eurozone in recession and you're 85% of the eu in recession. that's got to affect the world. we'll feel it. the fed is behind on this part of what's going on in the world.

>> the fed is behind meaning you think they should have brought it early center >> yeah. it's coming. it's a coming attraction. it's really unique what's going down in europe. the achilles heel of europe. >> why should our fed act more aggressively than their central bank. >> when they look at how our economy shall do they should be more pessimistic in the second half of next year. in terms of risk managers and buying insurance. insurance would be more aggressive on quantitative easing as other central banks will be. yep. i'm not saying that will solve the problem but that's what central banks have to do. >> for the fed -- you think the fed is behind the curve. what about ecb. >> they are way behind the curve but embroiled in politics of not making it easy for those countries to get out of their problem. politics are mixed with

economics in a financial crises. that's deadly. >> they don't have a dual mandate. >> single mandate. >> the fed is like -- nothing theoretically can stop them. they have total cover. >> they do now especially because their key inflation measure so the target is 2%. >> might be surprising they didn't do qe3. maybe they didn't do it because they think at the next meeting there may be something worse going on in europe. >> they have to shock the market. >> europe is a unique thing that's happening. a moment in history for europe. going to redefine -- can't really figure so i think central banks are always behind on these risks. >> alan, is it fair to say, even

if no one lend more money it's unlikely that as a whole that they are able to payback the money that they already borrowed if they don't devalue? is that fair to say. >> fair to say. >> that's bad. like insolvent. >> some of the countries aren't solvent. >> even in total, is there enough there? >> yeah. they have to get the money from the markets. they have to put it up through the mechanism that they created and the backing and fire power and get it from the central bank. ultimately the central bank -- >> how it is that the euro is not at parity. >> some of the countries are doing relatively well and so that holds up the euro. it's an average of the performance of all the countries. it's a fixed price. get dislocation but express it has to crack. >> germany and france are headed into a recession too. shouldn't that be something that drives down the euro if nothing

else? >> i don't think the markets are there yet. that would come two, three, four months down the road. this is a forward look. could be wrong. we're concerned because, you know, if germany goes into a recession, france goes too then you're talking about 48% between two of them of eurozone real gdp and 37% of eu that's 27 countries including the u.s. >> what do you in the markets. must make you think that bad things are headed in our way? >> in the short to intermediate term on stocks people need to be very careful. if we get through all of this and this is the big swirling -- u.s. is in pretty good shape relatively speaking. i call us in low flying orbit. we have a meteor down there and

then a fiscal cliff that they will let $500 billion of fiscal contraction hit by accident unless they do something about it. >> you don't think they will do something about it. >> that's the logical thing. washington is not logical. what we're seeing now is totally by accident. fiscal contraction, 500 billion next year. 60% tax increases, 40% out lay cuts. did anybody ever ask for that mix? >> alan, thank you very much for coming in. always appreciate talking to you. >> coming thunder morning top stories and dynamic reporter duo, two men look at the direct line to ben bernanke.

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♪ ♪ there was a day where they tate ad beautiful girl and spent the night together. why couldn't it be that day. why is it yesterday. no it's not. it's thursday. welcome back to "squawk box". i'm joe kernen. it's hot along with becky quick and andrew ross sorkin. is that your first movie reference it's damn hot? >> it's damn hot this morning. >> awesome. >> robin williams. can we say damn? we just did. several times.

>> hell yes. it's a dog. making headlines. the yuan streaming furthest from its official mid-point, doubling their allowable trading band. investors see market factors rather than fixing the rate itself, driving what's happening there. living social ceo says the online daily deal company has no immediate desire to go public. the company has said to be said learning lessons from the rocky public debut of other hot tech companies. >> like what? >> living social. >> groupon. >> groupon. >> you do this too well. >> i spoke pig latin with my mother. >> it's hard.

>> if you're dyslexic you get all mixed up. living social is expected to follow groupon's foot steps. numbers dwindling. new score data say it's the latest sign that growth may be leveling off. you didn't log in this week? >> no. >> how about last week >> i did last week for the first time in three months for about one minute. >> stock is -- did you see it. >> back up six bucks. >> six bucks -- last time i looked. it's back. i wonder how much if you try to read a teleprompter in pig latin how far you could get? >> you can't do those. let's check on the markets. we're looking at the futures under a little bit of pressure

this morning. this is coming for several reasons. first of all the markets closed down slightly after yesterday's fed decision. also then overnight in china you got disappointing manufacturing numbers for the eighth month in a row, a decline for the eighth month in a row. put a little bit of pressure here overseas. not massive moves. if you take a look at oil prices this could be the big story. oil prices have been significantly lower. and i think this board is still wrong. the number that we've been looking at on other charts shows it closer to $80.70. we're looking at crude oil down significantly. we'll try to check on this. the ten year note, the yield has been moving higher. actually things have just turned around. it was higher yesterday and higher this morning. prices are up at the yield is at 1.652. dollar is stronger.

the euro is at 1.2669. the dollar/yen is 79.88. gold prices are down. down $15 on the expectation that you're not getting qe3 so that did cause a pull back on gold prices sitting at $600 an ounce right now. >> fed watchers debating whether or not more easing may come down the pike. the fed extended its operation twisting. following the developments, the chief economics correspondent at the "wall street journal" and cnbc contributor greg ip who is the u.s. economics editor at "the economist". john, i don't think anything probably surprised you yesterday. if so, if something did what was it? >> two things. one was, you know, the market is

responding as if it was disappointed that there was no qe coming out of the fed. i didn't think they were going to do that. but, you know, frankly i thought the chairman had sounded very dovish to me. sounded to me they are moving towards more quantitative easing. the other thing is he was asked about the bank of england's program to funnel loans directly to consumers through banks. and, you know, he was pretty sympathetic to that idea. that's a new idea for the fed on table. >> weird world. wow. he's really negative on things so you would have thought people would have been happier. that's what you just said. he said there's no end in sight. nothing bright on the horizon and yet people didn't take that positively. >> that's another way to interpret it. >> bad. >> i mean what people -- what i

hear people saying in the market why didn't they do a qe. what i'm saying is like it seemed to me he was giving very strong hints they might. >> it's weird, greg because you would think and we've use thtd analogy a lot. i remember when the fed was coming down slowly one time in the past and people said, you know, if you have an infection and you're like i'll use a little penicillin bust i'll let it fester more. there can be a case made if you're eventually doing qe3 there's no reason to wait unless you do think you need ammo if something worse happens in europe? >> no that logic doesn't work at all. it's like saying you are being charged attack bay grizzly bear and you have one bullet and you'll wait until he really charges into you.

the market got more or less what most people thought they would get. look at the circumstances. look at the forecast that the fed put out yesterday. i mean they have been bringing down their numbers almost steadily for the last couple of years. even by those standards i was surprised how much they took their numbers down. half a point weaker this year, half a point weaker next year. no improvement to speak of in the unemployment figures. in their statement they talk about significant down side risk to the outlook. they basically touched all the three buttons that they said are the trigger points for more action. they did act. i count it as the seventh installment of some kind of unconventional policy since the end of 2008. relative to how grim things look out, there the case for qe3 is pretty strong and right to wonder is that what's coming next or has the chairman said that's all for now? >> i wonder, if the best thing for the economy and i don't

know, you know, i'm sort of in the camp that sooner or later training wheels should come off but if the best thing really is more qe3 and if they are not doing it because they are sensitive to the krcriticisms o there that they've gone too far or the steps are too large unfortunate if they listened to that and delayed it because they don't want criticism for doing more. >> they make the central bank independent for a reason. they can deaf ear to that politically motivating criticism. the chairman touched on this yesterday. they worry about the possibility that it could cause financial instability. what does that mean? they are worried that having interest rates at zero for too long could foster bubbles. he made it clear his druthers

you get action by congress. >> that will help. >> i can make a couple of points. >> quickly. >> why the fed didn't act. we have to remember the chairman is running a committee of 19 people. you know, he needs time to kind of bake this cake to get everybody on board and don't forget it was in april when the fed was raising its forecast by just a little bit they need more time to build a consensus around and it looked to me they are very much moving in that direction. >> let me grab the last word here. you're absolutely right. one of the interesting things despite the forecast being downgraded very little movement in terms where members think interest rates ought to be three, four years from now. people want to see the lift off point before 2014. maybe it's a matter of coalition building for the chairman. >> everyone wants rates to go up but only if the economy improves. you can't wish that to happen.

thanks, john. greg, were you from canada -- >> for 11 years i've been trying to get rid of that. >> you don't have one of those ears. >> just pretend i'm from minnesota. >> excellent. all right, thanks, guys. >> if you have any comments or questions, e-mail usat "squaw squawk@cnbc.com.

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we're we're back on a thursday morning, joe, and the man

responsible forced a vising european governments through the 2008 and prior crises is our next guest. charles rand. big question this morning how is he advising his clients through the currents euro crisis. good morning to you, sir. i'm curious, you work with big corporations in europe. what are you telling them they should be doing right now? >> well, that's exactly the question. i mean, our clients, very few of them have material exposures to greece and those who did particularly the financial institutions got on to this early because they were smart enough to do so or their regulator told them to do so and they started to investigate their exposure, looking at the contracts, looking at the relationships and then trying to manage those exposures down or to change their terms.

big corporations, you had exposures in greece were able to do some work and do the same. of course we're moving to completely different phase of the crisis, and a lot of corporations have exposures to spain, and it's not easy to do things about those exposures very quickly. if you got a lot contingency in spain, a large amount of assets in spain that's the way it will stay that way. there's not much you can do. what you can do is not panic. you need to say to yourself this is a crisis which looks imminent but it could go on for a very long time and you can start looking at your contracts, start trying to get clarity as to what accounts you'll get paid in, and if the contracts are governed by local law over time when those contracts come up for renegotiation you should look at moving away from the eurozone

member states. >> a number of companies have moved their money out, some have tried to leave greece entirely, some are thinking about what to do about spain. glaxosmithkline moving a lot of money out of greece. talk through the calculus of literally getting up and leaving the country completely, meaning do you want to still be doing business in these countries at all? the long term effects of that, you built a franchise, do you stay, do you go? i assume this is a conversation you're having with boards? ooh our sense is that clients stay. they built up businesses over a long time and if they try to exit them in a hurry they are is going to lose pretty much everything. and, you know, one thing i a big difference in view on the two sides of the atlantic, in the united states, i think has a view that this eurozone thing is bound to break apart.

i think over this side of the atlantic the view is slightly different. i think there's a much greater sense of the determination of the core eurozone countries to somehow muddle through and make things work. boards are trying to stick in there. >> charles thanks for joining us this morning. appreciate your perspective. >> you're very welcomed. >> coming up, rentals for the super rich. if you have $100,000 a month to spend, you must hear this next story on what we're renting.

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♪ ♪ welcome back, we're on "squawk box" and we have robert frank joining us in "chairs" this morning. i haven't gotten to officially welcome you on air. >> thank you, great to be here. if you think rents are high in your neighborhood, consider what's happening for rents for the super rich. demand for super lux rentals is creating a new crop of properties that rent for $100,000 a month, that's right, they rent for $100,000 a month. brokers tell me there are dozens of these six-figure rentals around the country, this could be town houses in manhattan, estates in beverly hills, beachfront mansions in miami. let's take a look at some of these. we have rent afternoon h-a-mans

growing strong. this one in miami rents for $150,000 a month, currently backed by a saudi family and their entourage. it is 19,000 square feet and has its own yacht dock. the owner just got an offer to rent the place for $200,000 a week for a wedding. we also have properties here in new york in soho a 13,000-square-foot apartment renting for $100,000. >> where did you get a picture of my place? >> beyonce filmed a video in the indoor pool in this property. who are these people paying these mega rents? it's celebrities, oligarchs and foreign royals who want a short stay in a huge home. they want to entertain and have big parties and they like the privacy and security of their own house rather than a hotel. in miami the saudi family i mentioned said they would have

to rent 15 hotel rooms just for their personal staff for their stay so renting for $20,000 a day was actually a bargain, and they get a free parking space for their yacht. >> and i'm thinking about this, because these are probably second homes for some of these people, so you'd say you should buy and write off the mortgage interest and it would be less but you can't do it on the second home anyway so they have so much money, and when you say things like that, people in occupy wall street are already mad at you and thinking, see, he takes a helicopter to work, he lives in a $100,000 a month, don't -- >> i rent it out for $100,000 a month. >> every summer we see, and it's not 100,000 a month for the summer, a half a million dollars. >> sometimes in the hampshires you'll see $500,000 just for the month of august and you get bidding wars there now but

what's interesting these are year-round properties, not just prime season beachfront homes. >> is this a comeback? what was happening during 2008, 2009, 2010, do z that drop off and it's resurfacing? >> in a strange way it's follow the rental market. there were not many of the homes back in the crisis but there are a couple of dozen around the country, a lot of them whisper listings. they're not officially listed because the wealthy owners don't want them to be out there. there are a lot more properties and a lot more demand than there used to be. >> the wealthy owners they're buying them as investment properties and renting them out or originally buy them to live in and somebody said i'll give you 100 grand a month if you move out? >> it's more of the latter. i was talking to a guy in miami, said i never considered renting my house. this is my prized multimillion-dollar property. somebody offered him $125,000 a month. he said if i do this for four weeks i've covered the expenses for my mansion for the entire

year. so it's a practical decision on both sides. >> that's not what it's costing these people for monthly debt service the ones that own it. this is a lot more. >> yes. >> how much money do you think you need to pay $100,000 -- you need $100 million, something like that? >> around there. these are super, these are the oligarchs, middle eastern royals. for them the privacy, the security, knowing that your whole family is under one roof, off he got your own security, your own chef, your own masseuse, and they can stay in the same place that's worth it to them. it doesn't matter what it costs. >> that's how the other half live. >> masseuse comes with the place? >> that can be arranged. >> anything can be arranged. >> thank you very much for joining us this morning. >> thank you. >> we appreciate it. when we come back we'll have more of this morning's top stories including global market reaction to the fed. first welcome today's guest e host ed lazeer, he'll be sounding off on everything from

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risk and reward. >> the committee is prepared to take further action as appropriate to promote a stronger economic recovery. >> how will investors interpret the latest fed action? former counsel of economic advisers chairman ed lazear joins thes "squawk" set to explain to fed policymakers what they have in store to boost the economy. it's time to trade. the inside scoop on what's hot on investor agendas before that first transaction. get the expert analysis you won't find anywhere else. plus only the best on cnbc, we're talking to the biggest mutual fund managers in the country as the second hour of

"squawk" begins right now. ♪ ♪ is someone getting the best, the best, the best of you ♪ ♪ is someone getting the best, the best, the best of you ♪ that's the foo fighters. good morning and welcome to "squawk box" on cnbc. i'm andrew ross sorkin along with joe kernen and becky quick. the dow would open about 17 points off this morning. we begin in terms of headlines with the fed's latest moves to boost the economy and the market's volatile reaction. ben bernanke and company are still worried about the strength of the economic recovery. the federal bank stands ready to take more economy-boosting steps of steps if necessary and steve liesman is breaking it all down for thus morning. >> thanks, andrew. question was the fed talking like a lion but easing like a lamb? the fedex tending operation twist, when it sells short-term

securities and buys long-term ones to drive down long-term rates but downgrading the economy may be more seriously than the market expected. here is some of the language that changed. employment said to be experiencing slower growth, household spending rising at a slower pace. the only good news is that inflation was said to be declining and growth will pick up very gradually. take a look at the forecast here, the fed shaved a half a point off of the growth outlook for 2012, 0.4 for 13 remains above trend at 2014 but really the fed is saying for the rest of this year what we see at 2% is about what we're going to get. erin burnett calling the move of extending operation twist substantive and not shy about suggesting if the economy deteriorates further the fed could do more. >> we've taken a step today which is a substantive step which will provide additional accommodation for the economy and we're prepared to take

further steps if necessary to promote sustainable growth and recovery in the labor market, so we are prepared to do what's necessary. >> "the most important take-away from yesterday's policy statement was the introduction of an easing bias in the fed's discussion of its balance sheet plans" writes lou crandall of wrightson icap. the forecast for the full year now is below where we are right now. it went up for '13 and it went up for '14 as well from 7.05 to 7.35. looking at the stock market yesterday it's unclear which part of yesterday's fed statement really spooks stocks. you had an up and down, there's that spike up and down with the statement, then the market generally rose, and then as bernanke started to answer, he gave his opening statement and as he began to answer questions that's when the market came back off and came back up.

this kind of volatility is not unusual around a fed day and my guess, guys, is that the market came a long way in the month of june and the kind of volatility was really just sort of hot money frothing around at the top whereas underneath i don't think there was much action, joe. >> who knows, they closed down 12 points so after all is said and done. the other thing is, steve, we're back in the bizarro world of the worst bernanke talks about prospects, that could make the market go up because it means the qe -- we're in this thing where you could explain anything based on opposites at this point. >> i think that's right, but i will say that we have this idea that the prescription of, the description of the economy has to meet the prescription of it. i'm not sure that was the case. >> really? >> they downgraded the economy and extended twist, given the downgrade of the economy, could you read the statement the fed gave, the characterization of the economy says you know what? this is an obvious case for qv. >> we talked about that, in the

last hour we were talking to greg and stuff and that was my point that in times in the past where we knew the fed was eventually going to ease and you make the point if the patient is sick and it's got the infection, you know you're going to give the antibiotic in two months, why would you wait before the infection got worse but then the guys earlier said he needs to convince, like the eu, he has to convince croatia to do it, 19 people. >> two things are going on. i don't think it's clear to the market that driving down long-term interest rates is one of the fixes for the economy. when i hear bernanke and other members of the fed talk i don't know if they know it's entirely clear what's wrong with the economy. they've done what they need to do and how it's going to be fixed by lowering long-term extra rates i don't think bernanke has made that case. >> thanks, steve. >> sure. >> exceeded ben bernanke on the council of chairmen of economic advisers, ed lazear joins us,

teaches economics at stanford university. you were in the bush white house before that, before that an academic at stanford and now you're an academic at stanford and in the white house you were more theoretical type stuff. you're a thinker, right? >> is that good or bad? i'm not sure? >> i'm trying to preface saying you're not here to talk about the political angle. >> right. >> talking about what is, and what is different about last time you were on is that we really have seen a significant deterioration in what you follow in the economy. >> we surely have. if you look at the numbers right now, almost all the numbers are down. that's particularly true in the labor market as you know, i'm an economist by training. >> we're going to get a claims number today, too. >> exactly. if you look at the last

j.o.l.t.s. numbers, jobs oepgs labor turnover survey. the nice thing about j.o.l.t.s. it gives you hires and separations broken down into quits and layoffs. it breaks it down better and you can follow what's going on in the labor market and what we've seen over the past couple of months and last month in particular which is a little frightening, there's been a dramatic decrease in the number of hires and there's been a decrease in the number of quits. now the reason hires is, decreases is important is obvious. if the economy is not hiring as many as it was and by the way it's hiring the same number as back in january of 2009. >> you mentioned that. that's -- >> that's pretty scary, because january 2009 was when we were on the significant way down. >> we were at -- because we know that was inauguration day, they were at 7.8 and just went straight over 10. >> that's not encouraging.

the piece of good news was that quits were actually picking up and in the last report quits started to turn down again and the reason that's indicative of what's going on in the economy is pretty obvious. if you think about it, people quit when they feel there are job opportunities out there. they don't quit if there are no job opportunities out there. when quits start to fall it tells you the people who are in the labor market feeling their everyday actions going on are not willing to take the chance. >> they're glad to have the job even if they're not that happy. >> that, coupled with the last few months of employment reports has not been encouraging, and that's actually been worse, because last month it wasn't just that the unemployment rate ticked up a little bit, but the trend in job growth has been really negative. the trend -- it's not just a gl blip anymore and last month, i learned this from one fy guys when i was chairman of the council on economic advisers is you look at the hours, you look at average weekly hours and the

reason is that one-tenth of an hour decline is equivalent to 350,000 jobs so that's huge in terms of the amount of -- >> say that again? >> one-tenth of an hour is equivalent to 350,000 jobs. >> wow. i had no idea. >> well, if you multiply it out, figure it out, just do the arithmetic and figure out how much that means, multiply it across the labor market, so it's enormous. so when you see a decline like that, that tells you that the labor market is really softening and it's just started to go back. >> we have a fiscal cliff, 2013 coming and reading between the lines from what you're saying, either slow down to 1% or a recession isn't out of the question. is there any historical precedent for a recovery which has already been ten id, actually petering out, like '80-'82? >> sure. but the difference with '80-'82 in some sense we're already past

'80-'82, we should already be in a pretty strong recovery phase. one of the things you want to think about, i made this point last week in a "wall street journal" oped. we actually were on a positive growth trajectory that was pretty good. the recession ended. it really did end. >> i showed a chart last night, ed, on kudlow when i was on that showing the growth before the affordable care act and the growth a couple of other -- it was headed higher, claims were headed down, the unemployment rate was headed down and you could put a point in time where some of the policy initiatives that were huge, as opposed to the reagan policy back then was kind of the opposite, and claims continued to come down and so did the unemployment rate. do you really think that's responsible? >> well, let's put it this way. >> timing doesn't mean cost. >> the timing is coincident, and i don't mean coincident

accidental, i mean coincident in that they're together. this was july of 2010 so until july of 2010 we looked like we were on a recovery. >> a normal recovery? >> pretty close, 4% growth is pretty good. could have been better but that wasn't terrible and that's what we were calling for. when i left the white house back in january of 2009 we had to put out a forecast, the council of economic advisers does this every year and we put out a forecast and we were saying that the economy would start to pick up at the end of 2009 and grow strongly in 2010, everybody thought we were nuts. that's what happened and it wasn't based on stimulus. that was based on just the normal projections on -- >> it wasn't a normal recession? >> it wasn't but that goes in the other direction in the sense it was a much stronger recession. what we know from historical record is that the stronger the recession, the stronger the recove recovery. >> even credit recessions?

>> even credit recessions. the question is the timing. if you think about the great depression was a credit recession. you had an enormous stock market crash and enormous loss in gdp but if you look at the three years in the mid '30s that followed that first three years of crash, that was 35% growth in three years, 35%. so you had an enormous swing back and that was financial. so again i'm not sure how much you make of that. >> ed will be with us throughout the rest of the program. we want to get you up to date on some of the other stories we've been following this morning. if you weren't aware already there was a spanish bond option this morning. the debt yields set new euro era records again, strong demand at 2.2 billion euros, more than expected. the sales were for two, three and five-year debt and the yield on the five-year came in at 6.07%, the highest since 1997, before spain joined the euro.

samsung's galaxy 3s smartphone will not be available today as scheduled. there was overwhelming demand and limited supply. the company says preorders should be filled within a few days and those phones should be hitting retail stores as well. johnson & johnson is settling a government investigation regarding offlabel marketing of its anti-psychotic drug risperdal. the settlement could be $100 million or higher, one of the highest in a case of this type. if you have a question shoot us an e-mail. our handles -- and the show @squawkcnbc. you need to throw a little r so

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check the let's check the futures right now, see where the market is indicating after go a 12-point loss after a whipsaw session yesterday. not much going on today. it's probably not crazy to say that the claims number has gotten to the point where we wait for the first friday of every month, that's the big number, the employment report but we do get these every week with unemployment and people probably are hesitant to do that much. we had all the big news yesterday from bernanke so we'll see. what's going on with peter teal? >> something cool. he's searching for the next disruptor and he and a.j.roian are launching a new fund. joining us first here on cnbc from san francisco is a.j.roian, managing general partner and founder. it is a new fund just launched at least announced yesterday. a.j. thank you for being with us this morning. >> pleasure to be with you, thank you for having me. >> how is this different than

what peter has done before both with the founder's fund, he's obviously been behind some of the big names whether it be facebook, paypal, et cetera. >> founders fund i think is the single best venture capital firm in silicon valley. >> maybe you should stick with that. what are you doing? >> we're focus on growth so we'ring agnostic to sector and geography. we're focused on being international. the opportunity basically came about because peter and i started talking about two years ago about the need for growth capital. there are great entrepreneurs for being companies in sectors that are unloved relatively speaking even within technology and they're doing it in places beyond silicon valley as well as in silicon valley. when they hit an inflection point they need a partner that can see the marathon along with them and set up the drink station along the way. >> ajay give me an example.

we're talking outside of the technology world. >> we're talking about technology but technology as a tool, not technology as an end. you have the most successful technology companies of the last two decades. google revolutionized advertising and media, amazon is it a walmart with a website or is it revolutionizing retail or you take apple a computing company, and then a great media company when steve jobs essentially relaunched it in the late '90s and it hit its stride in the 2000s. all of these companies used technology to approach much bigger markets. >> ajay, there's a story on the front page of the "wall street journal" that says lawmakers push for overhaul of ipo process, this in the wake of facebook what they're calling fumbled ipo. since you live out in the valley and this is your business, when you look at your ipo, does that

change your view of valuations and how you're thinking about investments these days? >> i think facebook is a fantastic company and i've been focused on building mithril. the opportunity is companies that want to stay private and have a flexibility of not having the pressures of being in the public eye, even when they're larger these could be $10 billion companies that want the space to pivot before they hit their terminal velocity, that's when they need a partner. >> do you think going public makes sense anymore? >> i think it does for certain companies at certain times. it makes sense when you've basically solved the technology and market problems that are in the market you're trying to address and you're able to grow in a predictable way. >> do you think the system is fair? i ask you that because one of the issues that's raised in the article on the front page today is that the ipo system today is not fair for all investors. and what that ultimately means and what that ultimately means to you, when you think about exiting your investment. >> we're focused on building for

the long-term, that could be decades long and the reality is that i grew up around the world i think of america as having the fairest capital markets in the world. >> give me just a couple of ideas out there, two or three things that we're not looking at that you're trying to see around corners, companies or new industries we're not paying attention to. >> certainly, big industries are much more interesting and the variety of companies that we're looking at all the time, and i'd love to tell you about them once we invest. we take for granted competition software, band width networks and applying it to agriculture, space, pharmaceuticals, energy and industrials, where the approach to building companies taken for granted in silicon valley and the tools we take for granted can have revolutionary consequences. >> ajay thanks for joining us and send our best to peter. >> thank you for having me. coming up we'll talk the

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lattes and iced tea. >> is it tazo? >> don't taze me, dude. >> i drink the tea, is it drunk the tea? i've drunk the tea. >> you are a tea person. that was when you were preggers. >> i still drink it in the morning now. >> you do? >> why? >> because i like it. >> right, but you don't want a bunch of caffeine anyway. >> yeah, still. >> go on. >> that's right, there's someone who gets the caffeine if i drink it. >> so it ends up in him. >> oh. also when you grab everything to take to work friday don't forget your dog as well. friday is the 13th annual take your dog to work day, a day when employers are asked to open their workplace to employees' four-legged friends. we don't? >> no. i have three. that looks like zara and pongo and reagan. >> i'd like to see the pup, who

is no longer a puppy. >> she's great. she assumes the worst, but you can win her over, but she initially thinks you may not be -- >> i'll bring some milk bones with me on friday. take your dog to work day was created to celebrate the great companions dogs make and encourage adoption of homeless dogs from humane societies, animal shelters and rescue clubs as well. okay, coming up next -- >> a dog in the city. don't do it. >> i think it's mean, it's a cruel thing. >> it is, and your neighbors, too, because you would not pick up after your dog. you'd see who was watching. coming up next, what is next for the fed plus your tools of the trade, oil, gold and the dollar, how the fed's latest moves are affecting the markets. "squawk box" is back in two minutes. thor's couture gets the most rewards of any small business credit card. your boa! [ garth ] thor's small business earns double miles

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welcome back to "squawk box" everybody. in our headline this is morning we are just about an hour away

from the latest reading on the u.s. labor market. this is a biggie, the markets are watching, that weekly report on initial jobless claims is out at 8:30 eastern time. the consensus right now is for 385,000 new claims, little changed from last week's 386,000 but remember last week was a surprise getting back closer to 400,000 instead of the 350 we'd been sitting at for quite a while. also getting fresh numbers on housing later this morning. the national association of realtors is out with may existing home sales at 10:00 eastern and economists here are looking to are a 1.5% drop to an annual rate of 4.55 million units. president obama renewing his push for action on student loan rates. in a white house statement scheduled for this afternoon he'll be calling on congress to take action to keep subsidized student loan rates from doubling when they expire july 31st. a market outlook from our trading block, joining from us new york is boris shlossberg, managing director of pk asset

management, from tampa, tom o'brien, editor of "the gold report" and on oil, dan dicker, president of merck block. dan, let's start off with oil, the big mover. why this drop and would you be surprised to see oil fall below $80? >> i don't think $80 is the bottom line but the secular bull market is intact and that the lows that we see for this summer won't be lower than the ones we saw in 2011 which weren't lower than the ones we saw in 2010 and so if you use that line in the sand of about $76, that's where i think the lowest we'll see in terms of oil prices at least coming through this summer. this is a pretty steady kind of pattern that we've had during june where we've had various economic reasons for oil to find a bottom but it has rallied into the fall and that's been the pattern. >> ed lazear is our guest host today and ed was talking off camera a bit ago how this year

is starting to look like 2007. why is that, ed? >> if you look at the end of 2007 we started to see softening of the markets, oil prices as you remember, peaked in the summer of 2008. one of the things i wanted to push you on, we know that for every quarter of -- sorry, for every $10 per barrel of oil that you get in terms of increased price, that costs us about a quarter of a percentage point in gdp and also goes in the other direction as well, so we should be enjoying in some sense higher growth right now as a result of this. where do you see us going in the future? because i think about this as we move into the fall, you know, are those $10 going to be working in the right direction or in the wrong direction? >> i think they're going to be working in the wrong direction. we should have had already lower prices, considering like for example chinese pmi numbers that came out again dropping for the eighth straight month. we've got the full blown recession in europe, we've got tremendous production here and the saudis at full taps open

trying to mitigate the iranian boycott that's coming up in europe july 1st, all this should have led to a price that's way lower than where we are now and we're not getting it. it seems to me there is the thesis about money kind of crawling into the oil market. you have gold for example that's -- >> $1,600. >> and a gold guy you'll get to him, a $3,500 movement into gold over the course based upon easings and so forth. i think money is trying to find a place to go outside of the stock market and ten-year treasuries aren't making it. the german bund isn't making it. >> the lick wits oliquidities o there. >> it's the financials that are kind of broken here where we get a lot of money chasing an oil trade in the midst of what are very, very weak fundamentals and that's what you're finding. >> we'll continue on this. tom, why don't we bring you in

to talk about gold as well. what do you think the premium for gold has been because of the easings? gold is down about $15 last night, back to $1,600 after we did not get qe3. >> good morning, becky. i'd agree with ed. this is 2007 and the commodities market. the gold market is screaming that qe3 is not on the table. you know, when you look at it, the dollar, right now the world wants the u.s. dollar. it is king dollar extraordinaire. in germany, hinkle, huge industrial company, 800 million in euros they drew down a five-year term. in they take that out in dollars versus euro they'll pay 50 basis points more, that's saying the dollar is moving higher big time. my take is gold is going lower. the wildcard is the etf structure. eight years ago, nine years ago,

etfs owned zero amount of gold. they own 2,400 tons which is 77 million ounces. every time the futures go down, they have to sell it. that's big pressure. so when i look at the context and people talk about interest rates, when i look at the context of cash, you can just hold cash, don't trade it, and in fact you are going to buy more each and every day. >> right. >> the cash market is affecting all commodities and going to bring them down because the dollar wants to go higher. >> boris, jump in here and talk to us about why, i mean we've been trying to figure it out for a long time, why is the dollar trading at 1.26 to the euro. why not see a big drop down? >> because i still think there is hope in the market -- >> for the euro? >> yeah, i still think there's hope in the market that europeans are going to somehow mitigate their problems, they're going to at least be able to keep the ship steady. i think yesterday was an interesting day with fomc and

dr. bernanke. we're pretty much running out of non-conventional measures, and the one interesting thing that the fed said that was of note was that what they want to try and do perhaps is do what the bank of england is trying to do, credit easing, the idea being that if they're going to do qe going forward they have to sell it and in order to sell it they have to convince the market if they do qe it's going to allow everybody in the country to refinance mortgages. if they can actually achieve anything close to that, if we can imagine an idea where all of the mortgages in the u.s. could get refinanced at a lower rate that would be highly stimulative. i think the market issing looing at all of this big macro supposition and thinking that perhaps there may be enough liquidity to keep ris aclife which is why you see the euro trading relatively high to the dollar. >> ed? >> when you talk about the fed policy, one of the things that markets worry about and particularly when, as it relates to gold as well is whether the fed can actually reduce its

inflationary thread by its current policy of paying interest on reserves. i don't think markets are seeing that? do you think markets believe that or do you think that when the fed talks about something like qe3 they don't actually take as a given that the fed will be able to control inflation in the future? >> oh i think the inflationary threat is very, very low at this point. it's the exact opposite. i think the fed is still concerned about deflationary threat and when you look at the data across the world we've seen price levels coming down, not going up and oil is the single biggest inflationary threat and the fact it's come down a lot has given the fed more wiggle room to continue easing. that's why i think you still see risk being bought. >> we still have 3.50 at the pumps, that isn't cheap. eight months ago we were down at 2.67. plus what we avoided was that armageddon $5 a gallon that everyone was talking about in the early spring and that really i think caused a bump in terms

of the way people feel about gasoline prices at least now as opposed to where they were a couple of months ago. >> boreis? >> my view is that the whole slowdown in the u.s. could be almost exclusively attributed to the near $5 a gallon bump that we saw before, and -- >> i'm an oil guy so i agree, whenever it's oil-centric i agr agree. >> the one question i have with all of these, all of these markets are completely interrelated, all of its moves are based off the same news we're trying to get our arms around but the fed came out and lowered its outlook for the rest of the year. ed pointed out it's lower than we are right now. there are worse things to come. the fed tends to be behind the curve a lot of the time. there are other economists looking for a major pullback and once problems in europe set in, we had alan sinai on earlier who said you're going to look at france and germany go into a recession, at that point, it is a much bigger problem for the united states. so wouldn't that have some huge impact around the globe? >> if you take a look at all the

commodities, they're all priced in u.s. dollars. bottom line is that it's what you keep at the end of the day, so as the dollar goes up, commodities go down. and every different country they can still buy goods but the bottom line is that this is going to be like the '80s. the dollar wants to go to 9, it might go to par in another year and a half. remember the correlation three years ago, dollar keeps going down, commodities keep going up. we have the reverse going on and the dollar is running commodity markets is running the s&p, it's running everything because the large institutional -- large industrial companies have to arrange for that. they've been making a fortune because the dollar is going down. that's reversing. that is hitting everything across the world. >> right, but the underlying macro that's driving that is europe and becky, you're absolutely right. if germany and france go into a recession we have a 2007 lehman type of a moment. we very much have a hissing

situation and everything could fall off a cliff. right now the market believes we can muddle on through, why you're not seeing the pressures come up just yet. >> boris, tom, dan, thank you for being with us. >> have a great one. have a safe one. >> you, too. the best of the best fund managers are blowing into the windy city for the morning star investment conference. cnbc is there and we'll bring you some of the biggest names in the business after the break. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time.

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breaking news. hot out. summer -- >> damned hot. ♪ >> you are no longer a pop culture version. you have -- >> good morning, vietnam. >> you go good morning vietnam, you loved the movie, it's damned

hot. >> do we have that tape? >> he curses. >> in new york, 100 in washington. >> ow. >> cnbc is live at one of the most biggest mutual fund conferences in the country, the morning star investment conference in country. cnbc's best of the best is there, tyler matheson in chicago. you're the best of the best and interviewing best of the best. we basically got that right. >> you are the best of the best. last night i'm watching "kudlow report" and i saw you hosting it, working double duty. >> you got to respect larry. i did an hour on "fast and furious" and the holder -- i was like, ahh! we didn't say one thing about ben bernanke. we were going back and talking about previous invocations of executive privilege. i mean, it's not easy.

>> did i see a chyron, a font that said obama's water gate, question mark, question mark, question mark? >> it's different than water gate, it's water gate with a body count was his -- yes, because the guy died from one of the atf agents. >> that is vivid. all right, let's turn the page here, joe, a little bit and talk about mutual funds and steve romick runs fpa crescent, a $9 billion fund and you want good rating ratings,'s a'got five morning star stars and a gold rating, good to have you with us. >> thanks. >> i want to talk about your portfolio and where you've come from, your daughter graduated high school, you took her to spain on a trip. >> i did. >> congratulations to her. what did you see in spain? what did you sense over there? >> well, it's interesting, just going to madrid and barcelona, we visited, and not going outside you wouldn't know as a

tourist, wouldn't have any idea until you spend time talking to the people and you realize at that point in time there's a ton of the society hidden behind doors playing video games and watching television. >> 25% unemployment in spain. >> 25% unemployment plus all the younger people, unemployment for under 30s are like 45, which is a little misleading because there's a whole black market economy. >> let's talk about your portfolio and how you choose stocks. one of the things you look for is great value. you've had a couple of big holdings in your fund that have been good values and they have started to perform very well. walmart one, microsoft number two. take them in order. >> well, we have a saying in our firm, good things happen to cheap stocks and walmart is an example, infinite duration bond with the rising coupon. there's another company i'm aware of over the last 12, 15 years with operating margins only move 50 basis points between its high and low margin. if you said this company grew 3% to 7%, bought back 3.5% of their

shares over the last decade and as a dividend yield 2.5% and next five years higher on cost. our cost on walmart, much less than it is today we figure the return someplace conservatively of 7% to 13%, although it would do much better than the stock market and bonds so we're happy to own it. it's moved up, so it's 14 times earnings and we're not as enamored with it today as we were. microsoft, people at a point in time in 2010 and 2011 there's bad news everywhere. the lunch was being eaten by every other techno company. >> what do you think of the tablet? >> it's too early to tell, the surface, i don't have any idea. >> finish your thought on microsoft. >> you look to microsoft, people don't realize some of the value they get, patents they get, different android manufacturers pay them et cetera, so there's a lot of hidden value there. we felt that if anything

happened good it was going to drive the stock higher, which is what's happened. >> i want to talk about cash and risk, those are two things. you have about 20% of your fund right now in cash. is that a conscious decision on your part that tells me something about how you are analyzing the market and where values are or is it really just a consequence of what you've been doing? >> it is certainly a consequence, the latter. if you consider that over time ours average 25% over the last two decades and our cash builds up as a by-product of what we aren't finding or are finding in the market. we aren't beholding to the idea that we have to be invested. if something is not as attractive we take it out and sell it and cash in 2008 was as high as 45%, and then in the late '90s when small cap stocks were incredibly cheap, cash was down at 5%. >> talk about how you mitigate risk because a five-star rating

in morning star says your risk/reward performance is among the best in the business. you told us in a pre-interview that you're less concerned about matching the market, beating the market than you are about doing it with less than market risk. tell me how do you that. >> first we're trying to avoid permanent impairment of capital along the way. if we don't see things that are attractive, if energy is 8% and we're at 15%, so what. if financial services are at 15% and we're at zero percent for much of the last decade we don't care. we prepare for the worst and hope for the best, the best way you can do that is by understanding the downside of each of the individual investments. be willing to buy down if they're going down. >> that's the real discipline there, understand the downside of the investment. steve congratulations on a good performance. congratulations to your daughter. joe, i'll talk to you later. >> thanks, steve and tyler. see how i did that? you were going to cut that out and that's going to be on a reel

for "squawk box" and say thanks steve and tyler. see that? kidneys, always thinking. >> i don't look like steven tyler. >> you've had a lot less work from what i know. >> thank you. we head back, it's hot in chicago, too, we'll head back to the morning star conference in the next hour of "squawk box." who knows who we'll have next time. fidelity fund bob brown will join at 8:40 eastern and more of ed lazear, getting ready for the trading day, wi which is coming down. up next on "squawk box," don't start your day without knowing the names that will make you money. joe has your list of "stocks to watch" right after the break. ♪

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♪ all right, we're going to keep hammering this song, they do this to me and think it's funny. >> it is, anything to get under your skin. >> all right, let's look at some stocks to watch, onyx pharmaceuticals a panel

recommendation for an experimental blood cancer drug. this is almost like seeing the tech heavy nasdaq or interest rate sensitive utility average, if a panel gives you a recommendation, the full fda usually but not always follows the recommendation of its panel. >> you seem upset. >> yes, it's pretty amazing. celgene is reviewing its application for revlimid. bed bath and beyond is five cents above but the outlook is below expectations, going to be a big loser today. andrew and i both love bed, bath & beyond. we do. we could be arrested for loitering sometimes because we just, we hang out there. >> it's a cool place. >> linens, i mean, pillow case. >> i'm still looking at that

blender, vitamix, the most expensive blender. i look at it with awe. >> you got your eye on it. you pricing it at different places? >> williams-sonoma has it for more. we could talk about it. >> you're not kidding. >> no, he's not kidding. >> i'm not. >> are you saving up? >> this is -- >> how much more too big to fails have to go out the door at amazon before you get this thing? >> it's a $600 blender, the huge thing the blender. >> the question is will you use it once you get it. >> yes. >> for juicers? >> we got to go. you can make soups with it, margheritas, anything with it. >> the commercials look cool. >> the consistency t does something a regular blender does not. i have a friend who has one and i've been looking at it. >> this is not a shtick with you. >> no. we have a commercial break. we have to make some money. >> i'm not really serious about a lot of them. this is real. i love this. >> i'm with andrew. >> you like this blender? >> i do. >> when we come back, dino coss

on greece's next steps. and coming up at 8:30 eastern, jobless claims, a number that could move the markets. we'll have the number, the market reaction just ahead.

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the fed giving the green light to more operation twist, we'll call it 2.0. if the plan will succeed in enticing investors away from the sidelines. she's the ceo of a uk-based investment firm with $76 billion in assets under management. now helena morrissey wants to increase the number of women on corporate boards and has the support of the crown and country. breaking economic data. >> good luck with your layoffs. i hope your firings go really well. >> thanks a lot. >> great. >> we'll get the closely watched weekly jobless claims number at 8:30 arm eastern. the third hour of "squawk box" begins right now. ♪ >> welcome back to "squawk box," i'm joe kernen. the music, it's too early for this. i'm joe kernen along with becky

quick, the blender, andrew ross sorkin, our guest is ed lazear, university professor and former economic adviser under president george w. bush. we're going to buy one for the show just so look at it just for the show and you can get a look at it and take it home. it makes soup warm. >> it spins the stuff so fast it will make the soup hot. >> that i didn't realize. >> that's one of the, anyway. >> checking the futures -- is it a public company? >> vitamix? i don't know, i'll find out. >> checking the futures, up 23 now, better than the last time we saw, we have the claims number coming out in about 29 minutes and that might affect where we are. another global headline. becky? >> china is talking about manufacturing dropping off for the eighth month in a row. yields rising in the latest spanish bond auction, madrid

looking to sell 2 million, euros two, three and fichb-year notes and the yields came in quite a bit higher than the last auction but if you look at the ten-year, that number has come down, 6.557%, that's the good news out of all of this. europe may have found a new use for its bailout fund. top ecb policymaker is publicly backing the use of the fund to buy distressed sovereign bonds on the open market. benoit couere argues that the action to coease the severe strain being felt by spain and italy, all of the news, the rumors, the headlines that are coming out of europe, that's what's been moving the market. art cashin points out yesterday it was the fed talk had the market pulling down. when you saw the market come back it was out of the idea that europe could start this idea of using that money to buy bonds, sovereign bonds and that's what's been driving a lot of the action in the markets.

also in corporate news, samsung's highly touted galaxy 3s smartphones not available today as originally scheduled. samsung is citing overwhelming demand and limited supply. however, the company says that preorders should be filled within a few days. and those phones should be hitting retail stores very soon as well. also australia is fining apple more than $2.2 million for misleading customers that its latest ipad was compatible with the next generation 4g broadband network. the tech giant admitted to misleading advertisers and will be paying that fine. our next guest is a former fed inside we are some unique insights into the operation twist 2.0, joining us now on the set, dino coss, former vice president and hamiltonian associates managing director and guest host this entire show is ed lazear. thank you both for being here. we can go about 100 directions in this but we could talk about 2.0, talk about how long you

think it's going to last but i'm more curious what we're going to hear next month. >> well we've been in this mode now for how many years where the fed has been doing, the first lsap, large scale asset purchases, second one operation twist, the guidance language, so this is just a kncontinuation o it. you could make the argument qe3 started a year ago and this is a continuation. the fed is trying to keep demand going because this economy is impaired. it's gone through some trauma and it's trying to keep demand going and it's a struggle. >> walk us through what you think the conversation is like internally about this. >> there's one conversation is about effectiveness, so how effective will this be. another conversation is about tactics and timing, so do we do this now? do we do this later? >> is there a conversation that

says let's do this, we're not going to do too much today but let's plan maybe when we hit july we're going to have to, we'll have to bite the bullet. >> you know, it's a delicate conversation, right, so -- >> it's not delicate internally. people talk openly i assume. >> you can look at the transcripts. the transcripts come out five years later. you can see verbatim what people were saying a few years ago and you can see some people will be worried about six months from now but most of the conversation is about what we do here and now. the thing about operation twist is that it is an unconventional monetary policy instrument as ben bernanke says. it's unconventional for a reason, it's less effective. it was taken from 5% to zero in 2008. this is the best that's available, but how much effect are you going to have by buying a few 10, 12, 15-year bonds and

selling some equivalent amount of three-year bonds. is this going to give cfos and ceos juiced up to hire. >> we had jack welch on yesterday and we were talking ahead of the number, how important is this number to you or what they do? he said pretty much zilch, we don't care. whatever they do is not going to change as a ceo wouldn't change with i'm going to hire, capital investment. this is just a non-event. >> and there was a duke university does a survey every quarter of cfos, and in their last survey this is exactly the feedback that they got that the cfos will not be impacted by what the fed does with its balance sheet actions. >> we plan for the trader, and is that the wrong strategically does that make sense? >> it is in part a play for the mind of the investor, you maintain confidence of the investor, you are preventing as it were markets from sinking, and that is one way to deal with the so-called wealth effect.

ed i'm sure can comment more expertly on that, but if the market goes down, people feel poorer, they spend less, and that has a negative feedback so you avoid that. >> there are two aspects of effect i haveness that you touched on i wanted to get back to. one is whether the fed is first of all effective in changing rates at all, changing the rate structure, changing the shape of the yield curve the first issue. even if they can do that, the question is how much does that translate into investments so people, you know, at least in my business, there are plenty of academic economists who doubt the fed has been effective at changing the rate structure and the question is, given that, what's the effect on the housing market, on other markets that would be the most sensitive to these interest rate adjustments. >> i'm willing to concede there's probably some impact. they've spent a lot of money, janet gelen had a speech, the estimate it impacted 60 basis points at the long end. ask ourselves how much of an

impact will that have especially since you have other blockages in the system. >> what do you mean people can't get access to credit? >> there's access to credit so if the banks increased, tightened their standards even if rates are lower they may not be able to refinance as easily as they could a couple of years ago. clearly that's happened. >> what's the right answer because the banks say we have regulators telling us we need to tighten our standards and in terms of making sure the pendulum had to swing, way too far in one direction of the number of people and businesses getting credit before, how we wound up in the trouble. >> you have the regulatory site of the fed and you've got to be prudent, you've got to tighten standards and on the other side the monetary side of the central bank trying to stimulate that same activity. >> every country has to make decisions about the tradeoff between how much you do before and how much you do after so if you do a lot of regulation before, you stop damage on the downside but you also stop the gains on the upside, so you may want to tolerate some damage on

the downside and say we'll deal with it after the fact. and that's what governments do. you always make that kind of a tradeoff, so i think the fed in terms of the regulations that they place on banks, in terms of what the fdic does, what the sec does, all of those things have to be taken into account. the question is whether they've gone too far, and i this i that's your issue, when you're looking at the situation right now and you're asking, well, gee, we got scared by the stuff that was going on in 2005-2006, have we gone back too far in the other direction. there's a good argument that we have. >> i was going to ask you about europe and about the conversation that you think ben bernanke is having with mario draghi and what some of the other board members are talking about internally. >> there's probably two conversations. one conversation is contingency planning, if there is a funding event, what do the central banks do to add liquidity. probably the bigger conversation is between governments so it's between the treasury, tim

geithner and his counterparts in europe because at some point to the extent that this crisis will be dealt with, it will have to do with governments actually spending money, writing checks, and that's not a liquidity question, it's a solvency question. >> do you think the fed today fully understands the counter party impacts on the banks that it regulates in terms of what could potentially happen in europe? you were there. >> that is a great question. if you look at the bas numbers, the bas has comprehensive international banking statistics numbers and if you look at the direct lending exposures of the u.s. banks to europe, they're small, and then there's this other category called derivatives and guarantees, and that's a much bigger number. now the banks will tell you this is all matched, it's hedged, we have a balanced book. does anybody really know for sure? i don't think so. >> that is a very sad way to start the morning but dino, thank you for coming in and sharing that perspective. appreciate it. when we come back this morning, she is the ceo of

newton investment management, $76 billion under management, now she wants to change the corporate world as well one board at a time. helena morrissey's plan to get more women on the boards of big business. and another top fund manager from the morning star investment conference, fidelity investment's bob brown will join us at 8:40 eastern. right now as we head to a break check out the "squawk box" market indicator and you'll see right now futures are indicated slightly higher. o o

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welcome back to "squawk box." futures right now up about 18 points, at least that's where they're indicated with the s&p up just under two. best buy increased its quarterly dividend one penny to 17 cents a share. now that you know that, plan your day accordingly, best buy up a penny. what's the yield now, becky? >> i haven't looked. >> i haven't noticed either. the old yield, it is a yield 3%, so 6% rise, almost up from 3.1, almost 3.2, 3.25%, because the

stock has done so awful the high for the year was only 32 but it's yielding a lot more now. it is not hard to find qualified women to serve on corporate boards but breaking the board room gender barrier is say different story. our next guest is making noise and britain's top bosses are listening. joining us is helena morrissey, founder of the 30% club, a group of chairmen and organizations committed to bringing more women into the board room and ceo of newton investment management and overseas $76 billion in assets under management. great to have you here today. >> thanks very much. >> i want to talk about the 30% club. before we do why don't we talk about what you're seeing in europe, what you think is the most likely outcome, and what it all means for the markets. >> i'm afraid i'm falling into the camp that says the eurozone was a flawed concept. it was doomed to fail, i'm afraid and of course we're seeing limping from one crisis

to another. we've somehow got to stand back from it and the euro leaders i think global leaders need to come up with a longer term solution, probably re-think the structure of the eurozone and either move to a closer federal state or else go their separate ways. >> can that happen, moving to a closer federal state fast enough to satisfy the markets? >> well i believe it could but i think it's going to take the individual leaders sort of transcending their differences. they have to have a different tone the way they talk in the media. at the moment no one believes what they say or think it's a short term sticking path to a solution. i think it's pretty near the end. >> one of the big problems has been the political leaders have changed so frequently. you don't have any -- with the exception of angela merkel, the key players have all been voted out by their constituencies. >> exactly. >> i think that's probably angela merkel's issue as she worries about getting voted out, too.

>> which is why we have to build could consensus. collaboration is an underutilized way of working. without this you get countries trying to achieve national interests but it should be thought of more broadly. you have huge youth unemployment, in greece it's nearly 60%. these are people's real lives and time to stop bickering and start thinking about what could change. >> i agree with you on your point about the fiscal union as a complement to the monetary union but some of the problems are country specific. unemployment in spain and portugal, little of that has to do with the lack of a fiscal union, it has to do wir and this policies, they have extreme labor market impediments to hiring, the kind of things that have been there for 30 years now and many of the problems spain is facing don't have a whole lot to do with the fiscal union. the bank situation, the housing

situation. this wasn't because they were passing the debt off to germany. >> no, but that's why you had this, try to have your cake and eat it, having in one sense joined at the hip with the eurozone and on the other hand running their own countries in their own way and that's incompatible, and it has to do, you know it could be that the solution is a northern europe tighter group whereby some of the so-called weaker countries can forge their own paths but that might be more humane, better, more managed solution rather than hoping we get through the next event and the neck one and the funding and what spain is going to do. that's not a long-term answer to all of this and it will drag down the world's economies, too. >> what happens in the markets in between now and then? >> volatile. one day things go up, one down. we have to pick stocks with good cash flows in sectors, consumer staples and health care that will tie in with them like the aging populations, will not depend on what happens in the eurozone.

>> what are some of the areas? >> i can't say but some of the companies in switzerland, roesh, novato, nestle, they aren't sexy names necessarily but they're dependable with high dividend yields. >> stay the course, look for good companies and don't worry about the headline risk? >> we worry about it for more human reasons i think. >> let's get back to the 30% club. what caused to you come up with this group and what kind of progress have you been making? >> it was out of frustration because i've been working on an internal initiative across europe and we were having great events, inspirational speakers but no difference in the numbers of women at the senior levels. i realized we were missing a measurable target. i don't believe in quotas and also involving men more. i approached the chairman of

companies and to my surprise some say we're frustrated because we've seen the difference having women a better balance of genders on our board and different types of people, not just men and women, more ethnicity, age, diversity and so forth and this makes for a more effective board room. we have 52 chairmen supporters and in a short spate of time this has moved to how do we affect change. >> i teach in a business school, and how much of this is on the supply side? right now, a third to 40% of our mbas are female, if you look back 30 years, the numbers were obviously much lower, so you are seeing the supply of very qualified female executives being enhanced. do you think this will straighten itself out over time or do you think it still needs pressure from groups like yours? >> it needs a lot of things to happen. this is a multifaceted problem, with more than one solution. it's great to have more women come through at the educated

stage but we do see a lot of attrition, particularly around the time people have children. we can't change the fact it's women that have children. we have to make sure the talent isn't wasted from the women's point of view and companies and economies. we've seen in britain this is more than a women's issue, it is a business issue and we can argue some of the crises we're seeing partly at least has to do with a sort of closed shop around who is managing things and the status quo hasn't worked. >> do you think if more women were involved we wouldn't have seen the 2008 financial crisis? >> lots of people are asking that, and i happen to think yes. i don't think all women it's a great idea. no one group should be just doing it. i think we need balance, we need different opinions. the fsa when they looked at what happened at royal bank of scotland did cite group think at the board and there wasn't enough challenge. >> you're not just talking about women, you're talking about people who aren't yes men.

>> this is prying the lid open on what's been the tight knit group of people running companies and countries. >> there is experimental evidence showing women are less likely to engage in high-risk activities. >> never seen that in myself really but anyway, i think you have to be ris acware, that's maybe what women to do. this can be a great career for women judged by performance and not out of -- >> i think we're uncomfortable with the generalizations. larry summers tried this once, but you've heard, do you hear women are less -- what? >> one of my colleagues at stanfo stanford, very accomplished -- >> i show you a bloomberg poll that has obama up 13 points. the obama white house said we're not taking that seriously. >> this is better science. >> is this like climate science?

wow. >> you don't want to have sweeping generalizations. there's a spectrum and people are people, but i do think, i see that women have a different approach, i think a better consensus. >> you could get rid of the old boy's club and get a new boy's club. >> i think if we are looking at reasons or a solution of how to change the environment, how to partly accept the fact that in a digital world as well young people are coming out to college again expect to make an intellectual contribution, any time, anyplace in the world, and companies have to think if i'm going to get the smartest, best people i have to change what it means to get to the top. that's what this is about. >> helena thank you for joining us today. >> thank you. coming up the closely watched weekly jobless claims numbers are due at 8:30 eastern, we'll bring you the data and market reaction and investment advice for your portfolio, we'll ask fidelity's bond boss how to get the most for your investment dollars.

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we're we're minutes away from the weekly jobless claims numbers as we head to break and we've been joined by the mud puppy's own steve liesman. there are the futures are now actually, futures are down by the -- who? >> mulan rouge. >> i keep getting the name wrong. stay with us. [ male announcer ] we imagined a vehicle

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welcome back to "squawk box" opinion we're seconds away from the closely watched weekly

jobless claims, rick santelli, jim yurio are standing by at the cme in chicago. >> and the numbers are 387,000, that would have been up 1,000 from last week's but last week's was revised from 86 to 89 so we're down 2,000. continuing claims hovering under 3.3 million, no significant changes there. you know, we're not above 400,000, but we're not below 350. i think that's pretty much the way people around here look at it. we're in somewhat of a range. i think others on the analytical side will express some disappointment but it's been a conte content, relationship between claims, layoffs and ultimate hiring which is the promised land we're all trying to get to. interest rates are moderating a bit, maybe on this number a basis point or two, the 30-year bond that's involved in

operation twist and of course is doing the best to the shield close to 2808 yesterday before the statement, it's hovering just around 270 and seems to be hunkering down over here. back to you guys. >> okay, rick, thanks. for more let's get to steve liesman the frontman for the mud slingers and also jim yurio of tjm institutional services. >> it's the moon custers and we're playing july 19th at allison's, 15 west 18th street. good night of music. it was not my intention to spend my time talking about my band but the economic data has decisively softened here and there's two% to the softening. the trajectory we were on headed down towards 350 is decidedly reversed and we didn't just go back to the 370s, we're up towards 308 and ed lazear talked about it earlier, there's

confirmation in the weakness of the jobs market in the j.o.l.t.s. survey, the job openings survey, where job openings plummeted. the other significance of the number is that we are in the survey week, this is the survey week. i don't know exactly where estimates are now for early july, i can look that up. the june report. i would think they would struggle to be above 100,000 at this point. >> really? >> 125 would be the optimistic numbers on the street right now. but hey, rick, can i ask you a question about twist yesterday? >> sure. >> i'm getting commentary from some of my guys in the bond market, yes, there are guys in the bond market who talk to me despite what others might think. the story is really going to affect the way the market trades. the fed will essentially have zero securities three years and under after the twist extension is done. they won't be able to buy the on the runs, meaning they'll have nothing to lend causing huge dislocation.

i always thought this was a reason they may not extend twist, they ended up doing it. what are you hearing about how this is going to affect the market, rick? >> i think these are the unintended consequences that some m.i.t. student down the road when he comes back and looks at these disaster programs they're going to see that corporate securities, when was thes last time we talked about big corporate issuance? there is liquids situation going on in corporates because the unintended consequences of are they going to put new jail for market making in corporates, ultimately slowing that down. we see that -- >> rick, i want to interrupt you. >> the fact, wait, 70% many issues. the short answer is it's a problem, yes, it's a big problem. >> i want to add to what you're saying. my trader friend points out that the volcker rule could have a negative effect. the big banks to make a market in the corporates, it was never liquid but if you layer the

volcker rule on top of that you could have another problem? >> ed, what do you think of this? sorry g ahead, rick. >> i wish that some of these people in congress and on these banking committees or their staff that writes this stuff would sit in a trading shop, watch corporates in the secondary markets inside large institutions is really a very necessary step. it is a bit obscure, try to get timely sales on your favorite ten-year corporate security for a week ago wednesday, i could get you a week ago wednesday eight years ago in this market, but that's also an issue. >> it's obscure but it's essential to the plumbing and the way the financial system works. >> yeah, and you know, obscure means it's highly profitable, and i don't mean to be weird here. >> that's the way it works. >> but that's the truth why. >> weigh in on the latest number, not a surprise, in line with expectations but it confirms the downward trend in the numbers we're seeing. >> there's no question this just

continues to bolster our view that the labor market is softening, and i never get particularly concerned about one number, but i sure get concerned when i see a trend and this looks like a trend. i mentioned earlier about the 2007, i remember in april and may of 2007 talking to ben, we used to have, monthly meetings but more often when things were problematic and we were both watching those numbers and i kept getting really nervous, because the ui claims were going up, going up, going up gradually but going up, and this smells to me like the same environment that we had then and that preceded some pretty bad events. >> you were talking to ben. it's ben bernanke. >> yes. sorry. >> what was the chairman's level of concern at that point? >> i think we never talked about interest rates. in fact, it was inappropriate for us to discuss interest rates so we would just talk about the general economic climate, and the views were, you know, at that time we didn't know what

was happening and i think in terms of where we were and where the economy was going, we all had a sense that it was softening and i think that there was some reluctance to accept it was softening as much as it did. by late 2007 we were already talking about some kind of fiscal stimulus. we did one in early 2008. i don't think it was particularly effective but that came much later and i think it did take some time to recognize it. >> we have a problem, becky, which is jim yurio is on the cnbc dole. he's collecting a check. >> i want to follow up with that. we'll get to that in a minute. going back to the numbers, if it took a while to recognize that and to see what was coming, do you think this bernanke and servels watching this, says fool me once shame on you, fool me twice shame on me. >> the environment is different.

ben bernanke said yesterday that we're not out of bullets and i think that's right, they're not out of bullets but the stuff they have left in the arsenal is weaker than 2007 because remember in 2007 we had significantly positive interest rates, so there was a long way to go. there was a lot that could have been done at that point. at this point it almost doesn't matter whether you recognize that we're headed in a bad direction. i think we are headed in a bad direction but i don't think there's a whole lot that can be done to make things effective. we talked about the fiscal cliff. i know steve you guys have talked about this ad nauseam, but there is a big problem on the tax side and i think that will be remedied but that's something we have to think about raising taxes right now is just not a good idea. >> let's bring in jim because steve's right, we're not letting you off the hook. >> he has to work for his living. >> thank you. this doesn't surprise any of us. the trend is softer and as far as the fed goes at the end of the day if all you have is rocks

and stones that's all you fight with. the fed said before the only real efficacy is from fiscal policy and structural changes and almost like fat chance we're getting any of that so let's throw things at the problem, whatever we have. the stock market is mildly disappointed that there was no expansion on the balance sheet but they assured us if it came to that we'll pump more money into the system. the oddest thing to me is how oil is completely imploding yet the stock market is holding in and that could only mean you're protected in the stock market. it tanks 25%, that's where the fed may step in. they don't care that oil is going down and don't care if gold is going down. >> jim i think it's the reason why oil is going down. if oil is going down because iran had come off the boil, it was more supply out there, that would be a happy reason for oil to go down. >> of course. >> oil is going down because of concern over not just the u.s. economy but the global economy. i'm reading more and more economists talking about global

recession and in that context i think extending twist is not commensurate with what's going on. >> not at all. oil is a more global story, that's why it's getting hammered. u.s. stocks, big caps with big balance sheets, look at the china pmi, weaker manufacturing number in germany and at the end of the day it's like the world's tallest midget, where else is the liquidity going to go than to help the u.s. companies. oil is not going to participate in that but u.s. companies may. >> i agree with you, steve, most of what we're seeing in the oil market is not a supply phenomenon it's a demand denom no phenomen phenomenon. you see it reflected in retail sales. these things tend to move in parallel and all moving in the wrong direction right now. >> okay. gentlemen, thank you very much. ed, rick, jim, and of course ed's going to be with us for the rest of the program. coming up, the best of the best fund managers there live from the morning star investing conference in chicago, coming up

next the president of fidelity's bond group, bob brown, after this bleak. ♪ break break are

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the welcome back to "squawk box." we were' going to get back to the morning star investments conference in chicago. tyler matheson is here with another special guest. ty? >> becky, thank you very much. my special guest is bob brown who is the president of the bond group at fidelity. it's not just any bond group. it has about $250 billion of

your investable money that they manage. bob, welcome. good to have you with us. >> thank you. >> let's talk about what happened yesterday and that is of course the fed decision, number one, and the fed commentary, number two. how do you interpret that and then apply that in what you're doing at your portfolios? >> so for me there are two key takeaways. the tone of the statement with respect to essentially the downgrade of gdp forecast of basis points for 2012-2015 and the forecast for basis points for 2012 and that the fed stands ready to expand their balance sheet if economic conditions do not improve. for our funds we've had -- >> is that like waving an all clear flag for investors who put money in and the biggest risk is rising inflation and rising interest rates. what you seem to be saying to me is the fed has taken that completely off the table. >> we are not investing for rise

in rates any time soon so i look out two to three quarters from that perspective unless economic conditions improve. we view bonds as a safe haven in terms of retailer institutional investors, portfolio diversification. if you thought ten-year was rich at 3% and 2% you missed another run so we view it as a good diversification tool. we've se we have seen that in our funds. >> there's been tremendous growth in the market over the past few years. your company almost doubled assets in bond funds. lot of people say boy that's exactly the wrong thing for investors to be doing. they're coming in at the top, there's a bond bubble, watch out. >> we are not expecting a move in rates any time soon and what we've seen with respect to the baby boomer crowd is a focus on income generation and wealth preservation and you can get that through bond funds and we have really structured our funds to be i would say risk offtrade

so high quality securities and sector selection. >> two risks looming out there are very real, one would be the fiscal cliff, the tax changes that might come, the budget cuts that may come after the first of the year, that's number one. number two would be the turmoil in europe. how do you factor that into what you're doing? >> europe is a significant concern. people need to remember that the euro is roughly 2 lly 1/20 of t of the u.s. dollar and during this economic crisis and downturn it's bringing out structural flaws in the euro. number of them, it's a monetary union without a fiscal union. you have essentially 17 different business models across 17 different countries during periods of economic stress, and you have significant competitive disparities and differences in unit labor costs. you have a monetary union without a federal bank union. you have undercapitalized banks and most importantly from my perspective you don't have a one

area for a crisis center. >> how do you take the variables and apply that across your portfol portfolios? what do you do paced on that? you say you're trying to avoid risk, in a risk off position, that means what? >> using our fundamental research to find those sector and idiosyncratic alpha opportunities and we're staying out of europe from a sovereign perspective and industry perspective looking at australia, canada, sweden and also other sectors of the market, the insurance market, the financial ek issor market and again the focus here is a high quality trade. >> let me change gears with a final question. fidelity has been known for decades as an equity-driven shop, basically a growth oriented investment shop, but i sense that fidelity, just like much of the fund industry, is pivoting as baby boomers move from the growth or capital accumulation part of their investment careers to income and distribution part. is that a fair assumption?

>> we are definitely seeing that focus from a retail and institutional investors from an income generation wealth preservation, but there is also the need for some level of capital appreciation in our equity team in boston, and across the globe is doing a phenomenal job delivering consistent performance for the last leg of the stool. >> bob brown continued good luck to you. thank you for being here. we go back to headquarters and the "squawk" team. >> ty thank you. we'll see you throughout the day. >> the glasses are going. the bonds looking at the interest rates and need a closer look. you don't want glasses if you're steven tyler, you don't see things too clearly. the view from wall street, heading down to the new york stock exchange next. [ tires squeal, engine revs ]

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welcome back to "squawk box." down to the new york stock exchange. melissa, jim and david are

standing by. >> i just spill mid coued my co >> can we get a shot? it's like a lake. >> we have a shot. >> lawsuit. lawsuit time. was it hot? >> careful, melissa. >> i'm going to back up now. >> the first time i've ever worn a cream-colored shirt. about to become cream and coffee. >> i've done this before. i feel for you guys. >> i did it to my own self. i did it to my own coffee. it just happened to happen before you guys came to us. this is live tv. this is what happens. >> what do you guys think of the jobless claim? >> the jobless claim is still hanging in there. the eddie murray story. we're agast. if you have info, send it in. the birth of a new drug company. major drug company. onyx has gone from being a speculative to being a major. >> 37% jump. >> huge pop. >> all the analysts come out

with their price targets. unexpected, i guess, strong support from the fda. >> joe kernen, you know this. when you get the panels being so overwhelming, you've got something really incredible. >> absolutely. how much is it up? that's amazing. >> 37%. >> that is amazing. like i said, it's almost like when we say tech heavy nasdaq. that's always the next sentence. do you remember that time, cramer, i couldn't remember what it was. there was a time where it got a big thumb's up from the panel. the full fda did not do it. i can't remember which one that was. it's very rare. >> was it ru 40 for devlon mcgregor. >> you're doing it again. >> you know how much trouble i got in from the "new york times" because i made that joke? >> i remember that. >> i did opera man. i know. i know. >> jim, we saw you tweeting back

around 4:00 in the morning about oil prices, how they could fall below 80 bucks. here we go. $80.40. >> i listened to your discussion this morning with my friend dan dicker whom i think was basically saying he thought it was going to bottom a little bit higher. this is the most important thing the consumer can possibly have. oil stocks, unless you've got some yield you're going to get crush zb crushed. >> we'll see you in just a few minutes. coming up, more from my guest host ed lazear. former economic adviser to president george w. bush, after the break. tomorrow on "squawk tomorrow on "squawk box." with so much uncertainty in the market, where should you invest? our guest host, pimco portfolio manager tony crescenzi. plus, advice from the world's top fund managers live from the morningstar investment

conference in chicago. "squawk box" tomorrow at 6:00 a.m. eastern.

♪music plays throughout summer in new york state has something different for everyone to love. discover what you love. visit ilovenewyork.com to plan your summer trip now. onyx pharmaceuticals is our

stock of the day. indicated up almost 40%. the company received a positive fda panel recommendation for an experimental blood cancer drug. our guest host this morning has been ed lazear, former chairman of the president's council of economic advisers. to summarize some of the stuff you said already in the last two hours, ed, is that it's not 50/50 for a recession in 2013. but you have certainly gotten more wary of that possibility. would you say 30/70? something like that? >> yeah. >> much higher than we thought. >> definitely higher. >> it implies less than 2% growth. >> things are worse than last time i was on. >> there are some things to be optimistic about? >> yeah. in terms of long-run prospects for this country there are plenty of things we can think of on the policy side and in terms of the kind of technology and human capital we have that are really strong things for the united states. think some of the things, by the way, we should be working on, we should be bringing in more high quality human capital that's

complementary to what we're doing rather than substitutable for what we're doing. if you think about policy, look, you know, we know that in terms of long-run growth, there are certain well-known things that work. these are low taxes, you know, positive environment for business, high trade policy, good trade policy. these are the standard things. it's what everybody talks about. we've been talking about it for years. everybody kind of goes to sleep when you mention these things. but they're the things that work. and what we haven't done, i think, over the past few years is we haven't focused on the long run. now we're in the long run. we go back to 2009, we say, you know, we were in crisis then. you know, we needed to do something in the short run. perhaps. but if it worked, it's not clear to me that it did, but if it worked it worked for only a very short period of time. now we're suffering the effects of not looking out over the longer horizon. that's where we are. >> i would say you couldn't ask every average man on the street if he's heard of simpson-bowles.

all of this acrimony in washington, the one positive it is front and center that we need to do something. maybe that means eventually these guys get it together. >> absolutely. that's a big positive. i actually view the environment in washington as being a good one right now. i know that sounds totally contrary. when in our lifetimes can you think of the most important issue in the election campaign being the budget and the economy? i mean, that's really boring stuff. that's the kind of stuff that only guys like me get excited about. now that's really important for the economy. it's the most important issue right now. >> your leg doesn't actually tingle. just as excited as i've seen you when you've been on the show. thank you for joining us. >> my pleasure. thanks for having me. >> i appreciate you being on the set. >> it's been fun. >> maybe i'll bring the dog -- >> bring the dog tomorrow. bring your dog to workday