let's get you up to speed. spain paying the highest rate since november today to sell its shor short-term debt. the treasury selling nearly 3.1 billion euros of debt that was slightly above its target amount but the auction was met with falling demand from the country's struggling banks, probably mo surprise. yesterday moody's slashed ratings on 28 spanish banks. italy, by the way, also holding a key short-term debt auction today. the country's zero coupon bond yield was the highest since december in this sale. and officials in cyprus say the mediterranean island may need a bailout up to 10 billion euros more than hatch the size of its economy. the fifth eurozone can country to seek help from europe. investor expectations are pretty quickly receding on this. there's a document prepared for the gathering suggesting that the eurozone could create a treasury for the single currency. and issue euro bonds in the meantime. that report was prepared by the

heads of the european commission, ecb and euro group. trying to figure out what the difference is for all of them. first michelle has this morning's top corporate headlines. news corp. considering splitting it self in two. the move would separate publishing assets from the entertainment businesses. rupert murdoch previously opposed such a move, but he is said to have recently warmed to the idea. i wonder what's changed? facebook naming cheryl sandberg the director. she becomes the first woman on the board that includes seven men. and for years sandberg has been one of the most vocal. starbucks reportedly plans to open about 40 stores in india. the economic times says the venture will first open in mumbai and has a budget of $100 million. thanks, michelle. i have more information on the news cor ction potential

transaction. i want to walk everybody through what's happening here. we may get some news as early as the end of this week on the potential split of the publishing assets and the media business. the publishing business now would be "the wall street journal," "the times of london" and the australian assets in terms of newspaper assets. >> much smaller. >> so now we're going to have the century fox film studio. we're going to have the fox broadcasting fet work and we have the fox news channel, also the fox business channel and all of those associated assets separately. now the big question does this create additional value ala viacom? we may pick up a screen here. >> does it do that or protect their broadcasting license from being threatened to be taken away from them? >> there are two issues. one is who would end up owning all of this. the murdoch family will control

both and that's a huge issue related to -- >> by splitting the companies -- >> it may not fund amountally shift the balance. or potentially even other deals that could be hampered by the news publishing, the newspaper assets unclear whether that actually changes the game. this is much more from what i understand and the people i've been talk iing to working on ha transaction much more about the potential value -- >> i do not believe that. that is the biggest but much of bs. do you really believe that? >> go back and look at what redstone did and call me. >> but why now? he was opposed to it six months ago and a year ago. what's changed in the last year? >> i don't want to suggest the hacking scandal was not part of it. >> it sounds like a good way to incompetence late the license. >> exactly. >> to insulate them but unclear whether it would -- and this is because it's not clear -- it's not even not clear, it's not going to happen. rupert murdoch is not giving up control fl the newspaper assets and is not giving up -- >> but rupert murdoch has taken

incredible stems to stem the losses on this, by closing down the one publication, okay, we're going to try to stop the bleeding and staunch this. take care of this mess and try to insulate the rest of the company. >> i'm not disagreeing with you, all i'm saying is if you talk to the people in the room, they are suggesting that ultimate ly it' not clear to them simply separating these things will fundamentally shift the balance of power. >> i'm sure it's not just like closing the publication was not enough to shut things down. >> the only reason i'm pushing on the viacom stream is because that from a strategic rationale in terms of long-term that's what they're playing against. >> it's absolutely a worthy question. >> it's a worthy question. i'm trying to provide what i think is the answer based on sources i'm talking to. >> i looked at it because as a former "wall street journal" reporter i looked at it, oh, no, now they're going to get put into the publishing side, the slow growing side, although with cbs it turned out to be a different story and it was okay for the valuation on that. >> if we could pick up some

charts, and i don't know if we can get them to crisscross, if you can show what happened to viacom -- >> the slow growing one turned out to be the big stock winner at the end of the day. >> absolutely. and so it's possible to turn around. i doubt the newspaper business will become a winner. >> but just to point in situations that are similar to the past, conventional wisdom didn't always work out to be the right call. >> the first year or so the stock didn't move at all. they were giving redstone a hard time. this makes no sense. there are people on the board who have been pushing this, the shareholders have been pushing this idea before the hacking scandal ever began and that's at some level i do believe where we are. >> should the "wall street journal" and "american eidol" g together? think about it. no "american idol" for you. done. >> it would be weird to have "the journal" splitting off

because after they finally put this together, they're all in the same building and you have "the journal" reporters able to go on your broadcast and come back and forth to split it up. >> if it's all still owned by murdoch and this goes back to the issue of if murdoch will own both franchises anyway does it change any of the licensing issues? >> it probably gives flexibility in a way down the road for other thin things. >> for other things but in the immediate term it's likely a lot of the things would stay together. all right. a check on the markets this morning. yesterday was a big down day for the markets. in fact a lot of mondays have had rough landings recently. eight of the last nine have been down. you can see this morning, though, we are up about 33 points. again, though, there was a pullback of more than a percent. we are talking about several down days in a row. four out of five days down for the markets. this morning we'll keep an eye on what's been happening in europe, also keeping an eye on oil prices this morning. at this point oil is, drum roll, up about 21 cents. still well below 80 bucks at

$79.42. ten year is yield iing 1.628%. the dollar/yen at 79.37. gold prices this morning are at this point -- well, they're flat, down about $3 to $1,585 an ounce. kelly evans is standing by. lots of cup tries borrowing lots of money at very high rates. kelly? michelle, that pretty much sums it up. you could also say that we now have five countries that need eu bailouts and have applied for them with cyprus. its figures revised up to suggest it might need 10 billion euros, i think that amounts to half its g it dp. in any case all of this means stocks are kind of certificasear direction across the region. as you can see behind me decliners outpacing advancers by a 7 to 3 margin. broadly speaking we're only down -- in fact we just ticked back up on the euro stoxx 600.

take a closer look at what's happening, back in the green up 0.1%. the ftse in italy up nearly a quarter of a percent. xetra dax in germany up about 0.1%. the same thing for the foot the si 100 in the uk. this may have something to do with comments out from barroso talking about saying there needs to be a sense of urgency. yes, we should have realistic expectation abouts what to expe expect, but he expects fiscal union will be happening in the background here. so as investors get more confidence there will be something like a redemption fund propo proposed or some measures that come out of the meeting, that may be supporting sentiment. otherwise, though, a little bit of a warning signal from bond markets this morning especially in italy as i mentioned where the yield in green here is back above 6%. 6.071% to be exact. retail sales figures fell nearly

7% on the year. spain is up at 6.7% after paying 4.5% to borrow six months' time. france and the german bund hanging in there better. just quickly a look at where the euro/dollar is trading because that, of course, gives you a sense what to expect when we hand it off, up to 125.07. amazing we're still at these levels. a quick look at crude as we wait for the consumer can confidence figures in the u.s., though, prices back up anywhere from 0.2% to 1% on brent as we have some comments out of the middle east, turkey and syria perhaps worrying some traders. the question is whether we have oil rising because of stronger demand or because of supply worries. and with that i'll hand it back to you. >> kelly, thank you very much. we have a first on kr cnbc report right now. we have the scoop on a major financial firm's second half outlook even before the clients do. portfolio manager at a unit of prudential, his team has about

$40 billion in assets under management. ed, how are you feeling? >> cautious. >> yeah? >> i still very much think in the long run stocks are the place to be but in the long run we're all dead, which is a memorable say of saying it's not easy necessarily to get from the short run to the long run. the risks are still on the down side. >> that's what a lot of investors are thinking, we have seen a significant pullback. we've seen stocks wake up and worry about what's happening in europe. it's not just europe but it's the global slowdown, the potential for a global slowdown here. do you think that's what's happening? >> i think there's a global crisis of confidence that affects consumers, business people and political leaders and it's not easy to figure out how we're going to get from where we are to a more sustainable future especially true in euram. the economic data in the united states, started off on a strong foot again and again has weakened. china is weak and india is weak. brazil is weak. although i think we will get through this, it's not going to

be easy. i think we'll probably have a few more shocks along the way. >> do you 0 think of any sell-off as a potential for buying in? obviously we don't know how the problems will get resolved but by the time we do, it will be too late to jump into the market. >> i'm not too worried about being left behind at the moment. it's possible, of course, there will be a shift in sentiment or a shift in political leadership out of europe that will change things dramatically. i hope that's the case. because i can't predict that, and there are some things -- i think i have some ability to understand and predict but the shifting winds of politics and political will is less likely. >> something this morning that berlusconi was going to run on a platform of bringing back the lira. what would that do? >> getting from the current euro situation to a more sustainable one is going to be very messy. >> the lira is suggesting the

end of the euro as we know it. >> if spain and italy and greece all exit, it certainly doesn't really exist anymore. there would be some new currency across all of europe. and although that might work in the very long run getting there would be very, very messy and difficult like lehman only on steroids. so i certainly hope that idea -- >> but you're not talking about shocks to the system meaning 100 or 200 point sell-offs but much bigger concerns? >> i think if you saw a breakup, a messy breakup of the eurozone we would be talking much bigger concerns than that. >> what does an investor do in the meantime? you can't put your money in a bank and hope that you're going to earn 0% interest. >> we're trying to stay as broadly diversified as we possibly can. with every mandate sticking close to benchmarks, a little bit more cautiously oriented than in the past. and trying to keep the money spread as broadly as it can though i don't like treasury

bonds from a long -term perspective. >> really? >> it really has been a good diversifier. you can zero them out in the portfolio but i think you'll get better income. >> the only thing that's not correlated, right? everything moves together. what do you do when everything is falling? there's nothing -- >> even as -- >> when you're broadly diversified everything falls except for treasuries. >> in some accounts we take, for example, long position. mixed futures because vix has been a decent hedge against down side for the equity market. >> and you're looking for more volatility? >> i think it will continue for a long time. so our colleagues in prudential annuities say why don't you let us worry and we'll give you a steady stream of returns. on fixed income believe why don't you put money in real estate where you get an income that's comparable or out of the bond market with some protection, some upside

potenti potential. broad diversification, true that in this world a lot of things that don't move together in the long run have moved together in the last couple of years but by trying to spread the money out as widely as you can and be as cautious as you can you would be able to live to fight another day. >> ed, you've been around for a while. what does it feel like to you? is there a time it remind you of or is it a whole new ball game? >> it remind me of the 1930s. >> you haven't been around that long. >> i think we're wrestling with some of the same issues. it's a very, very difficult situation. there's a lot of disagreement about what happened in the 1930s and how that eventually ended and whether that's applicable to guide policy now or take an entirely different route. this is not an easy problem to solve but in the aftermath of the financial crisis just as you saw in the 1930s, it's difficult to drag yourself out of and although we look like we're making progress, now we have a global slowdown, not yet a recession, i don't think, but still a global slowdown which making policymakers very

nervous. >> i want to thank you very much for coming in today. great seeing you. >> coming up, why mac users might be paying more for hotels on orbitz. doing business in debt plagued europe right now. but first, are sports news, of course. second seed rafael nadal and victoria highlight the day at women wimbledon. number one seed novak djokovic and sharapova won yesterday. first-time champ -- five-time champ venus williams lost. >> big, big loss for her. i love being out there. one of the great events of the year. >> it's tennis, right? >> tennis. in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.

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welcome back, everybody. take a look at u.s. he cequity futures are indicating a prettier picture than yesterday. right now the dow futures look like they opened by 40 points after a triple digit loss yesterday. rate now we're also looking at headlines. orbitz is steering mac users to pricier options. executives say research has found mac users actual ly spend as much as 30% more a night on hotels than pc users do. no stigma attached to any of this but it's shading its offerings appropriately. it is not showing different prices for the same room to different users but pricier

rooms to different users but again, guys, it gets to the whole question of privacy and knowing which platform you're coming in on and then assuming a lot of different things. i can hear -- >> pcs are ubiquitous. mac only has 8% market share on computers. >> i think they are classier -- >> they're more expensive. to buy a mac is to spend at least $1,000. >> am i missing -- am i missing the other hotels? >> you can find them. they're stacked differently. >> the mac users get pushed to the more expensive stuff. >> not me. >> the super 8? today's national forecast, maria larosa? >> reporter: our big headline today across the southeast

tropical storm debby still hanging on, winds at 45 miles an hour, crawling to the east at 3 miles an hour. you can see how right loaded this storm is still. the circulation still offshore but all of that rain, all of that tropical moisture pouring down on florida. some spots have seen two, three feet of rain since it all began this weekend. we could see an additional 5 inches so this is dangerous, life threatening weather in florida the next few days. another life threatening situation the heat. everywhere you see a dot, potential record highs from texas up to south dakota. temperatures approaching 100 degrees in places like corpus christi, dodge city 111. we had already seen some state record highs fall in nebraska and arkansas. enjoy today in the northeast as high pressure builds in. the heat moves in later this week. back to you. >> thanks so much. let's talk europe on the other side of the pond, doing business in europe these days isn't that easy. a cloud of uncertainty hanging over a number of debt plagued countries. our next guest is the cfo of siemens. it's great to have you on the

show this morning. we had jim o'neill of goldman sachs on yesterday and he said that a number of multinational companies are using europe as an excuse. that actually the problems in europe aren't as bad as they're being made out to but the multinationals, you see procter & gamble, a number of other companies take down some of the earnings forecasts and point to europe. he says they're pointing in the wrong direction. what do you make of that, joe? >> i don't know about the companies which have been nam named -- the fact of the matter is that we feel good about it, we are doing business. this is about the united states. so the ones who are only in europe, obviously do have some challenges to face and that's what they need to get over with to run the company well and in general i wouldn't be that negative about europe. they have a challenge to find the way they want to be at as a unified europe, as a powerful

europe. after all this economy is the second biggest economy in the world after the united states. so they have a job to do to solve it. >> joe, when you look at your own business, and i imagine that you guys have mapped out what happens if greece leaves the eurozone and what the implications are and what happens to spain and what happens to italy, what does it look like inside the corner office of siemens on those issues? >> i believe there's no single european issue which could be unified for all the european countries. i mean, greece has lost its x competitiveness about 20 years ago and they have been struggling since then to come back. they have some tail wind of interest rates cut when they joined the european union but it's a long way to go and in all honesty for us greece is not the place to be and can do a lot of business. it's quite different in spain and italy.

italy, after all, is still one of the richest economies in europe and actually in the world. so the private debt to g it dp in italy is much different than germany. have to collect the taxes and will be fine. because they have x competitiveness, they are strong in industrial environments especially the north. >> can you explain when you're doing business in greece and you still do it even though it's not the growth place and you want to look at other places, as a cfo managing for cash flow, managing to keep your exposure low in case something happens, i assume you're doing that. can you give us a accepts of the logistics of how that works? >> sure we do. but as the cfo you want to focus on the material matters you have in the company. in all due respect greece is a great country. it has nice islands but the business in greece for siemens and many other companies is

quite rather low. just to give you a flavor if you auch about siemens only 6% of our revenue is in the so-called former fixed economies which is italy, spain, ireland, portugal and greece. so it is not that big of a deal in all honesty in the greater scheme of things. needs to worry more about italy and spain than about greece and portugal. so, i mean, look, we are fact touring our revenues into greek environments currently in europe and if they are bail out of the euro then we factor them in whatever they have. we just move on and focus on the greater scheme of things. >> do this for me. what kind of slowdown have you seen? is there a slowdown? people talk about the uncertainty cloud hanging out all over this. and the last piece is do you look at this and consider there to be a lehman moment, if you will, and what will it do to

your business when you map out what it could do to the business throughout europe, in germany, france, uk, across the board. yes. if you go after plan "b," you need to make sure that your assets are being protected. and we have done a lot of actions, you know, behind in the back office to make sure that our assets are protected. >> for example, joe, what have you done? >> what you do is basically make sure that your net assets in those countries which are at stake, kind of in that local environment so if push comes to shove there would be an equal distribution between debt and equity. >> joe, we're going to leave it there. we thank you for your perspective and will talk to you soon. >> thanks. still to come this morning we have more of the day's top stories plus the early read on the trading day ahead courtesy

of kevin and his friend in the future pitts. a rare hour long conversation with superstar blackstone chairman and ceo steve schwarzman. as we head to a break, take a look at yesterday's winners and losers. >> surely you can't be serious. >> i am serious. as we head to a break, take a

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morning, good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross-sorkin and michelle caruso cabrera. we are playing all the music that joe hates. he hates steve miller and the eagles, too. he has a very big hate list in terms of music. >> are you shocked? >> if you have any requests you want to send in, anything from the boss -- let's see, go ahead, we'll keep it going. in our headlines china's exports growth in june is matching the pace seen back in may. and the commerce minister says it will pick up in coming months predicting that the country can meet its full year target of boosting imports by 10%. turkey's central bank raising its reported gold holdings by 5.7 tons last month, the late nest a string of countries to increase reserves this year. and on the u.s. economic front today standard & poor's releasing the case-shiller price

index. a few things for the market to be on the lookout for. a check on the markets so far this morning. futures right now are indicating a slightly positive open after the big sell-off that we saw yesterday. the dow jones industrial average by a third of a percent. the nasdaq by a third of a percent. oil three days in a row below 80 bucks a barrel. $79.41. higher now by 17 cents. weigh saw some buying in yesterday's sell-off, 1.68 is the yield on the ten year. the dollar versus the euro, the yen and the pound this morning is mixed. absolutely flat against the euro. gosh, i've never seen that. yen, you get 79.33 and as for gold, pretty flat. >> oh, boy. >> it is lower by almost $3 at $1,585.

to the futures pits, hey, kevin. >> reporter: good morning. >> good morning. pretty ugly day yesterday. we seem to be leveling off today. what will drive the markets? why did we fall so sharply today and why are we recovering today? >> right. good point that you just ran down on the currencies. i think you have to watch the yen had morning and particularly pugh tours are higher. the other thing that traders i've spoken before about, we don't like to see yesterday's move end with a higher opening this morning so there will be vulnerability. >> why not? >> you like it to see it end coming from down. you like to see the market come in on fear and leave on better feelings. so the higher opening, no one wants to pay up to end the trade is the way i would say it. so watch that for a little bit more weakness. at least early in the session. >> the price of oil below $80, is that a good thing or is that a bad thing? >> well, i've been on the rec d

record -- i'm always in favor of cheap oil, so i never bought into it. i will point out something that shows kind of the sophomoric kind of real causation trade. corn, up yesterday. that started to drag oil up. then you heard some middle east rumblings. so as oil came back you actually saw the dollar move and equity prices rallied. so on a very short micro frame you could see some of this silliness just starts to go through the market. in other words people were buying equity because oil was going up because there was trouble in the middle east. so none of that is going to hold up over the medium term. >> so looking at the dow jones industrial average, what are you thinking here the next cull of months as we try to get through the summer filled with all these european summits to save the euro one after the other, i'm sure? >> the sum earp of summits. the big key there obviously who is suborder nated. that will be the big decision but, again, we've been more constructive. we like to buy into the fear. i would say that you can't have

a crisis where everyone is looking and so we are less enamored with the real terrorists coming from europe but we are definitely upping our middle east problems. we don't like what's going on with turkey. >> and china, too, i would imagine. >> obviously the elections in egypt, too. >> and maybe some uncertainty about china's economy. subordination is when this big european fund starts to step in and buy bank bonds, et cetera, where is the average investor going to end up and are we going to get pushed lower or be even with them? >> the capital structure stood on its head. you can see in the spanish yields in today's auction today that people are stepping back because they feel they're behind those facilities. that's going to be the closed door negotiations to see if they could put them on equal footing. >> got it. kevin, good to see you that morning, thanks. if you have any comments or questions about anything you see here on "squawk" e-mail us.

when we come back, he writes the must-read note for anyone who does business on wall street or in washington. ben white joins us with the morning money. y. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade.

the the dow looks like it would open up higher with the nasdaq and s&p 500. also a couple of interesting op-eds in the paper this morning. in the "ft" a conversation we've had around this table and we've had this gentleman on the set. this morning writing controversially that the u.s. worked hard to create the american dream of opportunity, but today that dream is a myth.

he argues that unequality is greater in the u.s. han ever before and president obama plans to preserve and increase funding in programs that help middle and lower class americans. it goes to the issue we keep talking to with people like warren buffett who say you could be born anywhere, you would be born here. other people are questioning the dream and upward mobility. joe is not here to suggest that upward mobility is alive and well. >> it is absolutely alive and well in this country. there's just no where else in the world regardless of who your parents are and where you were born you can still make it here -- and i'm not saying there are not hurdles but compared to anywhere else in the world. they've done surveys of a lot of european countries and ask you who is in control of your life, are you in control of your life or stuck with the society you live in and the united states, the vast majority of americans come back and say i am no control of my destiny and 75% of germans say i have no choice.

>> i think the issue is the american dream morphed into the american entitlement dream and that may not be alive and well in the future. >> andrew, wow. >> maybe not entitlements in the way you're thinking but leave it to beaver american dream that everybody who goes to school gets a house, two kids and a dog and -- >> the promise of a job for life. >> a nice job for life and at 65 you go et to retire. that dream -- and that's different than people who think they can become the next, that american dream is still alive. >> you should write a column. >> the separate issue of the paint by numbers dream where it's just all going to work out is harder. >> and that's partly because we need more and more education to get a good job to hold on to things and you can see that in the unemployment numbers. you should write a column. >> i think that will be next week. it could be bad medicine for the landmark health care law. the supreme court is expected to unveil its ruling on thursday. ben white is following this medical drama and more for

politico's morning money. he joins us now on set. >> my favorite. >> they faked us out yesterday. we all thought we were getting this announcement and i don't blame them. >> don't they know we planned the whole show? cable tv was waiting. >> they know how to hype a story. >> they do. i don't blame them. i would have held on to it then, too. when you look at what happened with the immigration ruling, does that give anybody in washington sort of thinking, okay, i know what will happen on the next ruling? >> no,, it doesn't really. nobody knows. the basic thought is that it's going to get struck down, the health care law. >> the individual mandates. >> the individual mandate piece of it. what pieces are left standing after that, can they sever the mandate from other aspects of the law. it calls into question the rest of the law. if that happens, that's a big problem for the president. that's a signature achievement of his first term, that's not a good thing for this white house. >> why did the conventional wisdom get to this? that's what i've been trying to figure out. >> the ideological breakdown of

the court and the thought it's going to go 5-4 and justice kennedy will view this as unconstitution. there are those court watchers who say scalia could go the other way. there's precedence he's ruled on the commerce clause and other areas where he could uphold this individual mandate. so it's not set in stone but it's generally thought that it's likely to go down based on the oral argument. >> there's some political thought if the individual m mandate was thrown out, it actually galvanizes the support for the election. do you buy that and why? >> i don't necessarily buy it. it basically says this is what i spent the first portion of my term. instead of laser like focus on the economy, i decided to do health care reform. i did it in a way that left it vulnerable to the court tossing it out. so you lose that. there is the argument the left gets fifrd fired up and says the high court is trying to take down another element of a great society kind of program and we need to get behind this president and fight even harder.

i don't know i necessarily believe that. the headline is president obama's chief accomplishment of his first term is no longer in existence and that's nothing but a negative. >> if the conventional wisdom doesn't go that way and the mandate stands, does that mean you don't go out and buy the other side of the argument which is the conservatives would come out in full force to try to defeat it in the election too? >> it's possible that could happen and i think it probably would galvanize them to a certain degree. it would be demoralizing because there is this general expectation it's going down. it would be sort of shock through the conservative world that it doesn't happen. maybe it fires them up for the fall. >> it sets up a huge battle in congress about trying to repeal it. >> you talked to a lot of lobbyists. lobbyists generally, whether it's insurance companies or hospitals, if the single mandate falls apart, if this whole thing collapses, what do they end up lobbying for? >> that's a very good question. i guess they end up lobbying for, you know -- they will just

be happy to see an increase in insurance rates. >> ezequiel told us yesterday you go state by state and try to convince each state to go with an individual mandate because massachusetts -- >> but is it bad news? >> it's a state by state issue with which is good for lobbying firms who like to lobby in every state and rack up a lot of bills for their state legislature lobbyists. in a way it's a win for them. there's no situation in which washington lobbyists lose. >> the bigger government gets, the more lobbyists make. >> and they continue to do that. >> how are things shaping up and feeling just in terms of the economy right now and how people are kind of trading on this in terms of what it means for the election in november? >> right. we're sort of, again, this tipping point do we do what we did in 2010-2011 which is go south again with the jobs numbers? does europe bring us down? there's a lot of high stakes on this eu summit this weekend. do they come up with the brand

solution which doesn't look like they will because the germans once again are opposed to any kind of sweeping bailout of all of europe. so i think the conventional wisdom is the economy is softening again. we'll continue to soften. it's not going to fall off a cliff. we keep getting job numbers in the 50,000 to 100,000 range. we stay above 8% or right at 8% which is basically, you know, the likelihood of an obama loss based on that or a very narrow win. there's not any momentum in the economy that will sweep him to a second term. we're going to be right on the edge. >> congratulations on losing 50 poun pounds. >> thank you very much. it's all clean living. >> you look great. thank you for coming in. great to see you. >> thank you. coming up, live to ride, ride to squawk. harley-davidson ceo pulls into the set to talk business and the state of the american consumer and then in the next hour we've got a big rare interview with pioneer black stone chairman and ceo steve schwarzman who will join us as our guest host at

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welcome back. making headlines this morning senators involved in marathon talks on the transportation bill say they are close to a compromise with house republicans. at issue, a two-year deal for funding u.s. roads, bridges, and rail projects. there is a pry day deadline to finish negotiations. no word on whether the potential

deal would include a measure to improve the canada to texas keystone oil pipeline. harley-davidson, one of america's most -- is one of america's most america's most iconic brands and its stock is up more than 20% so far this year. keith wendell is the company's chairman and ceo. thank you for being here. >> thank you for having me. >> you were saying you didn't bike here this morning. >> no, we didn't. >> how is business going? >> it's going pretty well. we've had sequential sales gains the last several quarters and the first quarter of this year we had strong sales so we felt pretty good about that. >> can you give us some context? i'm assuming that the height of your sales was during the credit bubble 2005-2006. are you back to those levels again in. >> no. actually when the credit crisis hit -- >> you guys got hit hard. >> we lagged a little bit going into it, but by april/may of 2009 our sales were off about

40% from the high point. so it was pretty significant. >> and when you think about your business relative to watching some of the automobilemakers, does it track completely? >> it was surprising to me. i was joining the company in may 26009 actually and the car companies were down earlier in that year about 35% to 40% and harley was off about 10, and immediately after i joined like one day later with he fell to about 35% to 40%, too, so it was a shock. >> tough stuff. >> to in michelle's point, the credit bubble made it so people had an easier time to take money out and get a bike. >> that's been a big thing for us because i think folks did take out home equity loans and buy boats or motor homes or motorcycles and that sort of went away. i do think that for the last

couple years people have become net savers again and have sort of paid down some of their debt, so i think we saw some pent up demand that occurred in the first quarter along with i think maybe a pull forward from the extremely warm winter that we had around the country. >> i read in the notes you didn't want harley-davidson to go the way of gm. that means what, and you did what as a result? >> well, i mean, that was just an example, because -- >> pension reform, health care reform? >> the fact that you had this great company with great market share position around the world and great brands and then found itself, you know, in front of the senate banking committee, right, looking for at that time what i guess we called the bailout, right, and so harley-davidson is really sort of a precious, i think, iconic american brand. it's been around for 110 years

as of next year, and you know, it's the idea of making sure that we protect that brand and that we don't do things that erode the brand value. >> keith unions. >> yes. >> unions and manufacturing, good, bad? >> well, i think -- i've worked in all kinds of environments, right, and i've worked in union environments. we have union labor in our plants today. we have a great relationship with our unions. our folks have worked with us, so i think it's what you make it. it's how, it's whether you can develop the trust and respect for each other and make sure that you're always doing the right things. >> have you had to cut their benefits? >> we did. we went through some, i would consider some very difficult negotiations, just a few years ago with our labor unions and certainly part of the deal was the medical benefits that were reduced somewhat. >> did they come together

collectively and realize that for the preservation, long-term of the company, that it was good for everybody if this happened or is there still resentment, too, you think? >> i think any time you go through a change like that, it's tough, and so i think it takes a while to work through it. i would tell you that we're probably 60% to 70% of the way through it and the changes we're making in our plans and how we're transforming manufacturing to be truly world class in everything we do, our employees see that, and i think they like it. >> keith, as your biggest challenge, something internal or something external? do you worry more about union issues and trying to make sure you're stream lining the company or worry more about the global environment? >> more about the global environment i think. i think what we've done in the company in terms of transforming how we design and develop products and bring products to market and how we manufacture more flexible closer to the customer manner, that's well on its way. what we don't have control of is what's going on in the economy, if you look at what's going on in europe and the potential for

another credit issue if you will. those are things we worry about it. >> keith thank you for coming in. no bikes? i've never been out on a mark, jeeves would have to drive me -- bad joke. >> thank you, appreciate it. coming up the seat of the nation's power is about to shift to the "squawk" set because house majority leader eric cantor will stop by. first, right here in studio we welcome steve schwarzman, blackstone chairman and ceo in a rare television interview, here for a full hour, straight ahead. welcome. [ male announcer ] this is the at&t network.

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it's a power hour here on a powerful business morning. first, blackstone's steve schwarzman is going to be here on the "squawk" set to talk about europe, the economy, and the race for the white house. then, house majority leader eric cantor on what d.c. lawmakers need to do to boost america's job creation. >> we've stayed focus on trying to clean up bad policies, to cut spending, to promote the ability for people to get back to work. plus, donald trump with his take on the supreme court's

pending health care ruling and more. >> as the second hour of "squawk box" begins right now. ♪ hey little thing let me light your candle ♪ ♪ because mama i'm sure hard to handle ♪ ♪ yes, hard to handle now good morning, everybody! welcome back to "squawk box" here on cnbc. i'm becky quick here with andrew ross sorkin and michelle caruso-cabrera. the dow futures are up by about 36 points, the s&p futures are higher as well, comes after a rough day for the markets yesterday, down more than 1% again. in the meantime part of the sell-off was energy and financials got hit the hardest on growing fears of a global slowdown. yesterday you see it, they were down 138 points for the dow industrials. in europe, this morning, we are looking at a few green arrows but barely, ftse up by 8 points,

the dax up by almost five points. spain saw short term borrowing costs triple after a downgrading of its banks. the spanish ten-year yield creeping back up to around 6.7%. it covered 28 spanish banks against banco santander and banco bilbao. you can see 4.66 cents, ominous number there. the euro, rising concerns about the upcoming summit weighing in, right now 1.2491. >> our guest host is one of the private equities biggest players, steve schwarzman, president and ceo of the blackstone group, here to talk about the economy, europe, a little bit of politics through

their various investment vehicles the firm has $190 billion? that's a lot of money. >> total. >> in assets investing for public and corporate pension funds, academic and charitable organizations among others. thank you for being here. you are a man of your word. we've been trying to do this for a long time and we appreciate you being here this morning. >> glad to be here. >> there's a lot to talk about, europe and the deconomy. we should do the elephant in the room and talk private equity. i was reading in the "new york times" about bain. i'm curious why you think the private equity business seems to have done a lousy job and what it can do to market itself better, to make people either understand it better or at least understand what they do and appreciate what you do every single day. >> well, it's a little bit of a complex business, which is one

reason why perhaps it's not so easily understood but it's quite straightforward. what private equity does is it raises money from pension funds, and these represent policemen, firemen, teachers, corporate executives, state employees, municipal employees, and invest that money to buy companies. >> but is it an issue that people, do you think the public doesn't get that or the industry hasn't projected that properly? what is it? >> i think the industry's done a miserable job of marketing for sure. >> right. >> this is an industry that creates a lot of return to make pensions safe. the reason that the industry hasn't communicated this message is somewhat of a mystery to me. there was something yesterday that came out that showed that in the last ten years, the state of oregon, for example, earned

700 basis points more by investing in private equity than in their regular stock portfolio, so this is like $400 million more a year that goes to make pensions more secure for the people in oregon, and that scenario is repeated time after time. i think what creates difficulties is that not every private equity investment is a successful one, and by the way, in the real world, not every company is successful, whether it's private equity or not. private equity doesn't have a greater incidence of unsuccessful companies, but for some reason, there has been a focus on the ones that haven't been successful, so for example, and i can't speak exactly for bain, i work at blackstone, but the amount of jobs they've created, whether they're nine

times what was lost with troubled companies, whether it's nine times or ten times, on the whole, it's pretty terrific, for society. what happens, andrew, is that for some reason, we're just focused on the few that don't work. >> the core of your troubles seems to stem from when a company isn't competitive oftentimes you have to downsize and i think the public struggles with that tradeoff, right? how do you explain that? >> well, michelle, actually this has been studied by a lot of third parties, you know, harvard's done a big study, there's been a big study in europe. one of the studies actually took every buy-out deal done in the united states over 25 years and the way the numbers come out is if you take the whole industry and you take all the deals, the job creation is about the same as a normal company, for whatever the reason, we don't, we're trying to hold private equity to a higher standard.

>> mitt romney is running for president and got big bucks coming out to spend against it and targeting private equity. i guess that's the biggest part of it. is that a frustration for you? >> well it's frustrating if you believe the facts, as i know them, which are actually the facts, and if you can create nine times the amount of jobs that were lost, you know, just to take bain, for example, just a rough calculation, if we did that throughout society, that would be a huge, positive for job creation and for society, at the same time, making pensions safer. >> steve, i talked to one of your peers last week. you know him well. we won't name him on the set. he's a supporter of romney's and he said romney has on his ticket it says "i'm a job creator." he said why is he standing up saying "i'm a job creator."

maybe he did or didn't but he's saying i'm mr. fix it. we invested money, made money for our investors that's a better argument. do you agree? >> it's a political question and you've got eric cantor coming on later and he could probably answer that better than i could. mitt can do a variety of different things. he fixes things generally, just leave aside private equity, whether it's in olympics, whether it was an almost bankrupt bain consulting, that's his skill set, and i think that could be marketed quite well. i think the jobs focus is really sharing the interests of society and i think that's why it's probably used as a proxy. >> so here we go, red flag, big, uncomfortable question. article in the "new york times" about your colleague hosting a fund-raiser for president obama on the same day president obama puts out this campaign that is

anti-private equity. >> right. >> what did you think internally? does that make you crazy? >> well it didn't make me crazy. it was sort of an odd series of events. i'm a great believer in, you know, sort of people should do what they think the right thing is politically, they should express themselves, that's a good thing, and having an active dialogue is a good thing, and that's something that, you know, the president of our firm, tony james, wanted to do, and so there it was. exactly why there was a simultaneous sort of ad campaign or whatever chosen that date, i mean personally i don't think that was the wisest thing, you know, in terms of coordination, but political -- >> smacked of hypocrisy, i'm going to take money from private equity and i'm going to bash them at the same time? >> i can't speak to that. what i would say from being around politics a little bit, though i'm not an expert, is

that a lot of stuff happens in a somewhat uncoordinated fashion that somebody might wish to do a little differently, and that may be one of those. >> steve, we're going to slip in a break and continue this conversation. >> we have some corporate headlines as well. corporate headlining this morning, news corp. is considering splitting it self in two. final decision however has not yet been made. home builder lennar is reportedly in talks with a china bank for a $1.7 million loan, used to jump-start two delayed projects. facebook officer sheryl sandberg becomes the board's first female member. coming up next, from washington to wall street, how majority leader eric cantor has left the hall is of congress an

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we're we're back on a tuesday morning checking futures right now, green arrows across the board, dow would open up 40 points higher, nasdaq up ten points and the s&p 500 up a

little over three points. while most of washington and america await to hear the supreme court's health care decision the election and jobs are still the discussion in the in a tigs's capital. joining us is house majority leader eric cantor. thank you for joining us. >> good morning, great to be here. >> let's start off talking about health care. we thought we were going to get the decision yesterday. it looks like now it will be thursday. conventional wisdom is that the mandate will be struck down. if that's what happens the big question is what remains in the rest of this rule? how do you proceed in congress at this point? >> there's clearly a consensus at least in the house of representatives that obama care was a mistake and that we need to really repeal the law so that we can get back to the kind of health care outlook that most americans are looking for. >> if you do repeal it, what steps in its place? there's no one arguing we don't have a problem with health care. even though the majority of americans are a little afraid of

what's happening with this, there's no question we have some major, major problems with our health care in terms of who is insured and not insured and in terms of the cost curve. >> no question about it. i don't think anybody accepts the status quo, and the whole discussion on obama care back in '09 started with the president indicating that he wanted to do something about bringing down costs, and if we brought down costs, somehow we could afford more access to more patients, and unfortunately as that law developed and went through the process, costs became secondary, if not tertiary, and what instead took its place was coverage, and now what we have is an unsustainable situation where you've got under this law which we believe is very flawed, washington in control of what goes on ben patients, doctors and the rest, so i think what we hope to have happen is that the court only strikes down a portion of the law, the house will move to repeal the whole thing, and then we'll begin to go and put back together a health care plan that actually

stresses choice on the part of families, the ability to go and access health care that you want to tailor for your own needs, not somebody in washington deciding for you. >> but we had zeek emanuel on yesterday he said you control washington so you control costs. how do you control costs if it's not washington costs? >> i respond and say when has it worked when washington goes in and sets costs for quality service. think of the irs, the post office or what have you, most americans say wait a minute, i think the private sector can do a lot better and really patients and doctors, health care providers can do a lot better. there's a lot of innovation going out there in the market. we have to capture that and provide some more choice and really start to focus in this country on disease management rather than to continue to focus on the fee-for-service acute care. >> there are a million examples of the individual being able to

make choices and control costs, right? i don't understand why there is this general acceptance the government is going to be better. we allow the individual to make choices all over the place, right? >> steve, has this impacted your business in terms of your thinking, the ruling? >> i think the general political uncertainty that comes along with this affects consumer confidence and all types of different things. i had some conversations with some smaller business people because there's evidently like a 50-person limit on the health care bill if you're over 50 and i have a number of people who say i'll never grow my business over 50. >> is this the conversation in the board room in terms of what the decision-making process is going to be either holding back on hiring or -- >> i think, andrew, there's sort of a general caution in the economy, this unresolved issue is a part of that.

>> would you like the certainly of a final decision to suggest -- in an odd way it would be better to say yes, this is moving forward or ultimately if it doesn't move forward there's going to be a whole nother round of uncertainty in some respects. >> i think that doing something just because it's there as opposed to something that's really much more optimal, you'd normally wait and do something right. we have a saying in our business that on time and wrong is not as good as late and right, and i think that, listening to part of that political dialogue it was fr fractous and complex with 9% of the economy being affected we have all kinds of health care companies we own from hospitals to other types of, you know,

equipment and devices and it affects all of these it's very pervasive. >> good for the hospitals probably? >> on balance, probably, but the whole health care system has to work well. we can't keep increasing costs at the same rate and letting it eat a larger and larger percentage share of the u.s. economy. we're paying around double what almost everybody else in the world does with about the same outcomes, so something really has to be done in a significant way about that. >> leader cantor, you hear what steve schwarzman has to say and a huge part of what he hears is the political uncertainty. how do you change that? how do you -- you can't control the election outcomes. you're probably going to be sitting across from, having to form some sort of partnership with the other side no matter what happens, no matter who controls the white house, there's going to be some way you have to reach across the aisle in some sense. how do you clarify a lot of these questions for business

leaders and maybe ease some of their concerns on these issues? >> becky, we've been after that now for about a year and a half since our majority began, and we started the session of congress back in the beginning of '11 saying look, we've got a serious deficit problem in this country and we want to try and address it. fundamentally what's behind the health care law as well is the unfunded liabilities that we're wracking up both in the medicare program and medicaid program, and it is trying to get that straight, trying to answer how to best control the costs, so that we can provide the certainty, so that we can get the debt under control, and then from there, at least in parallel with that, focus on job creation, how do we provide the platform for innovators, for investors, for people who want to go take a risk, to allocate their capital, put it to work in this country, and let's get back to the business of growing, and i think that if we all can focus

on job creation, creating the environment for a better investment outlook, that's what america does best, and as you say, no matter who wins, i feel very strongly that mitt romney is going to win the white house, and we are going to maintain and strengthen our majority in the house and win the senate, and at that point, i think that we all should work together, both sides of the aisle, because anything big like health care reform needs to be collaborative, so we can get on about the business of growing america. >> but if you have such differing opinions from the other side in terms of what needs to happen for a massive fix, as steve points out at 17% of the gdp at this point, i mean how do you do that, let's assume you have to work across, if you don't have majorities in every one of the houses, if you don't have the white house on some level how you reach out and come together on something that probably you have very different ideas? >> if you look at the health

care reform that we have proposed in the house, essentially what we're saying is in the medicare program, switch from a defined benefit to a defined contribution outlook. >> and they go crazy. they go crazy. >> the president rejected that, so you're right. >> grannie getting pushed over the cliff so becky's point. >> what we do is look up, no one on their side or at least the president did not embrace bowles-simpson. bowles-simpson is a good start but we believe it fundamentally leaves in place the flawed structure of a washington -- >> the whole point behind bowles-simpson, you take the whole thing, you don't get to cherry pick the parts you like. >> if you look at it it's a good starting point so there's good aspects of tax reform and the rest and there are also good things in social security that bowles-simpson does but in terms of the health care, we can work together and we can look to see some of the kinds of things that it prescribes around the edges, we can at least start there on health care. >> steve, would you take

bowles-simpson right now? >> i think eric's right, that bowles-simpson is a good start, if you talk to the two guys who did it, erskine and alan. they'll tell thaw they kept away from certain things because they just didn't think it was politically possible. would you take that as compared to where we are today, yeah, sure. i mean, we have a problem that is actually relatively simple to explain. historically we've taken in 18% of gdp in taxes and we've spent 20. today we're taking in 16 and we're spending 25. this is completely unsustainable, and we're wracking up deficits of about $1 trillion a year on roughly a $14.5 trillion economy. if you keep doing this,

something terrible is going to happen. >> greece. we become greece. >> something terrible will happen to us. >> and yet debt is apparently cheaper than ever. >> well, that's only because the alternatives of where you leave your money may be more risky and people believe that the u.s. can solve their problems, and the reason they believe that is that the u.s. can solve their problems. it's not so hard, and the debate is over mechanisms to get you back to 18 or get you to 20 or some people think maybe it should be taxes at 20, and spending at 22. you first have to figure out what those aggregate numbers are and then you get to them, and there are different ways to get to them but there are a lot of easy ways to get to them. you probably need in this country some type of tax reform, because you need to be a nuclear scientist to figure out how to do a tax return.

there's something wrong with that, and there are many countries in the world that do extremely well economically, growth and job creation, with lower tax rates, flatter tax, less deductions. it's a formula that i don't know has failed anywhere. i mean it's one way to go, and it's reasonable. today we have half of americans not paying income tax. it's sort of, i find that somewhat odd, and so we have to have some shared sacrifice in society to get you from these enormous deficits. >> and on that note we have to sacrifice because we have to go to the commercial break to pay the bills. don't move, you're sticking around. >> leader cantor, thank you very much. we appreciate it. coming up, donald trump talks politics, the economy and much more right after this. defense max. with a new continuous spray wand.

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we've we've got more to come from guest host blackstone co-founder and chairman and ceo steve schwarzman. up next the donald will be up with us talking politics and global markets, after the break.

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and and welcome back to "squawk box." in the med lines this morning we're going to get a fresh read on home prices this morning, the april case-hiller report expected to show a 2.4% drop

year over year in home prices. seagate technology will become the newest member of the s&p 500, the stock will go into the index later this week replacing progress energy, in the process of being acquired by duke energy. if you're looking for a market to watch today consider soft commodities. corn has hit a seven-month high and wheat a nine-month high as a u.s. drought puts a crimp on supplies and the usda says crop conditions for certain commodities are the worst for this time of year since 1998. becky? >> michelle, thank you. the supreme court announcing its ruling on immigration but leaving the health care decision for thursday. joining us on the "squawk" newsline is donald trump, good morning. >> good morning. >> we have steve schwarzman on the set, just been talking about tax reform. what needs to happen, how do we solve the deficit? just a few minor problems we're trying to kick around and solve on a tuesday morning. do you have any thoughts you'd

like to throw this here? >> first of all steve is a friend of mine but also a very capable investor and guy and i heard what he said and i have to go along with it. you look at the tremendous tr d capacity of our tax cuts and it's gotten totally out of control. steve is exactly right, you have to do something, you have to do simplification. you want to keep taxes down, absolutely, but when we have trillion-dollar deficits every year, we've been doing this every year now for years this was a word trillion that nobody ever heard of four, five years ago and now it's commonplace, so something has to be done about the deficit, and something has to be done about simplification. >> i agree on both counts not only for corporate but also personal taxes to try to find a simplification there. we have a tough time getting simple things through congress, through washington at this point, and i guess a massive undertaking like tax reform has always seemed to be a third rail. it was a miracle when it got

done in 1986. what do you think has to happen to get it done today? >> there's great hatred in congress and politics like i've never seen before. i've been involved in politics for many years and i've never seen anything like it. i mean, mr. cantor just left and others leave and they all have opposite views and people don't get together like they used to and work out deals that are good for the country. i mean, everybody has their own opinion, and there's just no deal making going on in washington, which really is a problem with leadership, if you really think about it, but people are not getting down to business, and they're not doing what's right for this country. >> steve, what do you think? >> donald, i think there's a bit of change in the wind on this, and certainly for this year, 2012, i think you're right on th that. i think there's going to be the need for different groups to come together next year, and i

think there's a genuine commitment by political people i've talked to recently, and this has changed over the last month or two, that they really want to get something significant done next year on real tax reform. i think their record low ratings by the public, the fact that they're not accomplishing what they came to washington to do, is to going to provide an opportunity for them actually to get something done. it is inconceivable that you'd go another four years without addressing these issues and the time to address them is the first year and it all gets to the fiscal cliff and what happens at year-end, where they can't deal with it, and so they're going to kick that can down the road, but in exchange for that, they're going to, i think, seriously address taxes.

>> question for you, steve, and actually donald as well, because it affects both of you, carried interests on the real estate side and more broadly in private equity as part of tax reform, would you want carried interest to still be part of the business? would you be willing to let it go if ultimately rates all the way across the board came down? how do you think about that issue? steve first and then donald. >> i think the carried interest debate is a bit overdone in the sense that it aggregates somewhere around $1.5 billion estimate a year out of $1.2 trillion deficit, so it's really about one-tenth of 1% of an entire deficit in terms of trying to address the large issue. as to what happens to that, i think you have to look at overall tax reform and if something's good for the whole country it's good for the whole country and if we put the country on a really good economic footing, everyone feels

that what goes on is fair. there's going to be sacrifice needed by everybody, by carried interest. you'll have to have big decreases in benefits. you're going to have to have other types of modification in tax. you have to have a broader tax base. >> there was a larger tax reform package if it worked you'd give up the carried interest rate the industry is going to continue to lobby for? >> andrew n the context of what i just described, which is a system that requires something of everyone, and gets us into a real growth mode in this country, so people overall are going to have their standard of living up. you're going to have more jobs created. i think everything's on the table to allow that to happen, but selectively picking out one thing and leaving everything else more or less the same, i don't find that to be any type

of structural solution. >> donald, your thoughts? >> i think real estate is, i agree with what steve said but i think real estate is a very fragile as it our country position and i don't think you can be doing too much to delve in and hurt real estate much more than it's already been hurt. now it's been hurt artificially. it's been hurt for lots of different reasons and carried interest is not a big portion of this country's problem, but that being said, and as steve said, if there's a great solution to the overall problem, which is on a much bigger basis, i'm all for it. >> you know, donald, i'm not sure if you heard the part about simpson-bowles and the discussion trying to get to that. if there was a simpson-bowles or a simpson-bowles like plan that came forth it would probably take place down the road for exactly the reasons you just raised, concern about hurting the economy more at a delicate time. is that something you'd get behind? >> president obama asked for simpson-bowles and when they came out with lots of very

strong recommendations, he never embraced it, never even really discussed it. it was like forget about it. i think after the election you are going to see -- i agree with what steve is saying about people coming together. i don't know if they're going to come together like they have to come together but after the election, i think things will get -- and regardless of who wins, after the election, things are going -- because people realize and people in congress and the senate realize what trouble this country is in. we are in serious, serious trouble, and if it goes for another four years like this, you're going to have, you're going to see results like we've never seen since the great depression. something has to be done and done quickly. >> donald it's michelle. >> hi, michelle. >> we see eye to eye on a lot of things but how do you feel about the decision by the supreme cou court? >> they did us no favors, they did no side a favor because all you're going to have is

discrimination lawsuits now, lawsuits all over the place. they really gave a down the middle ruling, and the ruling is, i think, not good for either side. i think they're probably going to end up going back to the supreme court again, as you understand at some point but i think either side, you know, could you say they both won or both lost. i actually think both sides lost and the supreme court did no favors to anybody, other than creating tremendous confusion. >> you are a supporter of the republicans. it confuses me about republicans who claim they believe in the free movement of labor, capital and goods. they're all good on goods in the capital but when it comes to labor a lot of the republican parties are very anti-immigrant. do you think that's a good idea when it's good for the economy to have as much labor movement as possible? >> you know my views on it and i'm not necessarily -- i thin i'm probably down the middle on that also because i also understand how as an example you have people in this country for 20 years, they've done a great job, they've done wonderfully,

gone to school, gotten good marks, they're productive. now we're supposed to send them out of the country? i don't believe in that, michelle, and you understand that. i don't believe in a lot of things that are being said. the problem is the ruling yesterday is nobody knows what it means. nobody knows what effect it's going to have, and it could have a very, very seriously negative impact on everything. it's total confusion and what it will do is tremendous amounts of discrimination lawsuits will be brought in the courts. it's going to be, in my opinion it's going to go before the supreme court again and we're going to have to, they will have to do a lot better job because they did not do a good job this time. >> donald, one thing i'm not sure if you've seen this morning but there's a story out news corp. may be considering splitting in two, setting up the entertainment, broadcast businesses in one arm and setting up the print businesses in another arm, something like viacom, the way that was split up. is that a good idea for unlocking shareholder value?

>> i've watched it over the years many times and seen it work, i guess it worked in viacom's case but it hasn't in a lot of cases. i think steve would be the expert on that. i don't see what the dirves is whether you have one company that's larger with the assets but a lot of people like it, they like it with respect to news corp. i've seen it work and more times than not it doesn't work. i'm not a fan, no. >> that's a great point. we'll bring it up with steve later, too. donald, thank you, we always appreciate talking to you. >> it's so fun. >> thank you. >> it's trump tuesday. coming up talking about sea world looking to build on last year's success, we'll check in with the ceo to talk about economic conditions and the future of tourism, after the break, shamu. with arthritis pain. and two pills. afternoon's overhaul starts with more pain. more pills. triple checking hydraulics. the evening brings more pain. so, back to more pills. almost done, when... hang on.

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sea world saw record financial performance last year and is hoping for more of the same this year. joining us is jim atchison, president and ceo of sea world parks. sea world is a portfolio company of blackstone. i didn't know you liked penguins so much. >> absolutely. >> how is business? >> business is very good, michelle, thank you.

we had a tremendous year last year, came off a record year, our ebitda up and attendance up 5 and we're following a fairly pattern this year. >> you're describing all of the new things, new roller coasters in san diego and tampa, turtle theater, on and on. do you live in an arms race when it comes to theme parks to get people to come? >> sure, the markets we operate in orlando, southern california -- >> very competitive. >> very competitive. we're always raising the bar on what we offer our guests. we try to make sure we create new product that's immersive and gets guests entertained and learns a little bit along the way. >> the consumers are still coming out. is there any sluggishness, are there areas regionally that you're paying attention to or anxious about, doing better in certain places? >> sure, good comment, andrew. one of the advantages we have is a bit of a portfolio effect, we

have parks and destination markets line california and florida, when we see softness in the destination market we tend to do better in the regional markets and it of course swings the other way. so right now we're having very good growth out of the international markets in particular, really south america, less so europe of course but south america and our domestic attendance is good and that's really coming on the backs of strong work building our brands and telling our story under our new leadership of blackstone. >> softball. >> sure. >> private we canity, job creators or job destroyers, big investors in your business. >> i think private equity, those who want to criticize -- >> that could be a hardball depending on how you think about it. >> his boss is sitting here, what do you think he's going to say? >> it's a softball. people want to criticize private equity should spend time with us. we were a subsidiary of anheuser-busch for 50 years,

acquired by inbev and became a new company. we needed to be on our home and needed the wisdom and leadership of blackstone to help us establish a new independent company and with their familiarity they brought a lot to the table. >> it's not just money. what's it done for your job and hiring picture? >> it's done quite a bit. when we began with blackstone we had 21,000 employees and we'll have about 34,000 here now. we've doubled the amount of capital we've spent with black stone and have continued that pace. private equity is a great story for us here. >> how often do you talk -- when he's going to build a new roller coster and invest tens if not hundreds of millions of dollars do you have to give him the okay? >> i personally don't. >> do you ride the roller coasters at least? >> we operate, andrew, as a company. we've got $120 billion of revenue and we've got 700,000

people who work at all of our companies. >> but everybody has their deep down. >> and we have a team of partners led by my partner joe baratta in this particular deal and joe and his team would work with jim to figure out whether that capital expenditure is a good one. we did an amazing one down at universal with harry potter, we risked $275 million for what's ended up being i guess the greatest attraction that revolutionized that park, and really brought huge numbers of people to orlando. so the whole issue of intelligence spending and investment in the park area can get you terrific returns. jim ought to talk a little bit about what we're going to do with penguins, because people like penguins. my wife loves penguins so we got to -- >> we have a new ride. >> a great new attraction we're developing in orlando t will

open next spring called antarctica, and this is a terrific concept. you actually get in a ride and ride through kind of the life story of a penguin and into the penguin habitat, you get out of the ride, you're in the habitat, it is cold, but you can stay as long as you like. it's a significant investment for us. >> how much? >> we don't disclose the investment figure but i'll tell you it's the biggest investment we've ever put in that park. >> this has been so much fun. >> you go the to bring the seal next time, a live animal. i know you brought steve, but -- >> we have 16,000 in our employee if you will and we had twin baby sea lions born yesterday so i'll bring them on next time. >> cool. >> thanks for having me. when we come back final thoughts from blackstone co-founder steve schwarzman. coming up the trillion-dollar team from blabrock joins us with their quarterly allocation. "squawk box" will be right back. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine.

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we're we're back on a tuesday morning, final thoughts from steve schwarzman. we haven't talked about europe yet. you're there all the time, you own a lot of portfolio companies. lay out what you think is going to happen here? >> i was there twice in the last two weeks so it's easy waking up for "squawk box" because i'm on european time but the reason europe is important is that it's 25% of the world's economy. u.s. is roughly 23, to 25. got 10% to 15% other and the

emerging markets 35. >> how do you see this playing out? >> if something goes wrong with europe it will affect people all around the world. they're dealing with a number of simultaneous problems, a banking cris crisis, a fiscal crisis with large deficits, a competitiveness crisis, and they're doing it all in the context of 17 countries needing to make decisions at the same time, along with the basel committee shrinking the amount of capital that can be invested in europe. >> do you think greece leaves? do you think there's a lehman moment? >> does the euro survive? >> does it survive? >> you know, i look at those questions a little bit differently. i think there's enough of a burden on europe that it's going to have very slow to no growth over a period that's longer than we all need or want, and that

it's going to affect sort of the global economy. >> would you invest in europe right now? >> we are making certain types of investments in certain countries. >> what kinds? >> we're buying real estate in certain countries where we've avoided -- >> which countries? >> spain, for example, we've been huge buyers of bank loans where in effect bank loans can be turned into ownership. at the right price, things are interesting. >> you're not doing that in spain or greece? >> we're not doing that in spain or greece because the situations there are -- >> where are you doing it? that's the question. >> where are you doing that in italy? where are you doing that? >> we're doing that in the uk. we're doing that in france. we're looking at doing that in italy, actually, and one needs to be careful.

there's very little lending. it's almost shocking how little lending there is overall from the european -- >> it is depression ary. >> to consumers, businesses or both? >> i'm talking businesses. consumers have similar problems but the business aspect is unbelievably serious, because you can't get out of your deficit problems if you have no bank lending, because bank lending correlates about 1:1 with economic growth. if you don't grow, you can't get over time more tax revenues. if you can't get growth in revenues, you can't address easily your budget deficit problems. >> steve, quickly, about six months ago you told me the world was less optimistic, that here in the u.s. we were less optimistic but if you go around the world people are more optimistic? do you still believe that?

. >> no. i think in europe there's a pervasive pessimism which is quite profound. in the u.s., despite our political dialogue and you know, sort of unhappy environment, i think there's a more positive tone in the u.s. in non-u.s. countries, if you take the brics, they vary from country to country, but there's a deep seeded confidence in those places that they will overcome their problems. >> steve, we got to leave it there. we thank you and we have to have you back. it was a lot of fun. >> pleasure, glad to be here. good to see you, everybody. blackrock's quarterly asset allocation revealed, we'll speak to the world's largest chief investment strategist on the equity and fixed income sides, that's at the top of the hour. ing done.

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election year politics, europe's lackluster recovery and the looming fiscal cliff. where should you invest in times of uncertainty? we'll ask bob doll and jeff rosenberg, where blackrock is

investing more $3.5 trillion. we are two days away from the supreme court decision on health care reform, ceo ron williams joins us. and preparing for the fiscal cliff -- how to position your portfolio before the scheduled expiration of tax cuts and automatic spending reductions kick in. the third hour of "squawk box" kicks in right now. ♪ i get up and nothing gets me down ♪ ♪ you've got it tough, i've seen the toughest show around ♪ welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and michelle caruso-cabrera. joe is off this week. u.s. equity futures are indicated higher although they cut their gains in half over the last hour. dow futures up by 1 points, s&p futures by less than a point, after a big down day for the markets yesterday, the dow down

by 130 points yesterday and it's not the first down day we've seen over the last four or five so obviously people still watching what's been happening in europe. >> and we got some headline this is morning, news corp. considering splitting it self in two, the proposal under consideration would split the film and tv businesses from newspapers, books and education. we may get a final decision as early as this week. the idea is to follow what was the viacom model when viacom split from cbs to try to hive these off. they would include 20th century, fox news corp. and fox news channel operating the "wall street journal" "the times" of london, the australian newspapers and harper collins. one note we were talking about it earlier the hacking scandal and how this facts things. unclear is ultimately the answer because the murdoch family would still own both so the idea of separating them could make it easier for some of the licensing

issues on the tv side but again not clear, since the in your dock family would still control -- >> whether or not it's a buffer. >> whether or not it ultimately serves as the buffer which chase carey who runs the place is pushing for the value they hope to create in terms of separating the papers from being a drag on the other business than this buffer issue but of course that could be another consideration. >> a motivator. >> you bet. in our global headlines, greece named a new finance minist minister. spain and italy holding short term debt auctions earlier today. spain paid the highest rates since november selling nearly 3.1 billion euros of debt, and in italy the country's zero coupon bond yield was the highest since december so everybody is paying more. officials in cyprus say the mediterranean island may need a bailout of up to 10 billion

euros, that pattern has become familiar and that is more than half the size of the country's economy. cyprus is the fifth eurozone country to seek emergency zone funding from europe. european equities at this hour are mixed, let's call it flat except for italy lower by a half percent. blackrock is out with third quarter asset allocation recommendations. the general theme, be wary of risks and so-called risk free investments. joining us to explain is bob doll, chief equity strategist at blackrock and jeff rosenberg, chief investment strategist for fixed income at blackrock. welcome to both of you. >> thank you. >> what is risk free in this day and age? >> we generally traditional risk free, things you buy and get a certain return, which is cash and most cash equivalents which the return -- >> i don't know if you can make your fingers small enough to show the return in cairn. >> risk free, yes, in terms of your principle, but if there's any inflation, you're getting near zero you're losing

purchasing power over time. >> cash to me seems like you're going to be certainly losing money, just by letting it sit there over the course of ten years, it could eat a significant chunk of your cash. lot of people are looking for opportunities to buy and jump in, they keep thinking they're saving, they're going to jump in when there's a market sell-off, another crisis. >> it's not just cash, we're talking about instruments traditionally viewed as safe assets. this is treasuries, this is high quality fixed income and what we've seen in the recent sell-off in european risk is that people have gone to traditional safe risk havens. >> u.s. treasuries, german bunds. >> when you buy treasuries at low yields you're putting more principle at risk than you ever have, the duration, the interest rate sensitivity of a ten-year treasury when you buy it at 1.5% yield is nearly ten.

that means at 10% decline for 100 basis point increase. >> the trade has gone on for so long. my entire term at cnbc every single fix the income person comes on, whatever do you, don't buy the long end of the treasury curve and what is the one thing you should have done for the last 15 years is buy the long end of the curve so you're going to be right, but when? >> not only in the last 15 years, go back further the last 30 years. the most important thing is you have to look at what is the risk and the reward. it's the upside of making that investment. maybe rates will go lower and for the last three years, they've only gone down to your point. when you're starting at 1.5, could rates go? if europe tends to spiral downwards, absolutely. look at what the end game is for all of us, and the end game is policymakers are trying to create inflation and if they're successful look at what your investment horizon is. >> to michelle's question, the

question is when. i know you don't have a crystal ball but when does this change? >> i don't think we know the answer to when but we know you're hearing europe is the big wild card. economic growth is positive but puny, but the third point and this is where jeff's comments, there's a lot of bad news in markets, if the chief risk assets in particular, and can i say the expensiveness of the assets we've been talking about. if you're making the bet that the world is going to fall apart, then you want to stick with what has worked but our view as the policymakers, at some point maybe when their backs are further against the wall will do what is necessary and to jeff's point they want to reflat the reflate their way out. we need more from the ecb most likely for anything we're talking about to begin to work. >> you look at the thousand at 12,400 or 12,500, do you think the stocks are overall good at

this level? >> i've always said how much of the plus we enjoy is based on how many days europe spends on the front page of the u.s. newspapers. the more away the more of the plus we'll enjoy. if it's there for the rest of the year we'll struggle. >> so when you look at it, though, any of the major averages, go back to 1999 and a lot of these major averages have been stuck in place particularly looking at the 30 dow components or something. >> we wept a decade with earnings up and pe came straight down. the moral of the story is pes were ridiculously high in 2000 at the peak. make back to jeff's point the risk/reward tradeoff and it's our view there's a lot of bad stuff out there but a lot of it is in their price when you can buy bokz at 12 and a fraction pe and for a lot a lot less than that. >> how careful and choosey and picky do you need to be in terms

of picking stocks and in terms of picking which bonds to be in? >> vary. the s&p got to 1422 in april and the world was looking a bit better. you've got to be careful not to succumb to oh everything's okay and conversely at 10,075 in october, i don't think the world will fall apart. >> where are we at 12,400 on the dow and with the s&p right now? >> we've recovered a bunch from the recent correction and only 6%, % off the high so i think you have to be very picky on price. >> on fixed income you have so much liquidity in the financial markets because of the central bank intervention, many areas of fixed income that are really pricing a lot of cushion for the risk that you're taking, that's corporate bonds, high yield corporate bonds, the area where you have to be picky going after yield is high yield municipal

bonds, a different story there but you look at what's going on in terms of issuance and the high yield market, we've had deals that are five, six, ten times oversubscribed that shows you the amount of liquidity that's looking for yield and in that environment, corporations won't default. they may postpone their eventual default risks but in the near term it's low so it's one of the sectors we favor. >> bob, i have to ask you about a story out in the last week or so about how you look at the models for your portfolio. there was a change in the prospectus that came out took a look at whether this was proprietary. how do you come up with the models? >> we did changed your prospectus in view of becoming as transparent as we could be. i've been managing money for 30 years and i use all kinds of models from wall street, from the cell side on the quantity tidive and fundamental side. on the fundamental side say we're analyzing jpmorgan, we

want to know what a bunch of analysts think and we step back and say what do we think in light of that education and massage those models and come up with our own idea. on bt quantitative side we use several different models, changed them over time, take some of them as they exist, others we ask the cell side to tweak for us. the technical factors the models make some rambunctious so we eliminate those and put them together in ways that change over time based on the way we see the future. i'm a user of models for 30 years on the quantitative and fundamental side and will continue to. >> i watched you go through and pick the stocks you're going to be buying in the morning. you still do it the same way? >> absolute same way. nothing's changed but back to your question we tried to be more transparent in our disclosure, not just for ours but lots. >> bob and jeff thank you for being here. appreciate your time. >> thank you. coming up, we're two days

away from the supreme court ruling on president obama's health care reform bill, or so we think. former chairman ceo ron williams will join us on what that decision will mean for the health care industry. and it's the ticking time bomb in the american economy, the expiration of tax cuts and triggering of automatic spending reductions that may cause businesses and households to postpone purchases and hiring. cnbc kicks off a special series on the fiscal cliff at 8:30 a.m. eastern. ♪ [ tires squeal, engine revs ]

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welcome back to "squawk" welcome back to "squawk" this morning. the supreme court's ruling on the future of health care a few days away. what will the decision mean for health care providers? joining us is former aetna chairman and ceo ron williams. thank you for being here. >> good morning, it's my pleasure to be here. >> you think that this ruling is going to strike down the single mandate? >> yes that's my opinion. >> why? >> i believe that the process that we went through resulted in a bill that had some challenges, in particular the individual

mandate had it been framed as a tax would have been on much more solid ground as a medicare tax is and i think the whole notion that knack activity is commerce is where i think the mandate will face a challenge. >> let's talk about the fix and i don't mean to steal becky's question but it was brilliant, if i could. maybe you should ask it yourself. >> go ahead. >> while we were in commercial she said is there any way to bring down the ultimate cost of health care from 17% of gdp down to say 15%, and it was to me the ultimate question. >> it's not even my question. i stole it from somebody else. so go ahead. >> whoever's question it is, can it be done, and given the seat you used to sit in, you're probably in a position to know the answer. >> i would start with the fact in the near term we're unlikely to reduce the percentage of gdp we spend on health care. we can slow down the rate of increa increase so as the economy grows we spend less out over a longer

period of time. if you look at the rate increase of medical costs during the period was 8%, 5% and then went to 2% and actually for one year was negative. set the clock back to the period between 1995 and 1999 to see that level. >> i'm remembering something when the health care companies, health insurance companies were under attack, was that part of what was happening? >> now just having the mature discussion about the issue of health care and how do we want to deliver and configure health care delivery in the u.s. the way we produce reductions in health care, a lot of consumers got drafted into health care organizations plans they didn't necessarily want to sign up for. i think we've matured and there's an opportunity for how to change. >> the debate came at a time when unfortunately we were see experiments where the cost curve was bending, more consumer choice, people were told the

first 1,000 bucks is yours, to do with it what you want to do with it and once people had that choice the cost curve came down a lot. we saw in a number of states general electric did it for one year before we went over to nbc. it makes a difference when individuals have a choice what they're going to do. >> i agree completely. when i was at aetna we introduced the plans for our entire employee population and they've been in them for years but the whole notion of cost is very important around discretionary consumer care, preference sensitive care. when you get into having cancer it's really about the quality of care that you are receiving, and i think the real answer for these types of conditions is getting the consumer engage and educated but changing the health care delivery system. >> is there a model that works out there, regionally in the u.s. or a country, you go i like it that way? >> i think when it comes to

other countries we have to recognize we're going to have to have a uniquely american solution, our culture is different, we don't accept the limits and constraints other countries are more comfortable with. in the u.s. there are about ten models that work and they're geisinger, kaizer, mayo clinic, cleveland clinic, these are organizations that have been 20 years in the making. they have a very strong physician culture and they do a tremendous job but transforming the average physician practice or average community hospital into that level of performance is very hard work. >> insurance companies, are they the good guys or the bad guys in this discussion? >> simply we're the good guys as far as we're concerned. >> i disagree, i think you're the bad guys, wanted the status quo. you like employer-based insurance, it's easier to negotiate with one company, cover 20,000, 30,000 people, instead of dealing with individuals, we'll demand choices, make a wide ear ray of products. that's why you played with the

white house i think. >> what i would say is that when you're in a negotiation and the other party is the congress, you tend to have limited choices about the options that you would exercise. >> that's a great understatement. sorry. >> i'm trying to be clear and accurate. but the other point i would make is that most plans today play in multiple segments. if we look at the three largest health plans have large individual businesses, they have very large businesses focused on the small employer and they do have the large national account employer and they play in the medicare market so i don't think that they're opposed to an individual participation. >> ron what happens if the mandate is struck down by the supreme court which means you don't automatically get a lot of new people who are coming into the system and willing to pay premiums or forced to pay premiums for health care insurance but the other parts of the bill are allowed to stand and you have to take everyone with a preexisting condition and keep kids on their parents up to the age of 26 and a series of

other things happen. what does that mean for your bottom line? >> well i think the bottom line is that for the consumer, health care becomes more expensive. there is no product you can make more affordable by making it more expensive. >> zeek emanuel premiums would only rise ever so slightly. >> i think we have to back up as a country we have a moral obligation to find a way to get everyone covered and we have to make a decision about how we increase the level of portability so that if you leave cnbc and you start your own business, there's a way for you to have insurance. we also have to recognize that people won't have insurance because they can't afford it or because they made bad choices. they then ask ourselves as a society who pays for that? do the people who have made good choices about insurance pay for it or is it a burden we all share? >> you think everyone has to pay somehow? >> there is no free lunch. we can't bend the laws of economics. >> you like the individual mandate in other words? >> yeah, i believe --

>> you think it's unconstitutional i thought. >> no, let me very clear on this point. i believe that the mandate as written in the current deal will not be upheld by the supreme court because it is linked to the commerce clause, and i believe that quite honestly, the solution they have in massachusetts works just fine for massachusetts. i think that when you mandate insurance companies to guarantee and issue insurance there must be a mandate on individuals or else economically it does not work. there are other models that could be applied as well. >> how much of a premium increase if the mandate is struck down but the other provisions are left in place? >> it's a actuarial estimates range being 20%, 30%. it's really a function of how many people wait until they need health care before they buy insurance. >> you have an example in new york, this state says this is a guarantee issue, you must sell health insurance to anybody who wants it, so what happens in new york state?

anybody, you wait until you're sick and you have a pool of significant vehicles and the premium levels are some of the highest in the country. >> they are three times more in new york than they are next door in the state of pennsylvania. >> yep. >> ron williams we have to leave it there. thank you for helping us try to fix the system. we have to have you back. >> after the supreme court decision. >> i think it will take a little longer than we've had this morning to fix it but -- >> we'll fix it in two hours. >> maybe you come back after the decision and help us sort what it means. thank you very much. >> thank you. when we come back, lower oil prices driving down the price of gas at the pump. you know this as you've been feeling the pain. how low prices can go. first we head to chicago for a look at what traders are watching. [ male announcer ] introducing a powerful weapon in your fight against bugs. ortho home defense max. with a new continuous spray wand.

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welcome back to "squawk box." in our headlines good news for anybody who drives. airlines, trucking companies and energy consumers are betting on further oil price drops, they say many consumers are reluctant to lock in at current levels for fears prices could plunge. more of a silver lining of good

news around potentially bad news. the race for the white house might run through silicon valley. at president obama raised over $1.5 million from top tech companies, less than he received four years ago but compared compared to mitt romney raised almost $340,000 from the same group so far. again mitt romney is ahead of the roughly 240,000 that republican presidential candidate john mccain picked up through silicon valley in may of 2008. coming up the looming fiscal cliff and your portfolio. cnbc kings off a special series next and we'll head to chicago for a look at the trading day ahead. [ male announcer ] we imagined a vehicle

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the dayughout throughout the day cnbc is bringing you a special series on the approaching fiscal cliff, eamon javers joins us with more. sounds so foreboding. >> fiscal cliff is a catch-all term that describes a whole bunch of things coming due in terms of fiscal policy by the end of this year. let me walk you through what that is so you get a sense of why politicians in wash have the

heebie-jeebies. the debt ceiling of $16.394 trillion is likely to reach that by the end of the year. boehner will only support the increase as long as there are spending cuts larger than the debt increase. the next one the bush tax cut expiration date is also the end of this year, complete expiration by one analysis would mean an average household pays $3,000 per year more in taxes. president obama only wants to extend the bush tax cuts for those under $250,000 a year, speaker boehner says the house will vote on its plan before the election, don't count on anything much happening until after the election, and then the hammer drops on the sequester, remember that phrase, that was baked into the caked in the last budget deal, automatic cuts january 2nd, 2013, up to $1.2

trillion in cuts, split between defense and domestic spending, for defense up to 15% across the board in defense spending programs and don't forget what they're calling the monetary cliff, we learned last week that the fed plans to extend its operation twist to the end of 2012, if that ends at the same time as all this other stuff that could exacerbate the hit to the economy, also in the mix a payroll tax holiday expiration and emergency unemployment benefits ending, add it all up and what you have a potential huge hit to the economy going into the new year at the end of this year. i talked to jared bernstein, former obama economic adviser and i asked him how we got into this and he said because politicians like to kick the can down the road. >> the only reason they go off is because the politicians don't have the compromise ability to get together and on the republican side, except new

revenues and the democrat side accept the spending cuts. if they could do that we'd solve this tomorrow. >> no progress at all probably until after the election and then it's really an interesting scenario, if obama wins a second term that's one scenario. if obama loses and mitt romney is not sworn in until the end of january that's an entirely different complicating factor. bernstein thinks we're going over the fiscal cliff no matter who wins the election in september. >> the political and economic permutations seem to be endless. eamon thank you so much. keep watching cnbc throughout the day, look at that graphic, how could you not watch with a graphic like that. >> this is true. >> is it animated, can the car go flying off? >> no because we don't know

where it ends. let's get a check on the markets. rick santelli joins us from the cme in chicago. we looked like we were looking at green arrows for the equity markets when we came in but there are concerns about europe after a couple of bond auctions there. spanish yields short term rates have jumped significantly every more than and in the context of traders, traders are kind of numbers people so they look at it like and we've said this before, the only problem with moving paper for the most part is price. you could have the junkiest paper on the planet and if you price it right, somebody is going to buy it. the real issue turns to thursday and friday and believe me, you're going to hear a lot of hope running through some type of solutions and of course we hope that is the case.

the real litmus test if people really want to be objective the litmus test is simple, recourse, recourse. put yourself in the role of angela merkel, think about the politics of germany, think about the economy of europe, and you ask yourself, are you going to backstop everything for europe, knowing how many extensions, how many a please, give me two more years from bailouts for programs thus far. if germany doesn't have tangible recourse when promises are broken i don't think anything is going to happen and to get recourse is a process they make seem simple, we'll do this and that overlay, ultimately extend the union and ultimately have a discussion. the problem is the markets are screaming now and that type of process is going to take a long time. >> the markets are screaming and when you look at the spanish bond yields, rick, the banks can't buy anymore. the banks turned out and were lousy buyers of the spanish

bonds because they're stuffed full of this, can't buy it anymore. you look for other buyers which means the yields go up from here. there's talk berlusconi supposedly is considering running in italy again, coming back and trying a run, a platform oflinging back the lira. >> that's my point, once you get down the rabbit hole, whether it's in this country, once the government sleeps with the banks all the dynamics change, every decision they make becomes scrutinized and whether good or bad that's the way it is and you see the politics. look at what hollande and france are doing. many think france is the country to watch, pulling back, putting on anti-reforms, making issues and potential rules that are going to once again make hiring difficult because firing would nearly be impossible, all these things are going to catch up with europe. >> so we wait and we watch and we see what comes at the end of the week, but i guess what you're telling us is we are still very much on headline risk

alert for what's happening in europe every moment of the day? >> well i'll tell you what, my personal opinion is three years from now we're still going to be talking about europe in some fashion. >> ugh. >> man. >> i know, right? >> it's groundhog day. i want to be like rip van winkle and emerge. >> how many will there be to save, 75, 80? they're already at 14 two years in. >> rick thank you very much. great talking to you. see you again tomorrow morning. >> i want to start growing my rip van winkle beard and when i come back dr-- >> good luck eating your breakfast. >> you can even grow a beard? >> thank you for that, and joe if you're watching you can appreciate it, too. >> wistful. coming up this story is for jeeves, how low can it go the price of oil. tom essaye, president of kensell trading. we'll explain what it means after the break.

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welcome back to "squawk." dow looks like it would open up 13 points higher, nasdaq would be up as would the s&p 500. seagate will become the newest member of the s&p 500 later this

week. you know what that means, it will probably possible. it's replacing progress energy which is being acquired by rival duke energy. >> you say in the afterhours trading when it was announced, boom. oil prices below 80 bucks continuing the slide as u.s. supplies hit their highest levels in 22 years. here with his take on where prices could go is thomas essaye, president of kinsale trading and editor. >> thank you for having me on. >> oil is for 80 because of the global slowdown in the world or the situation with the big glut in the center of the country because they haven't reversed the pipeline and once that happens they'll be able to export? which is it? >> it's both. you have to look at crude oil from three facets, look at supply, demand and then geopolitics. all three of those angles have been bearish of crude over the last two months. we've seen demand slackening from european concerns, we're

wewell supplied here in the u.s 7% over inventories last year and we've seen a reduction in geopolitical concerns as iran has been going through these negotiations, so really it's been three things that have pushed crude oil lower. i think unfortunately there's not that much lower for crude prices to go from here. >> let's talk about the particular catalyst. when do they finally get the reversal on the pipeline done so that way we can export? is that the next catalyst and what is this going to go to pricing? >> it's part of it just like those three things push crude prices down $30, in two months we'll see some contribute to probably arresting the decline. the pipeline reversed last week and they delivered their first batch of crude to the gulf for export. that will help reduce the glut here in the united states with regards to wti crude but we've also seen an increase in geopolitical concerns, not much of a geopolitical risk premium priced into crude now syria and turkey and then the egyptian

elections, none of the countries are significant oil exporters, but all that region is very, very linked, so you're starting to see a little bit of a heating up of tensions there again and given the relative underpricing of geopolitical risk. >> underforecast for the price for the year? >> i think we'll see 90 before we see 70. around 90 in wti and around 100 in brent is probably an average price by the time this year is done. we'll see prices ittic up from here. >> tom, a lot of the big airline and trucking companies, other big users of energy are taking or the side of that bet. the fte has a story saying commodities traders are hearing from some of the guys who are not taking out big positions right now to try to hedge and lock in prices because they think drops, there are more drops to come from here. who do you think, obviously they're putting up a lot of money on this or not putting up a lot of money on this because they think prices will continue

to drive down. what do you think is driving that? >> they're just going with the trend and seeing european concerns and europe is certainly going to continue to drag macro economically so have we seen the absolute floor in crude? maybe not. over the next couple weeks of this european leader, if it goes south we could see it maybe tick down to $70 but from a risk/reward standpoint, where do i want to put money to work, the energy complex has gotten killed and had the perfect storm if bearish forces hit it, i want to take a shot there versus some other sector that's holding up on hope of a european leaders finally working something out. >> tom, good to see you this morning. we appreciate it, thomas essaye. when we come back news corp. splitting up the company. and the view from wall street, we'll be heading down to the new york stock exchange. fix it or find a new job, all right?

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welcome back to "squawk" on this tuesday morning. we've been talking about this

news all morning, news corporation, mr. murdoch's company reportedly considering splitting itself into two different companies, move would separate publishing assets, the newspaper business, harper collins, et cetera, from the entertainment business, 20th century fox, fox news channel, the fox broadcasting corporation, all of that. there's an analyst out, we've been talking about why they would be doing this and one of the reasons that people close to the board have been suggesting to me they think this is a viacom like deal, split yourself, create more value. we talked about the suggestion both of you made about the scandal issue in terms of hacking and that would would mean to the bskyb deal. >> and maybe it buffers and protects one arm versus the other. >> ian whitaker at libirum capital saying it's credible and makes sense given the newspaper part has been a scandal hit element of the business and also suggests they may have another

tilt at sky in the medium term. i imagine it would be seen as a positive by the shareholders outside the family. >> you don't know if it's going to work. >> you don't know if it's going to work and people inside the company at least to me are suggesting they're not sure that that ultimately should be the goal because they don't know if they'll get there. >> the government will still maintain incredible control over both. it doesn't answer -- >> it doesn't answer that question so that's the big question. >> i'd like to know what the guys at the new york stock exchange think about this. why don't we get down there. jim you read through a lot of these things, what is your take on it? >> i think this is part of a growing group of companies that say okay, look, a lot of managers want growth, and they want value. the value side would obviously be these newspapers because no one really wants them. the growth side, fox news, fabulous grower, the movies, fabulous grower and will it make it so they have better regulatory vision? look, i think mur dak is a

shrewd guy and tried to figure out what makes it that passes muster. these splits only work if the management decides to buy back a lot of stock and tighten the float. remember this stock bottomed at 16 the day the pie was thrown. these assets are historically undervalued. >> everyone sitting here is a former newspaper person including you. >> yes. >> what i find fascinating through all the years is how much rupert murdoch wants to hold onto the newspapers, when they account for this much of the market cap, have terrible margins compared to the other products in the portfolio. i mean he's got it in his blood, right. >> warren buffett likes it, too. >> he's a johnny come lately to the newspaper business. >> when you're really rich, you can own a newspaper. owning a newspaper is like owning a harvard, it's like owning columbia. >> murdoch sees himself as almost like a journalist?

>> he is a journal -- look, newspapers are great. i don't know a soul -- i always ask younger people when younger come to work on this show or "mad money" what papers do you read. they look at me like i'm a moron. i delivered the paper for extra money when i was in college. there is no paper route anymore. these are relics, if you can split them off and have tv and movies, it's what i want. it's just a terrible business print. a lot of trees, a lot of people got to move them. doesn't make a lot of money. >> i hate hearing you say this. >> listen, i've been in it all my life. i started out at "the tallahassee democrat," and i covered homicide in california for the "l.a. examiner." >> jim, if you were a shareholder in sky today, would you consider it a good news? >> definitely. i would defer to my colleague david faber who has probably been working on this thing nonstop the whole morning while

i've been busy trying to figure out whether to get a triple venti cap chun know. >> did you go with it? >> i decided to hold off. >> invest verse been asking for this for years. there was a plan under way to potentially try to carve up the newspapers with the idea that the murdoch children would eventually run those. if they do this, they're answering to a certain extent what shareholders have wanted. they've been increasing the buyback. clearly you get rid of the anchor, the basic anchor around growth and multiple for this company. you get a higher multiple. you also potentially could throw a lot of debt with it. so we'll see. the question is, of course -- >> why now, david? >> yeah, and will they actually do it? >> why now? >> why now? i think it part it shows chase carey perhaps has more power in terms of dick kating how they'll respond to shareholders' wants and needs. it also has to do potentially with bskyb. that's a little unclear --

>> after conversations with andrew -- becky and i were very sceptical, oh, this is to buffer bskyb. now it seems like a lot of people wanted this, rupert murdoch is injured and weak and the people around him are seizing on the moment to do something they've wanted to do for a long time. >> you think it's injured and wounded? >> yeah. >> i think he's rich and happy. >> really? >> i think michelle is right in the context of the board discussion, he -- i don't want to say -- i think wounded may be going too far. >> a wee bit exaggerated. >> he doesn't have the same power necessarily that he had today and i think chase kerr rhee is asserting himself. >> granted the litigation goes with the publishing assets. but the overall risk is still across the board. you can't have fraudulent conveyance. again, we don't know the answers. we're reporting on the fly here. >> it's the first bit of exciting news out of so-called

europe that i've seen. a stock actually going up in europe because they're doing something, not just because some foreign minister has said maybe they'll be an ecb bond. >> you obviously haven't seen the most seven-page report leaked from the euro group on how they're going to save the euro. this is compelling stuff. >> gees, i was going to focus on fiscal cliff today. >> you've got to read that. we'll be talking about that this morning. we've got to. i know you don't want to. >> no, i'm going to do it. europe is most important. jpmorgan put out a piece of research yesterday saying let's stop kidding ourselves. i listen to your show all morning. it's 25%, 30%. we can't avoid it. it's too big. >> all right. >> is there anything to be said about cheryl san berg joining the board of facebook? we haven't kicked that around this morning? >> we'll have a lot to say. >> they've been criticized for being a male-dominated board. it's interesting they have eight board members.

you should have seven or nine. >> why not do it before the ipo. >> i don't understand why she wasn't an original board member. >> they kind of do what they want. >> isn't she an insider now. >> trace true. the flip side is there has been speculation she'd leave the company, pursue a job in washington. people put her name out for commerce secretary, treasury secretary if obama were to win again. by joining the board, this may be the suggestion that she'll be in it for much longer. >> yeah. i don't think she's going anywhere. >> jim, we will see you guys, and david -- >> good piece this morning about israel -- same israel. putin, no. that syrian stuff next. >> it was a crazy interview. i wanted to bring cameras. it was what they call a pen-and-paper interview. >> we'll talk more about this in a second. coming up, the stock of the day,

is it in your portfolio? plus andrew's interview with a con artist. "squawk" will be back in two minutes. >> i think it morphed i represented the american entitlement dream and that might be alive and well and that's different from people who think they can become the next steve jobs or mark zuckerberg. that american dream is still alive. the reason the industry hasn't communicated this message is somewhat of a mystery to me. i think what creates difficulties is that not every private equity investment is a successful one. i think if we all can focus on job creation, creating the environment for a better investment outlook, that's what america does the best. everybody has their own opinion and there's no deal making going on in washington which really is a problem with

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stock on the stock on the day today, morgan stanley, goldman sachs downgrading the company from neutral to buy and removing the stock from the conviction buy list. goldman says it sees value at current depressed levels but expects better returns at jpmorgan. it's adding jpmorgan to its conviction buy list. >> phil purcell, the former chairman of morgan stanley has a fascinating op ed in the "wall street journal" suggesting big banks should be broken up not for regulatory reasons for shareholder value. he says he spent the better part of 20 years ag greg getting businesses. breaki