good morning, welcome to "squawk box" here on cnbc. i'm michelle caruso-cabrera. ecb widely expected to cut its benchmark borrowing rate by a quarter point. to 0.75 and the deposit rate could go to zero. we'll be looking to are that decision about 7:45 a.m. eastern time. former barclays chief bob diamond gets a july grilling by british lawmakers. >> i was finally given all of the documents the weekend before this became public, because i was on the -- we had talked about. it took me a while to get them all downloaded. i was getting frustrated with my technology and getting it downloaded. as i get it downloaded and started going through it and i go the to some of the e-mails,

got physically ill. >> moody's has cut barclays from negative to stable. the ratings agency cited an uncertain management outlook as the reason for the decision. just moments ago, s&p did the same thing. more from this story in just a moment. steve? the focus will then turn to the u.s. jobs market, the adp employment report for june will be released at 8:15 eastern time, followed up by jobless claims data 15 minutes later at 8:30. all of this is the pregame for tomorrow's employment report. retailers are reporting june same-store sales today. analysts expect retailers could post their lowest monthly gains in three years. it's becoming more expensive meanwhile to rent an apartment. asking rents rose to $1,091 a month in the second quarter, 1% higher than the first quarter and biggest increase in nearly 2350i6 years. analyst says this affects the

growing number of people who aren't able or willing to buy a new home and the lack of construction. walking in here i saw where the futures were. i think when i did the fair value minus the futures, that's what i saw, down about 4 points. probably not a lot of action until we get the adp report. it's a double whammy today because of the holiday. we'll get the claims number as well as -- >> that cowl be 0.0002, couldn't it? >> yes. no coincidence that -- >> the grilling, july fourth. the american. >> yes. >> like a mind meld. >> this is what i miss. >> this is what i miss. that's exactly what i was thinking. >> what do you think bob diamond was thinking as he's sitting there, i got my uk passport for this? >> all american executives at british companies are given a hard time because we left the -- you know what somebody pointed

out? >> we left? >> that's one way to describe it. >> maybe we superseded anything they dreamt of in terms of wo sd domination. >> you go. >> you are now getting to know how i think. >> you're channeling them. >> but you don't believe that. >> it's terrible. >> i want to point out what a friend said to me. >> bob diamond's teeth are way too straight for them to like him over there. >> when he's sitting there, he became a uk citizen, i mean, he must be thinking to himself, you have got to be kidding me. >> i like that one line where basically they said either you're complicit, grossly negligent or incompetent. he waited and he said, is there a question in there somewhere? that is not a question, is it? >> first of all, i'm going to

say mr. kernan and ms. caruso-cabrera. the members of parliament were outraged that he used first names. >> yes. >> you wouldn't do that here. >> it was so rude, somebody tweeted. a friend of mine said three-quarters of the world's population has cast off the yoke of british oppression. it's not just america. >> they don't like anybody. >> i told you, it's not just casting it off. it's then super seeding anything that were ever dreamt of in your world. think about it. >> yes. >> we're going to have jemaah godfrey. she's a physicist. we'll talk about that. who bozons were named after. >> einstein and bose. >> they were named after two

people. >> a guy named bose. >> the indians were upset that nobody noticed an indian guy named boson. >> like photons. they didn't understand how these other particles at the beginning of the universe which were all traveling basically at the speed of light, they didn't understand how they finally got -- >> a mass. >> and they passed through this molasses of bosons and acquired imagination, whi mass, which is good. >> i read so many articles. that was good. that's the best we've got. >> steven hawkings said this was not going to be found out. the higgs was there. there were tears in his eyes as people were clapping.

remember we were going to have a super climber. they have a much better one which can accelerate these particles much faster. >> what i loved about the higgs story, a lot of great scientific discoveries, especially when you're talking about space, et cetera, start with creativity and an expansion in the way you think about anything and you come up with a theory long before it can be proven. right? he didn't think in his lifetime his theory would be proven. >> the entire theory is this model that was put together. >> the standard model. >> 50 years ago or whatever. evolution, we know how that works. it's called a theory but we have so much data and the carbon record and fossil record and everything else. >> he believes in evolution. >> oh, please. that's ridiculous. >> i know. >> people that write in that -- people that are skeptical about

things, they're anti-science, that kills me. >> right. what's great, is we have probably the only person in the world later on in this show who can talk libor and higgs-boson. jemaah godfrey. >> she's a physicist. >> i wanted to put that together with libor and higgs-boson. our two top stories. >> they were setting rates low to hopefully make the financial crisis not happen. >> maybe at the behest of regulators. >> this is two different sets of scandals, there's the pre-2008 scandal, guys sitting around trying to manipulate the rate. and then there's the crisis and post-crisis where now you're starting to wonder how do we preserve the entire banking system and should we manipulate that rate? should i read this?

>> i want you to really -- i like throwing her off. ask her to just go into the higgs-boson and what she thinks of it. >> do you want me to ask her about her teeth? >> no. we mentioned bob diamond talking about the libor price fixing scandal. kelly has the next step of the investigation. >> good morning. i'll take the libor piece of this one at least. i want to back up and remind people what we're talking about. the world functions on credit and the cost of credit depends on the benchmark borrowing costs, which it's a mortgage or corporate loan, it's benchmark funding costs plus a couple of percentage points. it's these benchmark costs that are now in focus. there are some like the fed funds rate and the rate the ecb will be lowering later today most likely which are set by

policymakers and there are some that are dictated by what banks say they're borrowing from one another at. it didn't actually reflect what it was borrowing at. we can get into the questions separately about whether or not that was the most evil thing in the world but what's clear it was a misrepresentation, that plus some of the individual trader behavior before the financial crisis is why barclays has been fined and right now behind me in parliament there's a debate going on as to whether to open a parliamentary inquiry into both libor and banking culture more broadly. this most likely will be voted as a yes. it's what the ruling conservative/liberal democrat party would like to see happen. at about 5:15 local time, noon for you guys, is when we're expecting to get the results of that vote. the minority labor party wants a harsher, more severe inquiry, that would be a judicial inquiry, it would mean people are under oath. we've only seen this in a few

cases, including the iraq war and the inquiry for news corp. a parliamentary hearing is quicker. it's probably the case that the labor party would like to deflect from attention from itself being in power in 2008 to focus on banking culture. we'll keep you posted on the results of that. stay tooned around noon your time. >> thank you, kelly. >> we are waiting on the decision from the ecb due out at 7:45 a.m. eastern time. sylvia is standing by. actually we're going to stand by. she's parentally not underneath that monstrosity. >> has to be there. >> that horrific-looking thing. >> i've been there. >> it's an awful location. the worst place to be line. >> that's the center of frankfurt. that's all they have. >> there was a big occupy frankfurt movement there. >> if you get that assignment,

you did something wrong. what about occupy capri? >> i never get those assignme s assignments. i get the occupy cleveland assignment. >> occupy frankfurt? >> yes. >> if sylvia isn't going to show, then let's forget her. >> all right. >> i want to ask what sylvia thinks about higgs-boson. >> we didn't hear from kelly much about the higgs-boson. >> did we find out what the next step going forward is? >> no. >> on the higgs-boson. >> guys on wall street, women on wall street, said we're not making enough of this, they think it's a really big deal. i said i have a hard time getting excited about it because rates were lower and i guess the one place -- >> back to libor again? >> yes. >> i thought we were on

higgs-boson. >> the libor is not a big deal. >> i don't think it's a big deal either. >> just one more chance. >> last 24 hours, just like you, i had people telling me it's a huge, trillions of dollars are priced off of this. in the middle of of the crisis what was the saying? libor is the rate at which banks are not lending to each other. the libor rate is not real if nobody's lending. it could be 0 or 1,000. what's the difference. >> banks once again, their reputation is sullied, their power before politicians. this gives politicians and the regulators another way to have leverage over the banks. >> events in the last 48 hours where we have seen people who were going to ascend the throne suddenly tumbling, i think there's something more to this in that it goes much further up the chain. regulators knew about a lot of this stuff already. >> this is interesting. >> this will affect a lot of different parts of the uk

government before this is done. i think this is why we're seeing this crazy reaction. >> i'm going to say to helen, i tried to make this a big deal. next, back to work in the u.s. trading pits. we're working with be not working, now we're working again. we find out which reports the markets should be watching ahead of the opening bell on wall street. "squawk box," we're just getting started here, more off this quick break. his is our pool. ♪ our fireworks. ♪ and our slip and slide. you have your idea of summer fun, and we have ours. now during the summer event get an exceptionally engineered mercedes-benz for an exceptional price. but hurry, this offer ends july 31st. for an exceptional price. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge.

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welcome back.

u.s. futures are suggesting a flat open. we are waiting for a lot of stuff this morning, weekly unemployment numbers. ecb, on and on and on. >> i think it's because of the higgs libor scandal. >> nice. >> a bunch of bankers falsified some data. we'll call it the higgs libor scandal. >> you wonder why they make a big deal out of this in london. >> which one are you talking about? >> anything. do you remember the wedding. >> the most recent wedding? >> we made a bigger deal of it than they did. >> i guess. >> we're crazy about that. >> out of that entire empire that's what they have left. >> there is a theory -- >> that's sad. >> there is a theory it is because of margaret thatcher and the way she changed the uk that that marriage could have

happened. kate's mother was able to expand her business and they were able to meet. >> is sylvia ready? >> get to the bottom of the higgs libor scandal. we're waiting, a decision as i've already read this before from the ecb due out at 7:45, i'm reading it again because sylvia was supposedly standing by outside ecb headquarters in frankfurt and wasn't. oh! did you have to position yourself in front of that monstrosity again, sylvia? there it is. thank you. >> reporter: yes, there it is. what can i do? i always got this in the suitcase and we pump it up wherever i go and i have the euro sign in the back. that's a tough assignment.

there are occupy frankfurt people in the background. >> reporter: that is a rough assignment. they've been here for almost a year now. they haven't cleared this camp yet, although there are rumors that it will be cleared at the end of the month. i dare say the ecb would be happy about that. on to monetary matters, 25 basis point rate cut is all but in the making, sort of priced into the market. some optimists said a 25 basis point rate cut is disappointing, we wouldn't get more. i say 50 basis point rate cut for the ecb, that's with the finger on the panic button if you get my drift. they don't usually do that. they try to smooth in waves rather than be pro-active as we know from a long year of reporting about this. probably the 25 basis point is wh what we're going to walk home with. the discount rain, basically shave it off to zero to discourage round tripping money at the ecb.

as to the rest, i think we'll hear more of the same thing, mario dragic will demand policymakers in terms of getting the esm on board to do the job that the ecb has been left to do over a number of months now. and that's what we are going to walk home with, if the markets gets 25-basis point cut, i think they'd be happy enough for the minute. the ball is really in the court of policymakers now rather than of the central bank. draghi does know that. the u.s. jobs market, plenty of news to keep the markets on edge following a brief day off on wall street. let's talk more to jim. sylvia is saying the rate cut of 25 is baked in. is that right. >> i believe it is, too.

the most interesting thing is that the dovish policy from the ecb is now considered in defense of euro. normally things we think would weaken the euro from a dilution standpoint. either way, they sit back and do nothing or they pump liquidity into the market which that's supposed to bolster the euro by eventually weakening the euro. either way, it seems you're supposed to be short the euro, which i am. >> are people feeling regrets about how they rallied on friday relative to the european union's decisions? is there a second thinking now that maybe it wasn't as good as we thought? >> of course there is, too, but remember with the euro particularly, there is overwhelming shorts in the euro. we're also going to see it in the stock market as well, too. to answer your we i would say yes. >> let's talk about the two drivers today, the jobs numbers

today and tomorrow as well as expectations for the federal reserve. what number would you say the market would be satisfied with when it comes to the payroll numbers tomorrow? >> i think they'd be satisfied with a 95. i think that we are getting a little tired of being disappointed by the labor numbers. we're probably going to take the stock market down in those situations. as you've just alluded to, we don't go down completely. we get to a point where we think the bad numbers equals a more likely fed movement. there's the put that's built in, without a doubt. >> would you say action by the fed in august is baked in right now? >> well, that's a tough question. i would say no. >> it's not the toughest one. there's a harder one coming next, jim. >> shoot, i'm going to fail this test then. i would say no it's not completely baked in yet. i think we know deep down if things start to get out of hand the fed comes in. as it stands right now ides say it's 50/50. >> what percentage of the

universe is dark matter with the latest discovery of the higgs boson? you thought the last question was a tough one. oh, that's a hard question. >> let's go back and talk about the royal wedding. >> dark matter is now part of the universe. if it's not a hard question don't sit there and say it just because you don't feel like answering it. can you believe that? ooh, that was a big one. >> if people don't know about higgs boson, don come on the show today. how much more dark matter is there? >> i think there's much more dark matter. >> we knew that already. that was already positive. >> much more. >> that was theorizetheorized. >> that's the stuff when they are transmitting the internet, the dark cables. >> there's a lot of it.

>> do you think higgs boson will be driving trading today? let's think about that. coming up, could the god particle solve the euro crisis? it's now on the teleprompter. >> we're going to go to jemaah who is the physicist. >> we'll visit an american-made business that depends on a strong summer for survival. it's a sticky -- >> wait until you hear the name of the new taffy. it's my favorite. as we head to break, take a look at yesterday's winners and losers. building pass, corporate card, verizon 4g lte phone.

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with michelle caruso-cabrera and steve liesman. consensus forecast lack for 108,000 private sector jobs. are we still losing government sector? >> that's the expectation. we're at 90 or 100 is what's

expected for tomorrow. >> right. >> report due at 8:15 eastern. joel prakin will be on, too. >> we booked him. >> it's the single best indicator -- >> single best. there can be two bests? >> right, right. >> double best. >> the nation -- >> i promised to be better at 7:00. >> the coffee hasn't at riffed yet. >> we've done the whole higgs boson thing without coffee. >> it has nothing to do with you being jewish. >> it took me a second. >> that's pretty good. >> you went to bed at 10:30 or 11:00. >> tried to. didn't sleep. >> even later. nation's retailers will be out with june sales figures throughout the morning. overall, thompson reuters predicts sales at stores open at

least a year will be up 0.5% compared to last year. and htc has won a victory over apple. the court ruled that four apple patents were not infringed. the markets indicating a flat open. we have a lot going on this morning. waiting for the adp number, waiting for the bank of england and the ecb. lots of stuff going on. the dow would open up by 10. oil, wti is at $88.20 per barrel. brent is definitively above 100 bucks a barrel. $101.55 per barrel. spain borrowed money this morning, their interest rates are up. the yield is 1.59%. the dollar across the board is

nixed. the euro is at 125.05. the price of gold this morning is lower by $3.80. 1618 per troy ounce. >> our next guest will have thoughts on the ecb and the god particle. jemaah godfrey, brooks mcdonald asset management ahead of investment strategy. it's the lead but we're a business channel so i can't really start with that, jemaah. i want to start asking you -- >> i can link it for you. >> really? we've had some pretty strange linkages so far. >> quantum physics has achieved what europe has failed to do. that's a great leap forward in terms of unification. the higgs boson discovery is a step forward to try and unite everything in the world, all the forces and all the particles in the world. while europe is, you know, it's struggling to try and move

towards fiscal consolidation. there you go. >> now that you have -- i was going to ask you about this spanish auction. i'm going to in a second. how much -- as a physicist, do you have an idea how much dark matter we're talking? >> uh-oh. >> it's been a while. >> yes. >> it's like asking me about molecular biology. >> can i say one thing? >> yes. >> and she's blond. >> i know. >> she's truly a riddle wrapped in a -- an enigma wrapped in a conundrum. >> some of the shorter maturities were not up that much. it looks like there was a lot of demand, not quite as much as the last auction. was this a success we saw in spain? the shorter term stuff actually went down a couple of the

yields. was this good? >> what you're seeing is initial elation from the outcomes of the eu summit and realization is misguided, because the measures that we saw coming out of the summit are temporary or limited. in one respect you look at, they made investors move further up the pecking order and be more senior to the bailout funds in terms of repayment. but, again, deposits aren't guaranteed. so the risk is still there. investors are suddenly realizing we're further up the pecking order but the risk of loss is still there. that's a bit of a caution. they tried to move the government out of the equation. they can recapsulize banks.

>> they're starting to see the dark matter in this entire bailout? >> better than that. >> speaking of dark matter -- >> not just the dark matter, they're seeing the black holes. >> the black holes. >> which is europe. >> now, speaking of black holes, exactly where i want to go with this. why won't the banks take the money from the esm and the esfs and plow it right back into sovereign debt? >> i mean, they did try to do that. we've seen 1 trillion euros from the long-term refinance operation go into the banks. that's exactly what spanish banks did, between the first and the second tranches of ltro spanish banks holdings of spanish government debt rose by 29%. we did see that. and what happens is you get this very short term, you know, kind of comedown of spanish government beyond yields and then all the risks resurface. >> that's play this through,

talking about the ability tore an electron to be in two places at the same time, which is that you're going to have this money, it's going to go plowed back into the banking debt, right? and there's no guarantee, there's no way to keep it as equity in the banks, right? the banks go and buy more sovereign debt which reduces the pressure on the sovereign. >> you're assuming investors will therefore differentiate between government debt and bank debt without realizing. investors are smarter than that. they can see linkage. if there's going to be problems with the banks, there will be problems with the country and therefore, the debt. >> let's go to the ecb. what's going to happen? >> people are expecting that the ecb are going to cut rates today. that could be cosmetic and not

medicinal. they're looking to reduce rates below the 1% level, not just interest rates but deposit rates. although this could boost confidence because it will assure the market that measures are being made. draghi himself came out and said last month that the price signals provide limited immediate affects in records to turmoil. what you could see is that not only will it not boost demand but actually if you're potentially threatening the profitability of banks, because obviously they will be earning less for deposits, it actually might lead them to reign in lending further and do the opposite of what they're hoping. >> and explain to us and michelle in particular, are you -- do you look at what bankers did with libor and does -- are you filled with revulsion and rage? we can't really put our finger on why -- >> i'm having trouble getting angry here. normally i don't.

>> you're british and you know what you're talking about. tell us, why are you so angry about everything? >> and her teeth are straight, too. >> the big concern about the banking industry investigations are the real victim be the man on the street. there cowl be damage to confidence, damage to credit and also further job cuts. >> but what if their justification was they are trying to maintain confidence? do you believe this conversation supposedly that happened between somebody at barclays and -- why is your libor rate so high? people get nervous and wanted a bailout. >> maintaining confidence or making profits? >> i'm talking about the uk government wanting there to be a maintenance of confidence in their banks so they don't have to do a bailout. >> that was a short-sighted strategy if that was the okay. the concern is this could affect

banking -- >> how are they making profits by keeping them low? don't you work for a bank? aren't there people listening to what you're saying about these awful banks right now? >> banking industry is the largest private sector employer. there's over 1 million people employed. the minority have been bad and are obviously being called to justice. the industry as a whole, there are innocent people there. i think the focus is, it's been on barclays but with 18 financial institutions, 12 of them have fired or suspended people. this is an industrywide phenomena. credit suisse have come out -- to answer your question, they've moved the rates down as well as up, depending on the environment, whether it was to boost confidence or help returns. >> how much dark matter is there, jemaah? >> no, no, no. >> can't answer that? >> i want to know how much dark matter there is. >> have you noticed central

bankers manipulating rates? someone is going to put rates where they want them. i don't know, it seems like we're splitting hairs here. is there a huge difference between private bankers and central bankers putting rates where they should be for mankind. >> with central bank action ultimately you may get a short-term boost over the direction you want. over the longer term, investors -- >> that's not his question. he's speaking to the morality. >> look at what central bankers do. that's short term, too. sooner or later this could come home to roost as well. the bubbles are forming in different asset classes because you're not letting market forces determine where rates are at this point anywhere in the world. >> at this point they're damned if they do, damned if they don't. if they do something, as you said, they're manipulating, is

that going to solve the problem. >> she doesn't know how much -- >> you didn't ask her. >> there's a lot of dark matter but you don't know how much, right? >> i'm not going to kwan thefy. >> you have different averages saying 25% to 90%. >> i say 90%. >> squawkepedia is not coming in with the answer here. a lot of dark matter on the set. >> we had a lot of time with her today. thank you, jemaah. >> she had two things to talk about. >> she's great. >> she is. >> comments, questions about anything, e-mail us at squawkbox@cnbc.com. we head to the jersey shore, no worries, no snooki, no cheesesteaks. how about salt water taffy and a new flavor called neapolitan blown apart.

"squawk box," coming your way, next.

welcome back. u.s. equity futures athe this hour, down just a little bit. you get the fair value in there. it open down 11 point. let's see the s&p, everything is just about the same. 0.0 something. we tell you about the results of coney island hot dog eating contest every july

fourth. joey chestnut won his sixth straight title forcing down 68 hot dogs in ten minutes, buns included. the prize, $10,000. the to the ale is a personal best an a record. and for the women's contest, sonya thomas beat her own record eating 45 hot dogs in ten minutes. >> you saw bloomberg. last week there was a lot of public officials with epithets. we did did the obama stuff. parentally bloomberg, someone wrote a lot of puns about i relish this and it's a dog eat dog -- all this stuff. he said into the microphone, on the cover of the tabloids, who writes this shih tzu for me? he didn't say shih tzu. he said the word himself. bloomberg, no 32 ounce big gulps

but he's there endorsing -- >> a hot dog eating contest. >> does that make sense to you? >> it's hypocritical. that's a good point. and what's with the pot ty mouth? >> everybody laughed. it went over really well. >> you can't say that, though. my kids are starting to use that word. >> my kids, too. both the -- >> you slap them around? >> no, i don't. i don't. >> there you go. >> i'm thinking about it. >> we're being slowly -- >> the whole society is going -- >> give me a break. >> well, you are, you know -- >> what? >> you are right there. >> people should know what you're saying during the break. oh, my god. >> it's unbelievable. >> can we roll back the recording we made? we don't have that? >> we'll have it next. >> our american made series takes us to the jersey shore, a board walk business that's tops in taffy. here now is the owner of shriver's. good morning. great to have you here.

>> good morning. thank you for having me. >> joe is eating it like crazy around. >> i just lost a crown but it's good. >> normally we are supposed to start with the broad questions. tell us about the market, et cetera. i want detail because i love it so much. tell us about this new flavor, because i love puns, called knee polit -- neo-politan blown apart. >> we have three to four flavors that are mixed together. it's the vanilla, chocolate and strawberry, the top flavors here at shriver's. we had to do it. there was no choice. >> i have a lemon thing going on that had white with it. what would that be? >> lemon with white? was there a stripe on it. >> yellow and white on one side. it's lemony and really good.

>> it might be one of more sour flavors. is it sour tasting? >> yes. >> it's good, though. >> i'm not quite sure what you're eating but it sounds good. maybe i'll get some after. >> it sounds like innovation is as important as in taffy making as it is in electronics, say for apple. >> yes, it's very true. we keep coming up with new ideas all the time, new flavors. we ask our customers. we get a lot of feedback from facebook and just try to get a good idea about what people want to taste. and we try to get it to them. >> so i have one here that has like five colors in it. right? did you need new technology to make that possible, to get all of these flavors in there? >> no. we didn't. we started out with something that -- a line of flavors called our special flavors, which are more of a child oriented flavor,

watermelon, root beer. that's where we kind of discovered that if we just take two big slabs of taffy colors, put them together, run them through the machine, that's what we come up with. about two years ago i said why not add some more? we took three to four big pieces of taffy and put those together and ran them through the machine and this is what we've come up, our twisted flaefrs. >> i love all this manufacturing video we're showing right now. it looks terrific as you make it. you're a summer thing, right? do you shut down in november, december, january, give it up, go to florida? >> we used to. and that's when i came into the business. boy did that sound good to get seven months out of the year off. unfortunately or fortunately, probably more fortunately we've stayed open longer every year. last year was the first year we

stayed open all year. due to the internet it's really helped us to be able to sustain ourselves to be able to be open all winter long. >> people are buying up to the internet even though they're not walking up to the store in front of you? >> absolutely. absolutely. this past winter, however, we had unseasonably, very nice weather. we still had people up on the board walk coming into the store. and on top of it, the internet sales. we did really well this winter and we're really happy with the results. >> can i ask just a couple not fun questions. how many employees do you have? >> actually, that is a fun question. we have about 100 in the summer. and we go all the way down to about 10 in the winter. it's very seasonal. >> right. >> and the people here who do come for the summer, they have a great time. and they get to take their winters off and the employees that we have all year round they just really enjoy working here

as you can imagine why. >> it's nice to have i asmall business operator on. we have to ask the question we ask a lot of small business operators, all of the regulations with health care, what impact does that have on decisions you may have to hire? >> really -- we're, as a small business, to speak for ourselves, we've really always tried to maintain a good relationship with our employees and to offer them great benefits, and we do do that. if we have to do it for 100 people, it might change our tune a bit, but for the most part, we want to give our employees good benefits. >> okay. >> great to have you, meryl, it was so much fun. >> thank you. >> i don't know if i can do the rest of the show because i have the neapolitap bonapart in my mouth. >> enjoy. >> 84% of the matter in the

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next, a trifecta for the markets, challenger adp and jobless claims and the dynamic duo ready to react. the countdown begins next on "squawk box." ♪ ♪ ♪

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the the markets await key rate decisions from the ecb and the bank of england. >> dad, he's speaking english.

>> oh, i know. >> will the news smack the u.s. markets coming off the fourth of july holiday? ♪ a triple play of jobs data. ♪ and we have a dynamic duo ready for everything. "wall street journal's" john hillsenwrath and fao's bob brusca will be our guest hosts. "squawk box" begins right now. ♪ i'll be there when you get through ♪ ♪ that's the beauty of living my life ♪ ♪ hold on baby good morning, welcome to "squawk box" on cnbc, i'm michelle caruso-cabrera along with joe kernen and steve

liesman. plenty of economic data ahead this morning, including three reports on the u.s. labor market. we'll get the challenge report on job cuts 7:30 eastern time. the june adp report 8:15 eastern time, weekly jobless claims 8:30 and 10:00 a.m. eastern the later measure of the ism's june non-manufacturing index, it's expected to decline slightly from a month ago. the new greek government is meeting with the so-called troika today seeking to ease the terms of its $162 billion bailout. negotiators from the eu, the ecb and the imf all in athens to talk to the newly installed leaders. ahead of all the economic data i talked about, plus interest rate decisions from the ecb and the bank of england the dow would open higher by 17 points, s&p by i 2.5. boe is increasing qe from 325 up to $375 billion.

we'll see if there are any other headlines, bond buying program 375, sorry, not dollars, it's pounds, and a statement is going to follow. should we -- you want me to read that, too? what do you want me to do? >> keep going. >> i want to talk about the boe decision. i'm going to introduce our guest. john hillsenrath from "the journal" and bob brusac, increasing qe, totally expected the 50 billion pounds? >> the 50 billion was expected but they are easing more and we're going to see possibly another easing by the ecb later this morning and connect the dots. you start thinking maybe the fed is going to follow suit and what have you, but they eased. >> right, bob? >> well, i don't think quantity tadive easing fixes what's wrong. i think the central banks feel obligated to do something. they've had the argument that the bank of england, the uk has

inflation running strong, it has money supply going negative, it has the economy waffling. there really is no monetary policy that's going to fix these things so they're going to do qe and look like they're being proactive. >> does this make it worse? >> it will make the unwinding worse. it's not going to fix this because qe is not that kind of an element, you know? it's something that the central bank can do but the same thing in the u.s., if the fed goes on to do more qe it will make unwinding a lot harder. what's broken is the credit demand, the loan demand process. >> couple of comments from the boe now, sees continued weakness in its principal exports markets, output has barely grown in a year and a half and it believes lower commodity prices should help ease the inflation rate, john, overall central bankers around the world are not concerned about inflation. >> no, they're not and i want wouldn't be surprised if over the next few months you hear

them talk about deflation if commodity prices keep coming down. they're expecting it to turn over and this becomes another justification for -- >> can i interrupt for one second? i'm getting e-mails that suggest china has gotten involved and cut benchmark interest rates on a number of key things as well. >> i have reuters headlines here. >> when they see the other big central banks act they love to jump in on the action. >> the futures have jumped now up about 45, 50 points. they were down. >> there's a wire story, michelle, that china has cut interest rates. >> the official website in china. >> i guess that's how they do policy over there. quite different from how they do it over here. >> that's how we used to do it over here, the sea leaves. >> are we excited because of what china is doing and the boe is doing, indicates it's one big

happy family. does it make it easier for to us do it now more? >> i think it points towards us doing more. >> that's whey mean, yeah. >> it's going to put more pressure on the fed but if the ecb cuts rates today which is likely, it will cause people to say oh great they cut rates but now they only have 75 basis points more so they'll start to get into that trap. once you start eating into that, what are you going to do next and they'll be arguing whether they should be and can do qe, whether the german also hit them do qe. >> you see what's in the prompter for me to read now? let me just read it. hey, two guest host this is morning. >> now you're going to do what i did. >> both of them closely tracking the job markets. bob brusca. >> good morning. >> and john hillsenrath from the "wall street journal."

>> steve travels faster than the speed of light. >> we went backward. >> we went backward because of time. >> it's just the most self-refreshing show on cable. >> you're the higs bozo. you know what is unbelievable i just figured out -- >> i made a game time decision and i stick with it okay? i introed to get -- >> they thought they saw some stuff and they couldn't rule out it was a statistical fluke with discovering this, so they ran a couple more tests. they then analyzed another 800 trillion proton proton interactions to make sure that they were right about it, but 800 trillion is what we've added to the deficit in the last three and a half years. >> funny. >> fiscal policy and the universe collide. >> it's the number that will be exacted from you in taxes.

>> i did think one thing they spent -- >> i thought that was funny, that's why he's here. >> they spent 10 billion on the collider in europe, only powered up half way, i was just thinking they probably didn't like spending that ten. we could have built 80 of those based on one, on the stimulus, right? what would you rather have, answers to the beginning of the universe or a couple more -- >> couple more roads or high speed rail. >> we didn't even get the roads, that's the problem. >> maybe you can do the high speed rail at the speed of light, be the first. check on china here. >> where should we go from here? what's going to happen tomorrow, bob? >> we're going to get a lot of data. >> you said 110 or so? stay at 8.2. >> stay at 8.2, i think that one thing we'll do, we'll dispel the notion that the employment gains are getting smaller and smaller and that we're going toward

negative numbers. >> that's not happening. have you been wrong about how slow things got or have you been too optimistic in recent months? did you miss us? >> the slowdown was more than what i thought, it took me by surprise but of course the speed up took everybody by surprise and the question was how much of that was real and now i think what we're seeing is that you take the whole first part of the year and just average everything together and probably gives you some estimate of where we're going. we had a turnaround in household employment, 400,000 household jobs gained which is why i think we'll get a turn around in the payroll report. >> in 2010 the numbers showed a lot of job growth earlier in the year and soft job growth in the summer, negative payroll numbers in the summer of 2010 and really soft payroll numbers in the summer of 2011. something funny is going on with

the seasonal adjustments. >> you're going to write a story about this, right, john, this was a footnote in a speech that bernanke gave in which he argued that because of what happened with lehman brothers, that there is that he whole thing that's messed up in the seasonals, but the thing i wondered about, since it was a footnote in the speech he doesn't seem to put that high on the list of reasons why jobs weakened. do you think it's up there now as a serious reason? >> i think it's one of the things that they think make the data funny to look at right now and why they're being very careful about jumping to any conclusions about how serious the slowdown is. yeah, if it's in his speech he's certainly been looking for that. >> it is curious that three years in a row now we've been doing great in the wintertime the first quarter and boom, we fall off a cliff. it doesn't feel like you can have a slowdown three years in a row and be statistical. people are saying things are tough, people are telling you they're not doing a lot of

hiring so what's your take on that in. >> spending had picked up. lot of variables were active in the earlier part of the year and a lot of things were slowing down, all the manufacturing data are slowing down, we had the big drop in the ism orders that is the opposite pattern we get out of durable goods. the durable goods numbers have actually started to firm up a little bit and of course we saw the auto sales that were actually pretty good. so they're staying firm. this is why i think there are things going on, consumer confidence also fell off all of the indicators on consumer confidence weakened sharply. there's something real but slower. >> what is the unemployment number the last informal report before the election, do you think? >> i think we're going to be below 8% but not by much. i think we might be 7.8, 7.7. >> do you agree the people at the labor department will rig the number so it's below 8% in. >> that's the whole bernanke footnote. >> there will always be people making that allegation.

i go back to the last time i heard this allegation made strongly which was when clinton was trying to beat bush and we're running up into the election, the economy got better. we printed a 2.6% gdp number, they said that was cooked. it's been revised and now it's 4%. you know, so come on. i don't think there's any evidence that the people in the statistical agency, they have real people, republicans and democrats working there, they have both parties. >> when you talk about it, it shines a light on it which makes them actually put out the real number. >> ha, ha. >> you don't know what the press is supposed to do to government agencies. don't you know that's what our job is? >> i've been talking to these guys for 20 years. it's the same people. how could they have loved bush and love obama? >> what do you mean? solis right there with an old hp calculator starting with the number and working backwards to

what she has to make. that's what i have, maybe you don't. when i say it, someone out there thinks it's true, like last time i said this, the number came up. do you see how many times it came down? >> you're very talking about this, bringing the, bringing the sunshine on the conspiracy. >> do you think there's any medicine that can help me? that is delusional. >> it is. you see a running back running and twist, put body english on the running back on the television. >> i see people talking to me on the tv sometimes because they know they're speaking to me specifically. >> i thought it was -- >> two of them. >> this is you now. >> still to come, this is something i should be reading. you want to read it joe? still to come on "squawk box" a preview of tomorrow's jobs report with ceo career builder and their second half forecast next and as we head to break check out the futures. more "squawk box" coming up next.

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they were higher than 15 minutes ago because we've had the bank of england at the bottom of the screen increasing its quantitative easing to a total of 375 billion pounds but we think what probably moved the markets more is that china jumped on the band wagon, cut lending rates and deposit rates and cut reserve requirement rates as well, their benchmark deposit rate by a quarter of a percent to 3% and that seemed to give a lift to the markets. remember, we're still waiting for the ecb later on today, waiting for the adp employment report and weekly jobless numbers in the big jobs number tomorrow as well but this has given a slight boost to the averages at this hour. >> we have another piece of the jobs picture, careerbuilder out with its mid year jobs forecast this morning, painting a better picture towards the end of the year. joining us from chicago is matt ferguson, ceo of careerbuilder.

>> good morning, steve, how are you? >> i'm great. let's talk about the second half outlook the only decent piece of news i've seen in a very long time. what makes you guys more optimistic about the outlook for jobs? >> it was a survey and so the employers came back and said 44% are going to hire in the second half of the year. some of the things within that, that i think show the uncertainty that's going on is there's a wider gap between those who said they're going to hire in the next six months and those who said they're going to hire in the third quarter. people are watching things closely in europe, how the election unfolds so there's a wider gap there. the other thing is a higher percentage growth in the people who told us they're going to hire contrary workers versus last year so that probably plays into the uncertainty people are feeling. >> where do you see the uncertainty by the size of the business, matt? >> i think the mid sized companies in this were more optimistic than they were last year, some of the really small companies you're talking less

than 50 employees we saw marginal improvement and the big businesses are more conservative. >> by region, is it across the country or specific places where the hiring is going to occur? >> the west in our survey showed to be the strongest, followed by the south, the northeast and the midwest. manufacturing has come back and slowed in the last couple of months. part of what you guys were talking about earlier in the statistical anomalies that may be occurring in the seasonal adjustments and the bls number, i think a larger issue there is really that businesses, the last couple of years, going into the fall, believed demand would be higher and then lower. and when uncertainty proves to be higher, last year the argument over our debt, this year it's europe and demand proves to be lower, they back off and i'm not sure that captures all of what's going on but employers have seemed more bullish at the beginning of the

year and when things become more uncertain and demand lower than they thought they hold off some of the hiring plans. >> talk about the places where there's expected to be hiring, what industries are leading the pack here, matt? >>ment so of the newer jobs that you see being published, information technology continues to be strong, some of the areas of that, anything around social media, big data obviously a big move for companies to manage and find intelligence in big data and we see a lot of jobs created there and anything around cyber security so the i.t. area has a whole health care has continued to move forward although not as quickly as it had the previous couple years, and so those are the couple areas we're watching, segments that companies are hiring functional areas, sales, customer service, or other areas, other than i.t., that you're seeing some hiring and i think that's good, may lead to some belief we're going to see a little better numbers in the fall from companies. >> what about the concerns of employers, what are they telling you about their ability to get talent and their concerns about

retaining talent? >> well, it's interesting that in this labor market what you would hear is heightened concerns over finding the right person for the job so you get back into there is a skills gap especially in areas like i.t. and health care, where the people, number of jobs that are coming open there are going up and they're just chasing a rather finite group of talent in that area so we hear more and more from health care and i.t. that it's harder to find. other areas -- >> matt, let me cut you off there. i'm worried, we see this in the nfib and other job surveys. do employers always complain about the lack of talent and is this more than they usually complain? is this really a skills gap or just employers with their main complaint? >> you're right, they always mention this and it's always high on their list. i will tell you there is a real problem there in i.t. and in health care and i see it and it's much different than it was two years ago. i wouldn't say that it's the same as it was in 2007, but i

would say we're getting back to a similar point for high end skilled workers and information technology so it's a real concern. you're right, they always mention it as the first and it will always be their first concern regardless of the economic circumstance but there's a real issue there. >> i didn't see in your survey if you ask about things like the fiscal cliff or the deficit, or health care uncertainty. how much does that you think right now that's playing in the issue of whether or not employers are hiring? >> i don't know that they came out in the survey. i will tell you all three conversations are on the mind when you get into medium and small business people what the costs of health care are going to be, what the regulatory environment is big, the election, what the tax rates will be because a lot of the small businesses are llcs so the tax rate goes to their bottom line and they make decisions on hiring based on that so those are real uncertainties and real concerns for small businesses around the united states and factor into their hiring. >> matt, thanks for joining thus morning. >> thanks for having me. happy fourth of july.

>> i want to ask our two econ experts here. john are you buying this the second half looks better jobs wise? >> i think people's worries about fiscal cliff in europe started in june to really hold people back. i think a lot of companies were lookinging to a second half. >> things were bad before that. i'm afraid we're putting the wrong blame on it. things were lousy before june, started getting worse when, bob n april? >> the job numbers began to break early in the year and then, you know, confidence went and everything else unraveled. if you look back to last year we had all of this terrible stuff happening f happening mid year and with the budget deficit reform and with all of the concerns the market did better. my recollection is the opposite, there's a chicken and egg problem. were people optimistic and get pessimistic or was the economy good and make them optimistic?

there's a chicken and egg problem here. >> john, real quickly? >> what turned was sent nimt may and june. the data started to soften but you've seen markets soften and you've seen consumer confidence weaken. i have a hard time looking forward toward the end of the year and seeing what's going to get people excited about the outlook and what's going to get the economy off at 2% growth path and on to a 3% growth path. >> joe didn't jump on you. hear what he said? he has a hard time looking forward to the end of the year as opposed to a hard time looking backwards. >> looking backwards. i'm time/space. i was preparing for the next segment in the show but you're adding segments as we go along. do you have the wrong button for him? you did, so he hears you but he's ignoring you. coming up a look at who is

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welcome back to "squawk box." mortgage applications fell by 6.7% last week. the mortgage bankers association says the drop was driven entirely by a falloff in refinancing applications. costco reporting same-store sales increase of 3% for june, short of analyst estimates of a 3.7% rise. if you have any comments or questions about anything you see here on "squawk" e-mail us at squawk@cnbc.com, and follow us on twitter @squawkcnbc is our handle. coming up next, the challenger ceo john challenger joins us with talks about who is hiring, next. ey do more. ♪ i'm consolidating my assets. i'm not paying hidden fees or high commissions. i'm making the most of my money.

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. jobs, jobs, jobs this morning, the challenger report is out, challenger ceo john challenger joins us with

results. not too bad. >> 13-month low for job cuts, at 37,551 for the month, that's down 39% from what we saw in may and down almost 9.5% from what we saw in june a year ago. >> but the year-to-date is not as flattering if you look at it through the first six months compared with last year it's taking account of a couple of bad months we've had here? >> we are. we're up for the first six months of the year at 283,000, up 15% from what we were a year ago. we're back in that same spring, early summer slump, but this is good news. maybe this is a sign that we're starting to see some turnaround, certainly it looks like employers are holding on to their workers right now, and anticipation not of the recession that some are predicting. >> so holding on means they're not firing. is there any evidence, john, they're actually hiring? >> we haven't seen strong hiring

growth, certainly the bls numbers are coming out luke warm, and so that is the key driver, companies aren't going to take chances when there are too many risks out there in hiring the kinds of workers we need. >> you guys also do some hiring stuff and didn't look like there was a whole lot going on in their numbers. >> aerospace defense led the way, 2,700 job announcements of hiring, health care came in at 2635 and telecom so there was some hiring plans but certainly no jump in hiring plans. >> there's the hiring plans, at 2,700 in aerospace so i think they all added up to 12,000 if i remember correctly, john. >> exactly right. >> where is the firing, still government and education losing jobs? >> yeah, two big areas in the month were education, 6,500 plus jobs that were let go, state and local governments are being pressured, you know, with their

budget crises to cut jobs and so far over 24,000 education workers for the year and that's mostly public sector workers have been let go. >> what are you seeing on the temp jobs? it seems possible that companies might be going, might be doing their hiring on a temporary basis right now until they see some of these uncertainties ease up. are you seeing more on that front? >> we don't really track that. certainly that's one of the keys when you start to see the economy come out of a period of the doldrums or the slow growth and they hire more temporary workers in advance because they've got the demand but we're not seeing that that demand is strong enough to drive real job growth, whether it's temporary or full time. >> and how about in the manufacturing sector? that's been one of the areas where we've been, we've gotten more good news. is that holding up or is that softening at all? >> well, manufacturing actually

held pretty steady in the month, and we thought maybe with some of the concerns with ism numbers that manufacturing might fall, but we saw job cuts there, 1,200 compared to 3,400 last month, so manufacturing, u.s. manufacturers didn't seem to make much change in their employment numbers in the month, to the positive side. >> john, would you say people should go from this number to being more optimistic about tomorrow's report? >> i think this is a number that suggests that some of the pressure we've seen through this spring may begin to relent. we have to see it followed up by more months ahead of slower downsizing but at least this seems to be a sign maybe a break in some of the heavy job cutting we've seen this spring. >> john, thanks for joining us this morning. >> thank you. i guess, guys, we'll see this perhaps in the jobless

claims number, michelle you wanted to say something? >> i was going to ask him a different set of questions. we've had on ceos all this week, a couple of them, chico's, kr eo for example said the health care ruling was perhaps going to lead him to hire fewer temporary workers, maybe close marginal stores, we've had a number of people come on and say because the higher cost of employees now related to health care reform, that it's inhibited hiring. do you see any evidence of that? austan goolsbee has a piece out there saying it's absolutely not true. >> we only just had the ruling so i don't see how we could have evidence of it yet. people have been thinking about it, talking about it, small business owners wary about it. >> has it led to knowing that it's coming, could that potentially lead to less hiring than otherwise would have occurred? >> sure, sure, people act on their expectations, and you know, i think this is an almond you throw in the mix there were there's europe and the fiscal cliff and all of these things and i don't know how you disentangle them from one

another unless you run a survey and really think that people partition them. i don't think they do. they're looking at everything going it's pretty uncertain, we don't know what's going to happen so i'm going to stay close to home. >> the thing about the ruling is, the law has been there for a while now, at least the ruling provides a little bit more certainty so what i have heard in the last couple of months was people saying i don't even know what my cost structure is going to look like in part because they didn't know how it was going to stand up. at least they have a sense they could start doing the numbers and make some choices. another possibility is they hire people and don't give them health benefits, they just pay the penalty and let people go off and do it on their own. >> because it's less costly. >> you chose penalty i see. >> subconscious. >> so it's not a tax. >> call it a tax. >> pelosi called it a

ta-penalty. tax penalty. up next a check on the markets as we get ready for the ecb rate decision. later the private payroll report from adp will be out. will that be similar to what we saw from john challenger? that's going to be interesting, most likely will be the market mover of the day. we'll have the number and instant reaction from joel prackin of macro economics advisers.

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on check check on the markets this morning, which did get a pop after china cut 31 basis points, and we were trying to figure that out. is it base ten? do we even know? >> it's numeorology. >> it's a percent of a bern benchmark. >> they always have an odd number based on the importance of numbers. >> feng shui. >> i don't think the chinese central bank is making superstitious numerical changes. >> are you kidding me? >> i will push back, i have traveled to china with a group of economists and i asked about the odd numbers the way they cut rates and they said it had to do

with the importance of number eight, numerology, directly. >> like they have a different word for every word we have, a totally different language, it's very different. >> the year the rabbit is cutting eight, that's what you're saying? >> got to go back to square one. >> they do move in eighths so i don't know if that's a superauto stigs b superstition. >> who says you have to be wedded to 25 and 50? >> the bottom line is, they're making up half the numbers anyway. >> were you ever given a barmitzvah gift, you give factors of 18. >> that's not making monetary policy. >> even more important, like gifts for -- >> let's look at the other. >> no, no. >> it's 18. you either give 180 if you're cheap or if you're really going to, if you really have to boss the son you give him more. >> how much did you give to the boss's son? >> i'm not going to divulge.

>> 360 at least. >> that was for starters. >> now up 720. up next -- how many kids, you got like four boys? >> two boys. >> two? only two? >> only two. >> wow action i'm giving you more credit, i thought you had four. you had a two for one split. up next, a market mover today the ecb's decision on interest rates expected at 7:45, a decision and the market reactions next, and we are jobs central this morning and we will be even more so tomorrow, the adp private payroll number is coming and joel prackin, chairman of ma kro economic advisers is our guest. we'll break down the numbers, he built them and preview tomorrow's government data. "squawk box" coming right back. and so too is the summer event. now get an incredible offer on the powerful, efficient c250 sport sedan with an agility control sport-tuned suspension. but hurry before this opportunity...disappears.

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we're waiting for the ecb's decision on rates. joining us is adam lerik of the american enterprise institute, he had a role with the advisory commission from 1999 to 2000 and he's helpful discussing the european debt crisis and greece, et cetera. good to have you here. >> happy to be here, michelle. >> you believe as we wait for the ecb number europe holds it together ultimately? >> absolutely. >> the euro survives? >> the euro survives, whether there be one or two members that leave really doesn't matter but the euro will survive. the political commitment to the euro exceeds greatly what most economists expect. >> germany will put up more

money? >> germany will i think try to drive europe too a fiscal union with central control and in return for that they'll put up a lot more money. >> another point that you have told me before, i don't know if you still think it's true but everybody assumes that 7% is the level for example where spain needed a bailout. you always said 8% to me. >> it depends. >> they went to a bailout before they got to 7. >> 7% is a magic number in the market's mind. it's not a magic number when it comes to spain or italy. spain and italy could finance themselves at 8%, 9% for the next two, three years. >> really? that is completely contrary to what everybody believes. why do you say that? >> if you look at the numbers, you just have to look at the maturity schedule of spain and italy's debt, as it rolls off over the next two years if that increases by 100 or 200 basis points they can maintain their budgets. >> the ecb did cut rates as expected and we'll have that, there it is a quarter point, they did not go with the 31

basis points. >> they also cut the deposit rate to zero from a quarter of a%. >> they didn't go with 22. >> i don't think eight goes into any of these numbers we've seen here. sorry to interrupt. >> in essence if you look at spain and italy's maturity schedule, spain and italy do not finance themselves in ten years, they could in two years, three years, five years, as long as their cost of refinancing is below 8%, 9% for the next two years they'll be sustainable. >> is the ecb doing enough? >> i don't think it matters what the ecb does, whether the ecb lowers rates by 25 basis points, raises rates by 25 basis points, leave them where they are it's not going to affect the real economy. we're already dealing with negative real interest rates of 100 basis points. the ecb can do very little through adjustments of their short term rates. >> bob, do you agree with that? >> yeah, i think this is true.

the markets have a fixation on the number that is often based upon incorrect numerology, and i think this is an example of it. i'm wondering about the euro area, do you not care if countries get blown out and are you not concerned about the possibly for contanlgian, and if that happens it puts pressure on spain, don't you think that becomes a clalening for the eurozone staying together? >> there are two things, in order for the eurozone to work they have to follow two key rules. if you do what we tell you to do, you get unconditional support, that's what we see with portugal and ireland. the second thing is if you don't do what we tell you to do, you're out, you don't get money. that's the test for later on this summer because greece has not and is never going to be in compliance. and so the test is they have to then cut off the aid, if they don't, if you're portugal, you're ireland, if you're spain, why in the world are you going

to make tough decisions if you get the money anyway if you don't. >> apart from the money, you have huge competitiveness differences in the mediterranean countries against germany and some others. if they stay together, how were they going to survive and how are they going to fix that. how do you fix a 15% to 10% competitiveness loss? >> excess debts can be written down, excess deficits can be cut. the problem in europe is that southern europe the people have, expect a standard of living, their productivity cannot deliver, and that's about a 25%, 35% imbalance, and in the monetary union that means deflation. >> you're saying that southern europe needs to see their standard of living drop another 25% to 30% in order to stay competiti competitive? >> absolutely and it's going to drop, inside the euro, outside the euro. southern europe will be 25% poorer one way or another. they can do it inside the euro

through deflation, a five to seven-year painful process where they can leave and devalue, and then it will be done overnight. >> doesn't this raise the question of political will? the leadership in all of these countries says it's committed to keeping europe together but are the european people committed to going through this pain in the southern tier and also in germany, they're committed to sticking by the southern tier through all these bailouts to make this happen? i don't think anyone doubts that the leadership really wants to make it happen, but is it the people? >> is it committed, juncker, who is prime minister of l luxembou has a great statement, we all know what to do, we just don't know how to be reelected if twe do it. schroeder enacted the agenda 2010 in germany to drive down wages, cut social programs and that's why germany is prosperous

today and the second is apatero in spain, he enacted reforms last year that led to the defeat of the socialist party. >> what kind of reforms? >> he started cutting the deficit, he started cutting the social safety net, trying to rein in the regions and he was thrown out. >> also, ireland, and absorbing all of their bank debt. that was falling on a very large hand grenade. >> for no purpose. >> for no purpose. >> whatsoever. >> does the 25% devaluation in the southern tier mean a 25% appreciation in the northern tier, is that a reason why it will never happen outside the euro because germany does not want that appreciation to the currency that it ends up with? >> no. >> inflation that comes with it. >> inflation and appreciation? >> i think the problem for the germans, the germans are fully committed to europe. and they're happy to pay a large amount. one of the largest hedge fund managers said adam, the numbers don't work, for europe to work it requires every german

household to transfer 100,000 euros to southern europe and my response was if you went to mrs. miracle and said that's what it costs, she'd say okay but i want to make sure it can't happen again, that it's only 100,000 euros. the germans are saying we're willing to pay but we're not going to pay an unlimited amount and if there's any country in europe that knows about transfer union it's germany. when they reunified in 2000, they set up a system where there's going to be a transfer to the east, the former east, to bring them up to west german standards. >> how much per household? just an estimate. >> i don't know the household, i'd have to know how many. >> do you think it was 100,000? >> oh, more. in essence germany -- >> it's not unprecedented. >> you have the solidarity tax, supposed to be a temporary transition manager and it's in place still today after 20 years and 2 trillion euros and still going full force.

it's a 7% income tax in germany to pay to bring the east to west german standards. >> it's nice in the east. i hear they have beautiful factories and facilities. in east germany they do. >> empty ones, yes. they've spent a lot. >> but it has paid off for germany? >> it's still going forward and now you're seeing a revolt within germany, the western states they're all saying we don't want a transfer anymore. >> you figure greece has gone? >> i think greece is gone. >> would you agree, what i sa s always hear from people greece should leave and devalue. it doesn't matter about the hotel that never gets built because their issue doesn't cost, the economy just doesn't function, they can't get anything done, nothing ever happens so they devalue, and yet the hotel never gets built and employment never improves. would you agree it would be better for greece to try and achieve these measures so they

could stay? >> of course. the problem with greece is, greece doesn't have to leave the euro but greece is not going to fulfill its plan. what greece could do is it could start all over again, stay within the euro, default on its debt once more, restructure the remaining bonds and then they will get a transfer from the northern europeans that will take the large debt from the european governments and in essence roll it over, extend its majority for 150 years at an interest rate of 2% and then it will be sustainable. greece is going to be, is going to receive massive amounts of assistance from europe inside or outside the euro. >> adam, the notes that we got ahead of your appearance here said geithner's policies are terrible. what did you mean by that? >> well, i demean mr. geithner -- we don't have enough time for that but simply i would say that the u.s. policies have been europe's greatest friend. >> europe's greatest -- >> friend. if it weren't for the terrible

policies here we have fiscal deficits, trillion-dollar fiscal deficits as far as the eye can see, we're printing money at an unprecedented pace. the only thing that is keeping the dollar up at all is the fact that europe's in a mess. if mr. geithner had sent $500 billion of u.s. taxpayer funds to support the european union he would not do as good a job as he's doing right now and the day europe does manage to get some order back in place, you're going to see the dollar fall 20% to 30% and u.s. interest rates rise 200 to 300 basis points. >> it doesn't sound like that day is very close at hand, the way you're describing it. >> i believe it's within the next two years. >> so you're saying europe gets its act together in two years? >> i think germany drives it into a fiscal union in two years with central control. >> haven't people been arguing for years foreign investors are going to flee the dollar and u.s. interest rates are going to soar?

i keep waiting for it to happen. few years ago the chinese were going to take all their money out of u.s. dollar assets and here we are and long-term interest rates keep falling and the dollar is no different today than it was four or five years ago. >> you're absolutely right and i'm one of the people that has been predicting it. the u.s. government has a false sense of security. u.s. treasury interest rates are very low, they think that's a sign of confidence but the fact is the only reason they're low is because foreigners are buying huge amounts of u.s. treasuries, because of the dollar's roll into the reserve currency and the rest are being bought by the fed. what's going to happen at some point is it's going to stop and it will stop when europe -- because there's no alternative reserve currency except the euro. >> this is my, you know, bob diamond can't possibly do as much harm as the fed in setting. this is the dislocation that's occurring as we artificially set rights rates. >> do you think the libor is a scandal. >> is it a scandal, yes, is it

material, no. >> is the fed, how much is the fed buying of what's coming at it? >> i haven't looked at the latest statistics, you probably have followed them more closely. there are few u.s. treasuries brought by private sector investors in the united states. >> that's where the real scandal, the real discloelocati. >> that's what qe is supposed to do. so what he's saying is that the fed policy is being effective and so effective just look at the economy and how well it's doing. >> what if this comes home to roost, wouldn't it be better if market forces were involved here? >> in three years it will come to roost. there are so some warnings. >> hide underneath a rock. >> thank you for coming, we really appreciate it. >> thanks. >> my pleasure. >> i like anyone from the aei. coming up we're counting down to friday's employment report and get an early report with adp jobs orp at 8:15 and

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the countdown to roll row's employment report is on. weekless jobless claims at 8:30. a spokesman for the bulls, the wharton school's jeremy siegel weighs in on jobs, the economy and optimistic target for stocks. and the impact of the european crisis on energy investing, rick ruehl will join us to talk to us about the boom in production. the third hour of "squawk box" starts right now. ♪ never gonna give you up, never gonna let you down ♪ ♪ never gonna run around and desert you ♪ ♪ never gonna make you cry, never gonna say good-bye ♪ ♪ never gonna tell a lie and hurt you ♪ welcome back to "squawk box" here on cnbc, first in business

worldwide. steve is speaking russian. as i said we sent back that, sent her back, we kept him. >> who did we send back? >> the russian spy, the hot one. >> the red head. she was cute but we got you still. >> that made a lot of sense. i'm joe kernen along with michelle caruso-cabrera and steve liesman. >> i'm loving it! >> becky and andrew are off this morning. john hilsenrath, chief economist at the "wall street journal." i give him that title. >> is that an insult or compliment, coming from you -- >> "the journal" it would be a compliment. >> okay. i'll take that. >> and robert brusca -- >> stock futures have gone negative all of a sudden. >> you really are a chief economist, liesman is not, john, they're economics reporters. when i call you that, people write in. >> he's a senior economics reporter. >> yes is he, down 18 now. we're up 20, and now we're down

15. and yesterday it was a holiday, it's a slow week, adp comes out at 8:15, jobs report at 8:30. >> we have one headline. >> which is? >> the greek finance minister, the new one who managed to keep the job just came out and spoke with reporters and said he has been told by the troika he'll be run roughshod at the next meeting in brussels, says he'll have a very difficult time at the euro group meeting. >> as he should. >> we also had the ecb and the bank of england and they basiccally did what everyone expected. >> and china, too. >> bank of cli in a which moves in numerology. >> i just want to point out that the euro fell out. >> interest rates and easing. >> 124. >> interest rates and easing dominating the overseas headline this is morning, the bank of

england announcing an additional 50 billion pounds of monetary stimulus, the ecb cutting to 0.75% and deposit rate to zero, china's central bank cutting rates as well. >> how much? >> it depends on which rate you're talking about. they cut many rates this morning. checking the european markets they're mixed across the board, ftse higher by 10, cac lower by 4, this is flat trade concerning what we've been seeing lately. checking the euro, i hope this is intraday. this is a one-year so no but we did see it move higher initially on the decision, now it has pulled back. silvia is standing by in frankfurt. >> reporter: no surprise for the key lending rate. of course the 25 basis point is already priced in, marginal lending rate down 25 basis points and the deposit rate down to zero. that was something the market

had toyed with but hadn't seriously expected. they kind of thought the ecb might shave off ten basis points but taking it to zero is a clear signal to the markets and banking industry saying come on, stop round tripping the money and pocket it at the ecb. it's time this money went back into the economy and did what it's supposed to do, or at least to start kickstarting the dysfunctional interbank market again so the ecb coming out with a hat trick of rate cuts here today, beyond that, i don't think we're going to see any surprises. we don't have any extraordinary pleasus measures coming on -- the street is being cleaned behind me, that's where the noise is coming from -- we'll hear about fiscal implementation, mario draghi might be asked a few questions about what he thinks of the banking supervision, the european banking supervision being stationed at the ecb essentially, but aside from that, i think it's back to politicians, next stop, euro

group, european finance ministers meeting and like michelle was saying there before the grilling maybe for the greeks but also the odd word about how exactly the esm treaty is going to look like in the end and of course let's not forget one more thing, next week we have a hearing of the german constitutional accord and initial hearing whether the german president is actually allowed to sign the legislation for esm and fiscal impact. if they forbid him to sign the legislation the whole thing could be sort of put back for a few weeks. >> thank you very much, silvia. we're still trying to nail down the big interday ecb and the euro? all the news seemed to come out. >> even the deposit sylvia was talking about. >> there's something going on there because it looks pretty startling on an intraday session move. our next guest called for, do you have a rumor or something, steve?

no? ♪ >> we're working on confirming something. >> all right, we're just confirming, cnn and fox both said they overturned the mandate. we it take a chance here. nothing happened. >> i hope to eventually end this experiment of me being on television with my reputation, i'm hoping it ends soon. >> it's fun to go out with a bang. >> one of those curses on tv or those kind of things. >> whisper is, steve. >> just between us. >> just whisper. >> wait, we're on thereof. >> jeremy siegel called for the dow 17,000 by the end of next year, i don't know if that was before what happened in europe and the fiscal cliff. joining success squawk market master jeremy siegel, finance professor at the wharton school at the university of pennsylvania, he's also author ofs the best selling books "stocks for the long run." when he introduces himself you usually say i am a squawk market

master if people don't know you. you don't use the professor thing or best selling author thing, it's mostly the market master, correct? >> well, i'm proud of that name. i don't usually use it when i introduce myself. >> feel free to. >> okay. >> 17,000, anything changed based on what's happening in europe or based on what's happening here? >> the real projection was 15,000 by the end of next year. i said 17,000 was a 50/50 chance if things go right. i'm holding very much with 15,000 for the end of next year. i think that's a definite odds on. there's two major factors that are depressing our market, i think, 1,000, 1,500 points. one is still europe. europe has gotten a little bit better but out worse is the fiscal cliff as it's coming forward and the obama ruling.

so those two are still big negatives on the market. now, i may be an optimist, i believe there's going to be an extension for six, nine, maybe even 12 months in the bush tax cuts so that next year's congress, and i think they're going to seriously tackle the deficit, much to everyone's surprise. no one has an incentive right now. the election is coming up in november, but once people know, hey, who has been voting for who, what position is being advocated i think they'll sit down and do some serious work and we're going to get some good reform next year. >> when i was reading austan goolsbee's piece today in "the journal" his case was basically that while health care was upheld and the markets didn't go down, and i was just thinking, we're all masters of the counter factual now and i'm just wondering what would have happened if it had been overturned, how do you know the markets would not have been up a

lot? and then you just sort of seemed to play into what i was saying there and after all, at these current levels, we've, we really haven't been rewarded for being in stocks for 12 years at this point basically? >> yeah, well, since 2000, returns on stocks have not gun good. we also have to remember that in 2000 we had a price earnings ratio of 30. >> right. >> for the whole market, which was with basically an all-time high and today we have 13, 12 to 13, so we have a very, very different valuation today. it was very interesting the response. right after the announcement, the market was choppy, and then people said oh, this means that 3.8% medicare surtax for the first time we're going to be getting it on investment income. oh my god that looks like a more likely event. i think it was that the realization that oh my goodness those taxes are going up on investment income that really

said this is a negative and i think that's why in the next hour or two, you had a 100-point drop in the dow. >> i was going to say the dow did go down, a wake of the decision. >> it was more choppy until everyone said it's the fiscal cliff and we all know that is major. even the cbo says likely that that could send us into a brief recession unless we reverse some of those measures, and i think that that's very important. europe is muddling through to get where they have to get to. i think one thing very interesting today was the drop of that deposit rate to zero. i've been advocating for some time that the fed should drop its interest on reserves to zero. i haven't gotten much traction there but i think that that would be a stimulus that the fed -- we always talk about

quantitative easing and twist. why don't we talk about dropping that rate just like the ecb did to zero, because right now, banks don't have an incentive to lend out. treasuries, two-year treasuries are 20 basis points. they say i'll keep it in reserves, i'm getting 25. we need to do every little thing we can do to encourage the banks to lend that out and one of those things is not by keeping that deposit rate at a positive level. so maybe bernanke is going to listen to the ecb and say maybe this is something we should do. >> professor siegel, it's michelle. it was one year ago i was filling in, and you were live from the jersey shore and i asked you a question and you didn't know the answer to it. i'll try again one year later. do you know who snooki is? >> i do know who snooki is. >> great. finally. >> and my sons afterwards said you know who snooki is, you've seen her on "jersey shore" i

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welcome back. steve liesman has the employment rates numbers. >> adp reporting the private sector jobs will grow by 1 6,000, that's far above what the estimate was both for adp of 105,000, may advised up to 136,000 from 133,000 and the non-farm payroll 95,000, the estimate for government and private sector. tomorrow, all sizes of business increase jobs and all types, service sector and goods producing center. live from st. louis, joel prackin, joel, this is a big surprise here. >> it is a bit of a surprise. outpacing the consensus for today's report and tomorrow's

roshl are report but it's a welcome surprise and encouraging if it holds up. >> i think what's important here is not so much the number but the sense that the job market is not completely down in the dumps right here, that there is some life and some vibrancy in here. what is this telling you? what you say take this with a grain of salt that maybe the prior week numbers are telling the better story? >> i like the point you make it seems the labor market is not falling out of bed. you know there is a story that winter numbers for employment were juiced by warm weather and numbers in april and may may have been restrained by the payback on that and now we could be returning to something that's more than norm. i think there is something to that yet i think it's also the case that employment slowed in the spring months because the overall economic outlook clouded at that time but the fact that we're accelerating and that acceleration is coming from our source data at adp, not the other information that goes into

the report suggests to us that maybe we've skirted the bottom le here and could see improvement going forward. i hope that's the case. >> joel this is bob brusca. >> how are you? >> i'm fine, thank you. >> are the numbers growth showing jump at larger or smaller firms? >> in this month's report the biggest increase came on payrolls of the small size, less than 50, and that has been the pattern for most of the recent part of the recovery, but as steve noted, the data looked good, looked positive no matter how you sliced it across goods producing or service producing sector by payroll or size. >> goods producing up 16,000, service sector up 160,000, i think that's key because this is a service sector economy but the manufacturing sector also turning around, 4,000. john, sorry, joel, does this raise questions about the ism here? how willing are you to put this up against the other data and

the weakness there? >> well, regarding the ism, that was an unpleasant surprise, the decline to below 50 but most of that came from the new orders component. the employment component of the ism held up pretty well so i think that it is, could easily be consistent with today's numbers. do i take this with a grain of salt? no, i don't. there's new incremental information with the adp data, you never get too excited about one month's data or one data point. i'll feel better if the bls shows similar acceleration in the official data. >> john what will happen with the economists and outlook for tomorrow? is this enough of a difference with what's expected on the street they'll increase their forecast? >> i don't think it's enough for significant revisions of forecast, but i think what the market starts saying is it prices in the possibility of an upside surprise but i think people stick to their guns on this, because you have to remember you look at other indicators, the jobless claims have not moved in the direction

that suggests we've seen a big improvement in unemployment. >> they didn't blow out, though, john, they didn't go to 400 but didn't go down to 350. >> they're not suggesting a big increase. it's important to remember the difference between 90,000 and 180,000 in an economy that employees 130 million, these are, we're talking about tenths of a percentage point of difference in terms of the underlying trend so i wouldn't get too carried away with it. >> go ahead, gjoel. >> the standard error is about 100,000 in any particular month so the difference between what we've reported today and what was expected in the consensus is only a borderline difference in terms of statistical things. >> bob, would you change your forecast now? >> i will. i like the adp -- >> do it live right now. >> i want to look at the numbers a little bit. >> come on. >> and look at the xon components and probably kick my number up to probably around 130. >> he gave in to the pressure, oh my gosh.

>> let me tell you something that will make people feel better if last month's estimates from the bls got revised up and the incremental acceleration, that would make people feel a lot better. >> i think adp does a great job predicting the change in the change. it tells you whether employment is going to accelerate or not. nobody does a great job with the point estimate but adp has been good at that. one of the things this tells you is we will get a stronger job number this month. >> all this makes me feel that i don't care. no matter what the data is saying right now i have a hard time seeing anything but a 2% economy. nobody has come along telling me it's a 3% economy and why, nobody has come along saying it's a 3.5% economy and here's why. it's still a 2% economy, if i do 175,000 on jobs, bob, am i wrong about that? >> it will take us a while to get there. the housing sector continues to improve. it will help jobs in the services sector and that's the sector that's been really

retarded. we get all this manufacturing data but we've had weak services growth and weak jobs services growth that would be an important thing and that could help bring us over the hump. >> joe could you tell us a story that makes this anything more than a 2% economy? >> our forecast is gdp will grow 2% this year and not much faster over the second half of the year. >> so no. >> but i will say this the difference between 170,000 gainful employment and 90,000 could be the difference between the unemployment rate going down as opposed to steady and rising. i think that would be significant qualitative difference. >> joel are you changing your own forecast for the jobs numbers tomorrow and also for the unemployment rate over the next six months based on what you're seeing in the adp numbers? >> no, we wouldn't do that based on one month's data. >> that's really the story and you used to be able to tell a story. i thought in the beginning of the year we had momentum going in the economy, feels like the knees have been cut off from

that momentum story. the only story you could tell is one of maybe higher -- lower gas prices, maybe that's what slowed us down in the spring and going to fuel us going forward. >> i like the story about housing improving, too. house prices look like they've turned up, construction activity is inching upwards. i think the question is, can housing separate itself on the upside from the rest of the economy, if the rest of the economy is dragged down by these other uncertainties. >> quickly one piece of good news we might be getting in the reports today, maybe companies aren't firing so much. >> we'll come back and talk with a story about firing coming up. come up, more employment data on the way, the weekless jobless claims number at 8:30 and we'll talk commodities with rick rule, chairman of sprott u.s. holdings. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar.

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welcome back to "squawk box." macy's saw june same-store sales rise 1.2%, below estimates of 1.9%. now sees full year earnings at 3.25 to 3.30 per share compared to the street estimates of 3.37. coming up, minutes away from

weekly jobless claims, at the break look at the dow futures, i think they pop up on the data but they were down and up. >> fair value is up 7 or something. >> right. like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. the teacher that comes to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number.

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welcome back to welcome back to "squawk box." we're a minute away from weekly jobless claims. the futures were down and up and up and down, we're now up 8 points, fair value -- we zero out with the fair value. we have two pieces of data better than expected, the challenger with the china deposit rate, whatever it was. >> ecb was the deposit. >> ecb deposit rate down to zero. >> boe. >> way better than expected. so a little bit of better news this morning, european markets what were they doing on the news? the euro crashed when it fell out of bed. europe is flat on this. they didn't really care much. >> they didn't celebrate july 4th. i don't care what happens with them. they don't. they totally ignore it. it cannot be ignored. >> right, okay, and the other thing that was happening is there's the euro which that's a cliff right there, el captain in

yosemite is what that looks like, 1.24, firmly under 1.25. >> we were above 1.25 this morning. >> let's go to rick standing by at the cme and stuart hoffman. >> reporter: 388,000 was the revised number last week, drops to 374,000, so down 14,000, that number was originally released at 386, continuing claims basically a lateral move from 3 3.302 to 3.306. probably the market will take this as better news as they digest what central banks are doing, just consider this, central banks are manipulating rates and what's the difference? i guess if it's called libor, it's illegal, when central bankers do it, it's okay, i don't know. >> yeah, we've been discussing

that. >> because who is going to do more harm, rick? you know, who is really able to dislocate things. >> politicians. talk to any trader that's been in the credit markets going back before the '90s. in the '80s you know what the topic was? everybody knew, i will bar was massaged. this is nothing new. rehashing the old stories, knock down banks, political gain. >> in the '80s there was a happy ending. there's not a happy ending this time. >> what about your friend -- joe, joe, joe, joe, what about your friend, mr. altman, now they're using eminent domain, going to completely shred the rule of law, trying to work the housing market in california, have you read that article today? >> i did, i saw the pimco comment. >> wonderful. mr. altman, are you listening? we'd like to talk to you at the santelli exchange today to see if there's like the r, the u, the l or the what part of rule of law do we tear out today. >> let's bring in stuart hoffman for more on the data, chief

economist at pnc. we're going to monitor comments from the president of the ecb market, mario draghi is speaking. we'll ask our panel of experts to comment. first put together what we see the better adp number, somewhat better than expected jobless claims number, does it make you any more optimistic, stu? >> i was a bit more optimistic even before these numbers, so i feel maybe a little more validated. our number for tomorrow was 135,000, so about 145 private and you know, 135 total, so adp gives me a little more hope that after two months of disappointment, double disappointment, because last month with the downward revisions, tomorrow i think the number will be over 100,000, and maybe we'll actually get a small upward revision to the two previous months and i think when you look at this, you have to look at the second quarter, add the last three months together, still not strong by any means but it doesn't look like the

momentum is getting worse. >> we're still talking, stu, if i'm not mistaken about a 2% economy. is your forecast any different from that? >> no, i heard your discussion earlier. greed that the drop in gas prices although that seems to be coming to an end with crude oil prices up around $8, $9 a barrel since the sanctions are against iran went in. still we're seeing around, back to gas prices are back to where they started the year, they're 40 or 50 cents less than a year ago on july 4th. maybe they don't go down much more but i think the drop in gas prices is one of the maybe sleeper positives that could help consumer spending this summer. >> we are getting some comments from moor yo draghi president of the ecb saying inflationary pressure has been dampened over the forecast to rise here, growth risk related to potential rise in energy prices, he's saying that's a little weird but economic growth in the euro area remains weak. basically justify, i don't know,

stu or rick, once this has been done now, are we expecting more from the ecb or is this a kind of set it and forget it for a little while? rick? >> well, you know, i can just tell you that the euro currency obviously has really gotten the stuffing taken out of it today, breached 1.24. everybody expected 50. they have 25. the deposit rate is a little more interesting in my opinion. i think they're going to take it one step at a time. three blind mice in a dark room, the central bank as well. >> rick, did you see the guy that is at this, the bank that wants to do this, the venture capital firm. >> we're in the eminent domain banking thing in california. >> he's the guy who pioneered lending programs for low income borrowers at bank of america. >> yeah, i guess he's going to try to clean up the mess he created. >> right. >> you know what --

>> you got to hand it to him, you got to hand it to him. >> lots of hutzpah. >> he's getting it on the way in and the way out. >> that's investment. >> my guess is he had a pretty big joint, he's not upside down on his mortgage. >> let me ask stuart again, going back to the inflation question, all i'm seeing is draghi comments on inflation, even talking about downside risk to inflation still expected to be 2%. what's going on over there, stuart, what is your expectation for what they're going to do in addition to what they've done today? >> well, i do think they'll probably do another quarter of a point. draghi will drag it out, and as even rick said earlier, one step at a time, obviously europe is in a worsening recession, germany seems to be succumbing along with their southern neighbors and near depressions, so i think the ecb will cut again and it probably means the euro is headed to stable 125.

>> in the attention deficit disorder that is this program, joe, did you want to go back to the disclosure thing? >> in california, i just love that, he pioneered the, a lot of these probably got his original product. >> municipalities are considering using eminent domain to seize mortgages from investors so that way they can renegotiate themselves and keep the people in the homes. >> was this guy ever an adviser, joe, was this guy's resume ever an adviser to greece about ten years ago? >> rick, what about china, was that a big surprise this morning to markets? >> you know, it was a surprise in terms of the timing. i think the strategy is pretty obvious. we're goinging to see another round of everybody at central banks racing the other central banks to lower, to mask how weak their economies are. the more i see coordinated lowering of rates, adding of liquidity and accommodation the more i personally think the outlook gets bleaker as to them

fixing anything that they're trying to correct through the lower rate gains. >> stu, quick -- >> it was a surprise to me. i'd look for more coordinated intervention of this type. >> stu, pick up on that and what's your outlook for the federal reserve at the august meeting? >> it's actually july 31st, i think they're going to stay put especially if the number shows more momentum. debris with rick we'll see more central bank easing, but i don't see the outlook because of that is bleak. i see it as a little bit brighter so i guess we'll agree to disagree on that one. >> stu, thanks for joining thus morning. rick? >> thank you. >> see you all throughout the day. coming up the european effect on energy and natural resource investments. rick rule, chairman of sprott u.s. holdings will join us next and we're monitoring draghi's comments on the ecb rate decision. unfortunately we can't understand a word he's saying. we'll bring you the highlights as they come in. mopportunities are hard to spot.

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out

out. welcome back to welcome back to "squawk box." futures now down 56 points. >> is this because of draghi saying the downside risk to growth has materialized? i think that's obvious but him saying it out loud making it sound like the economy is worsening more than perhaps they had thought? >> considering we got just about everything we wanted in terms of -- or is it that people now realize qe3 is gun gone and you

were right all along liesman? >> because of the rise in the adp number? >> you never thought qe3 was happening. the fed said why don't they do it now instead of some twist. they said because we want to see and -- >> which is what i thought and what i have been saying, what bob said earlier which is there's a lot of dissent on the board, a lot of opposition in qe3. john knows. john, what is going to happen here? are they going to do it? >> i don't think the bar is terribly high around qe. i think if we get a weak number tomorrow, it certainly increases the possibility and if not tomorrow a few more months. there is dissent on the fomc, but the fact is there are also a lot of people who are ready to do it right now. and there are a lot of people who are running out of patience for this 2% world that you're talking about, where unemployment doesn't move very much. >> what if you're right that -- >> joe thinks unemployment is

higher, closer to 9%. >> you know how high it actually is. how high is it really? >> you have six. >> what's that? >> that's -- >> spain. >> do you know that number? >> 52, i'll get it to you. >> that's always, that number is always higher than the headline rate. >> all i know is -- >> sorry, 14.8. >> we are now for 14 years reporting european style unemployment and it's painful and it's not, you know, it's disconcerting in this country to be where we're happy to get down. >> that's why i think the bar isn't so high, and again i don't think they think they're going to solve all the world's problems but i think -- >> i don't know why the futures sell off. >> hold on i just want to underline the narrative, the futures have dropped sharply and we're wondering if it's the adp report was good enough that is takes qe3 off the table, is that the narrative we're thinking here? that was one possible narrative, correct? >> a possibility. >> okay. >> if we get a strong number tomorrow --

>> the market goes down in theory. exactly. >> we did get some bounce on recent hopes for more fed easing. >> absolutely. >> but the market rallied back, let's not spend a whole lot of time with all of the kids with acne pushing the buttons right now. that's who's there. >> people who have a skin problem now, liesman? >> just emphasizing their youth. >> it's not their fault. >> nobody's got acne? >> i mean, you're bald. >> what's wrong with that? are you saying -- wait a second -- >> it's ad hominym. our next guest cautions investors in the energy sector to keep a two to five-year time horizon. rick rule, chairman of sprott u.s. holdings. >> thank god you don't have a blemish rick, we wouldn't listen to anything you said. >> there's hair there, i see hair. >> there's a little.

>> not much left. >> you got a lot to worry about. >> we've been talking about a couple of reasons why we might see some improvement in the economy, one of them is lower gas prices. is that something you're forecasting, rick? >> yes, i think at least in the united states and canada and north america we can look forward to lower gas prices for the next one or two years at least and i think that probably will help the economy. >> why are we looking at lower gas prices, supply or demand? what is it? >> first of all i need clarify, i don't know if you're talking about gasoline prices or natural gas. >> gasoline prices, yeah, sorry. >> i would suggest both of them stay lower, in the first instance because markets work. we had fairly high gasoline prices a year ago and those high gasoline prices damaged demand so there's less demand in the north american market than there was a year ago. the second thinghat's happened is of course at least in the north american context, crude oil prices are softert as a consequence of increasing

production in the united states and canada. some of that has to do with canada's very heavy investments in the tar sands production, rapid increases in tar sands production. the rest has to do with shale oil production really a new style of production in north america, so north american supplies, north american crude oil supplies are in very, very, very good shape and the u.s. refining capacity has continued to debottleneck in response to historically high prices and margins. >> the shale story is just so incredible. in fact, you're saying nat gas could go to $1, is that possible? tell me under what circumstances do we see nat gas fall further than what we've seen so far? >> i think the dollar is unlikely but it's possible. what will happen this summer if we don't have a hot summer and don't use natural gas in terms of electricity demand we're running out of places to put it. our ability to produce it has exceeded our ability regionally to transport it and certainly to store it.

if you're a natural gas producer you have the up front capital costs in the well, you produce that well and when you produce that well you have to make the gas go away. it hasn't been a challenge for the last 15 years but it's beginning to be a challenge now as a consequence of all the new production we've brought on. seasonally we have demand imbalances and in a very cold winter we can draw down the natural gas and storage rapidly. in the summer the natural gas begins to back up and without increased marginal demand for air conditioning, it's fairly weak industrial commercial demand, we're running out of storage business in the united states. >> john has a question for you. >> what is your rate on how big a slowdown we're seeing in china, how much demand for commodities in particular is slowing and how does that shape your outlook? >> i don't think with regards to energy demand that we are seeing much of a softening in china. it would certainly seem that we're seeing a softening in demand in china for things like copper and iron. this is anecdotal, but it would

appear that we're seeing a reduction in the growth of infrastructure in china. i'm not an economist. i'm really a credit analyst but it makes absolute sense that if you had a slowdown in the markets that china exports to, that their ability to continue to fund domestic growth from exports surpluses would begin to decline. i'm not saying that is what is occurring but it makes sense that is what is happening. the thing that's happening on the energy side in china has been that per capita, energy demand has increased spread over of course many, many, many c capitas. when poorer people become more wealthy the things they spend their money on are commodity expensive. we spend more money on services, we have too much stuff already, but when poorer people, and i'm using china just as an example of that, get wealthier, the increases in demand that they have are for things like

commodities, they can become more energy intensive, more stuff intensive and i think that's still happening in china. >> the mexican election earlier this week and the candidate who is talking about, president-elect talking about finally private investment perhaps within that oil industry, possible -- how important is it? we've seen them suffer for so long with declining production. >> i think that's a very, very, very important theme. most people in the world believe that most oil is produced by the multinational oil companies. the exxons, the bps, that's not true. it's produced by national oil companies and mexico is a prime example. >> hold that thought, steve has news here. >> the market's fallen off a little bit more and one thing that could be a reason, again, we're searching around for the reason, draghi sees a weakening of growth in the whole of the euro area, which i think means germany, too, and that may be the new information in there. >> that's significant. >> rick, do you want to comment on that, bob, brusca, you want

to comment on that? >> the german economy, i read about it daily and the numbers have continued to weaken. you have weaker orders. you've got clear signs of weakening in germany. consumer confidence is the best in europe but it has been very, very gradually eroding. if you look at it, it's very clear as europe has gotten weak in the south the relative strength in germany has eroded so the strong country has nottette can up the weak ones. the weak ones are dragging down the stronger ones. that continues to happen. >> it was the weak ones when they had cheap credit that were buying stuff like crazy from germany, right? >> that's why germany is also part of the problem. their banks were lending the money that was empowering the greeks, the spanish, and -- >> to spend like crazy. >> to spend and so my example is, it's like they're on "the titan tick" the germans said don't worry the gash is on the other side of the boat. they didn't realize they were at risk, too. >> rick, you must build in european weakness, right?

how much european weakness have you built into your outlook? >> you mean energy outlooks? >> yeah. >> i think the western world is really weak. i don't think it's hit north america weak. i don't think it's hit north america as hard as europe, but demand destruction isn't a consequence of high energy prices. the set of circumstances plays into energy demand. what we see isn't so much a liquidity issue. we see politicians dealing with liquidity. we see a solvency issue which is different. we see circumstances where people are afraid to make long-term investments as the potential for crowding out. solvency issues are different. >> clearly. you got up so early in vancouver for us and we appreciate it. >> pleasure. >> steve? >> coming up, more comments from the ecb president mario draghi. and down to the new york stock exchange for the latest on wall street. ♪

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♪ do you do the club? stock of the day, target, one of several big name retailers whose june same store sales came in below estimates. target is on increase at # 2.1 below estimates of 2.4. >> here's the best one. >> the best joke. >> a neutron walks into a bar and asks how much for a drink and the bartender says, for you, no charge. >> nice! >> that's the best one. >> we are telling this joke because of --

>> the higgos-boson particle. >> they think they have found a particle like it. stephen hawkings owes some guy a hundred bucks. >> higgs cried yesterday at the ceremony where they announced it. >> it sounds like you guys are going to walk out of here and croak. final thoughts. let's hope it doesn't happen. take it back, john. do you have some final thoughts for the show, bob? >> look, we have upside -- >> are we closing the show down over it? >> i want these guys to be okay though. >> maybe this is our final time on the show. as boring as it was today, it might be -- no, it was great. these are all -- i'm surprised the market is down. it got everything it wanted today. >> europe is a problem and people are worried about it. draghi isn't saying upbeat things. maybe the ecb won't be as

activist. there is a focus on monetary policy. i don't think the world revolves around monetary policy but often it does in the eyes of markets. >> lately it does. >> you can give the positives and negatives. for every reaction there is -- >> anti-matter. >> right? the better things are the less likely qe. >> maybe we moved toward that with today's adp number. the bar is low for the fed to do more. a bad number tomorrow -- >> when you're above 8% you can never trust them to sit pat. >> it's anti-matter and then what's the matter. >> another physics joke. that was the best one? >> i have more. >> i worry about your judgment. >> two atoms walking across the road.