caruso-cabrera. becky is off but joining us from sun valley on thursday morning along with warren buffett, alan simpson and erskine bowles. we're calling it searching for solutio solutions, avoiding fiscal cliff. >> china's surplus jumps. chinese officials are warning exporters face rising risks of trade protectionism abroad. the comments come a week after u.s. filed a trade dispute. from asia to europe, eurozone ministers agree to give spain an extra year to reach its deficit reduction.

regulators are not you in the hot seat over the libor scandal. "new york times" reporting american and british lawmakers want to know whether regulators loud those banks to report false rates to the run up to the 2008 financial crisis and afterwards. yesterday the house financial services committee oversight panel sent a letter to the new york fed about it asking for transcripts from at least a dozen phone calls in 2007 and 2008 between central bank officials and executives at barclays. michelle. >> in corporate buzz this morning alcoa reporting better than expected second quarter earnings and revenues after the close. the company says it sees strong aluminum demand driven by the auto space. year on year comparison not so good. amd slashing its q2 revenue outlook. seeing revenue falling 11%. prior guidance was a range between a 3% decline and 3% increase. investors punishing the shares late yesterday. take a look at that. off by 9%.

intel is buying up to 15% of asml. intel will spend more than $4 billion. the u.s. shares of asml jumping announce. the company is the world's largest supplier of machines. google close to paying $22.5 mill thrown settle charges it bypassed the privacy settings of using safari. >> some of the stocks to watch this morning, united technologies announcing its aircraft unit signed a five year $8.5 billion contract with the u.s. military. shares of mayco surgical. cutting its full year guidance for sales of its rio robotic arm. saying it's been slower than

expected and has seen slower than expected growth in the first half of 2012 and shares of price mart are trading lower. companies earnings and revenue missed the mark. they operate warehouse shopping clubs mostly in central america. >> you know what my favorite is, umsurance just to let people know i'm not from here. >> in case they had any doubts. >> i'm sorry for interrupting. >> something i've used.

>> absolutely. >> for what? >> on the hinges. come on. >> oh, man. >> cue it. thank you. >> we don't have a squawker moment. >> has there been a squeaking sounds with you at times? wd-40 quarterly results -- >> what time is it? >> if your twins had a swing in the backyard, wd-40. you don't have a backyard. that's why i said if. >> hinges. hinges on doors. just recently. you sneak around in the middle of the night. people are trying to sleep. >> pre-war building. >> i'm sneaking out to get here in the middle of the night. >> she had the music going and who knows what's going. >> i'm trying to defend you. >> oh, yeah, right. >> wd-40 quarterly results

disappointed wall street. it said it was hurt by lower sales in its american segment. full year results will be at the lower end of its outlook blaming continued uncertainty in europe and oil prices. >> people buying fewer older cars or what? >> don't know what that was. alcoa was weird. we said it was earnings but it was a loss. pushed into a loss. >> better than expected. >> $2 million which is a zero loss because it's not even, doesn't equate to a per share loss. if you factor out items it was a six cent profit. $8 stock. >> comes the first day -- >> we have to make it significant. >> but it is the sort of the left-hand side of what will be a lot of earnings. the first one. it's not because it's aa. >> why is it? >> we always say it.

we all say that. >> they can do whatever they want. >> when you name a company you want it in -- you've see quadruple a, aluminum siding. >> i would think there's a lot pressure. >> on alcoa. >> if i was alcoa, have to go first. >> get it out of the way because it's never good basically. it's an $8 stock. ate dow component. they took every other dow component out that deserved to be taken out and leave this poor -- what's the market cap interest. like the tenth of a dow component. $9 billion dollar cap. apple is not in the dow. >> you can't do things based on whether -- so you leave this thing in here. >> swear they do put stuff in there. that's why cisco and intel is in there.

you need a death knell. >> the death knell. >> microsoft, intel and cisco. >> aig was in there. >> this is like a stadium -- >> no. >> stadium curse. >> cover of "business week". death of bonds in 1981. death of bonds in 1981. that's bloomberg "business week" and it's better. >> barons said -- >> it's in my driveway and i'm the public. i don't even take it out of the plastic any more. >> you just read it online or you don't read it? >> i don't take it out of the plastic which is somewhat reflective. if i have that -- when did he jump the shark. he jumped the shark before. he jumped the shark before fonzie was jumping the shark. >> now who fonzie is?

>> yes i do. >> let's check on the markets so far this morning. right now the futures are indicating a positive open. the dow would open higher by 56 points. the price of oil is lower across the board. wti is down 49 cents. sbrent below 100. the ten year yield, we saw weakness in the markets yesterday. we didn't regain anything. this morning we're seeing treasuries sell off a teeny bit. yield is at 1.523%. the dollar is lower. the euro will cost you a buck 23. >> you have jerry mahony on your lap? >> price of gold is higher. 1593 per ounce. >> let's go across the pond.

it is time for the infamous, if a mouse global markets report with kelly evans who is standing by in london. all sort of things and green arrows. she's going try to stay standing this morning as well. so good morning. >> i am. good morning, guys. different picture from what we've been handing over in the last several days. sea of green behind me. only about one in ten stocks down under the europe stoxx. up with the overall average of 1%. reasons not entirely clear. maybe a pause of selling activity. some relief on the headlines after the bailout discussions. nevertheless, attention shifting to barclays because these shares are up more than 2%. this comes as its current chairman, outgoing chairman, marcus agius testifying. he's the third attorney testify. this is happening behind me

still. he follows bob diamond the now outgoing ceo and paul tucker the deputy governor of the bank of england. this all including the libor fixing scandal. marcus agius kicked off his comments with this announcement regarding bob diamond's compensation. >> bob diamond has voluntarily decided to forego any deferred consideration and deferred bonuses to which he otherwise would have been entitled. >> what's the value of that? >> well it's not a precise figure because it depends on -- >> current valuations. >> the maximum amount would be 20 million pounds. >> 20 million pounds. trying to curry favor with the committee. got contentious quickly. they focused on cull issues at the bank, the relationship that barclays had with regulators. that hearing will probably go on

for another hour two. market is supposetive. we started out mix to lower. italy up 1.7%. dax up 1.3. ftse 100 up .8%. helped by relief over uk retail sales in june. quick look at the bond wall. this has set the tone lately. this is where we're seeing a bit of relief. spain was well over 7% mark yesterday is now 6.855%, italy also below its key level of late that's 5.195% and to finish up france now seeing its eeld at 2.37%. ten year bund in germany 1.33%. guys? >> all right, kelly thanks. in other news this morning, $220 million in customer funds is mission at an iowa brokerage. a regulatory group says it can't

account for the money at peregrine financial group. it's order the company -- every time do you that -- >> the paper is so big. >> you're talk. company's accounts. pfg -- >> becky is back on thursday. >> pfg is telling clients its founder and chairman russell wasendorf sr., not a good thing if you're one of the people that doesn't have his money, he attempted suicide yesterday apparently. the national futures association says it has information that pfg may have falsified bank records and has $5 million of the 225 million it claimed it had. someone gets stacey keach on the

phone because, you know what i hear. >> ""american greed"." >> "american greed". >> debuting in three months we can turn this around. >> we might need it by next week to be in the news. >> if you want it totally current. 220 million. "american greed" has done less than that. >> we should all get on there. we can do it as a "squawk". >> we don't know anything about it except it's in iowa. >> at 20 minutes past the hour we'll get a demonstration on what the money was spent on. then, you know, 32 minutes past confessional by somebody. great formula. >> if you were an investigator, would you start investigating this really hard when i just saw a picture of corzine out in the hamptons. what's the big restaurant. >> nick and tony's. he's still, you know, around. how much was that? i don't know if i would like for

the 220 until -- >> were you finished with corzine. >> they are still looking. >> it went to money heaven. i can't believe nobody figured it out. >> it would be a two part or three-part "american greed". don't you think? >> nobody knows. >> they are still on turn around on that. >> yeah. >> on turn around? >> yeah. >> you've done this. you've done the -- >> it's a turn around. >> you wrote the script. you've done this. >> we could -- >> this is a hollywood phrase of turn around. i was thinking of private equity. >> did you see how this tripped off his lips. >> you are aaron sorkin, according to some people. >> how did you manage that to have the same last. >> i'm as him. your related? >> no. >> great minds. >> we can only hope. let's talk about other news. a new survey finding some wall

street executives see wrongdoing as a key to success. little weird. 24% say those of those polled believe financial services professionals may need to engaging unthickal or illegal conduct to be successful. they would commit insider trading if they could get away with it. i just wonder whether this is -- i don't know what to make of this. the whole thing -- >> i learned a world. >> what's that. >> called push pulling. >> if you ask the right question. >> it was with the "new york times" i'm sorry once again to bring it up. do you remember it was before the health care -- it said people think the supreme court are a bunch of politicians. it was a week before. >> he had made his decision. >> he had been hammered by the "times" and left and legal

profession and president. hammered him which caused him to change his initial vote. >> they are going survey them and find out they are not political. >> my favorite thing about the "times," i saw this news elsewhere, but i was going to ask you for the siren or some kind of an alarm sound but romney again outdoes obama in fundraising. call to arms, call to arms. obama being outraised. if you've got any money please send to it the president. hurry, hurry, we're losing. whoa, whoa, whoa. what's going to happen, it may not work. "new york times" wake up. wake up obama fundraisers. wake up. isn't that what this is here? call to arms? >> yeah. >> is there an 800 number? >> right here in the second paragraph. right here. >> is there a weather story.

>> that's lead story snic. >> i was on the website looking where to put my credit card number. >> did you know that the president does not want to extend the bush tax cuts for people making over $200,000 a year. that was one of the leads on the "nightly news". >> your saying that sarcastically. >> do we know that? he's made that point before, right? he has. will it work with this current congress? >> no. are you sure? >> i'm positive. >> are you being sarcastic. >> you know this. he said it again and again. this is a good time to bring up the tax issue again because it's unlikely the job situation is going change much. according to a lot of people. >> this is a calculated decision to raise this up again, to bring up tax fairness. >> even people that argue higher taxes cause people not to higher

can he get hurt any worse? it doesn't matter at this point. >> got a quick question. did you put this article in the "wall street journal" on the other side? you could run the sirens or no? i agree with this article. political spending by unions far exceeds donations. >> if unions -- union wos not have a reason to exist if their leadership didn't have a reason -- >> you know my view is that unions should not be allowed to make campaign contributions whatsoever at all. i would take them out of the mix and that would the level playing field in a different way. >> i don't know. >> take the super p.a.c.s out. >> i just gave you my reasons earlier off camera. >> we can talk about it on camera. >> coming up we'll talk more about europe and connect the problems there with investments here at home. but first some sports news this

morning. prince fielder winning the home run derby for a second time. detroit slugger joining griffith jr. the only player to win multiple titles. >> i'm calling that 800 number right now. >> you're up to the maximum contribution already? >> i'm calling friends. one that's working to attract businesses and create jobs.

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>> they are calling trading in choppy.

alec young is s&p equity strategist. alec, are you up to speed on exactly what your people at s&p are looking for, for earnings for the s&p? >> sure, joe. the consensus is looking for s&p 500 earnings to be down 1% on a year-over-year basis. >> what would that be, the total. it would be over 100? >> that's the annual number. i was talking q2. >> on an annual basis. >> around $105. >> it is 100, 105. a lot of people now are thinking it might be a stretch. but every time we think it's a stretch usually when its all said and done usually the companies are able to do it somehow. do you think ate stretch? >> think it may be a stretch. not so much q2. the bar is lower. it will get exceeded. if you look at that $105 that bakes in earnings growth.

the year's 6% growth gets bailed out by a fourth quarter rebound. given all the macro challenges at home and overseas a lot of investors are having a tough time figuring out how will we get to this 105 number if it requiresreacceleration ofarte i don't know it will be wildly off the mark but i wouldn't be surprised if we came in around 102 or 103. >> if companies are stretching, alec, in trying to reach a lot of their numbers, it doesn't seem like a great time to be adding employees either. seems like you try one last time to squeeze more productivity out of who you have already especially with this uncertainty. doesn't portend good for jobs. >> the stretch for earnings compounds that and we're not looking for anything but this kind of tepid nonfarm payroll growth for the rest of year.

it doesn't kill the markets valuation. this isn't a multiple expansion that's allowed us to stay at whatever, you know, 1350 on the s&p. but, if you're looking for growth it's hard to pay up for anything and make it go up from here, isn't it, there's no growth to assign to the s&p? >> absolutely, joe. that's been our big thesis. lukewarm on the market. we're looking for 1400 by the end the year. 4% higher than where we are now because we think profits keep grinding higher even if they don't meet expectations currently. given the uncertainty with the fiscal cliff for next year where street sees earnings up 12%, again i think investors won't pay up and expand pes with all this uncertainty. i think investors felt confident that next year's earnings would hold up this market could easily go 1500. given the macro uncertainties i don't think people pay more than

13 times and that want gets to you 1400 in the second half. our favorite groups are discretionary less global risk, technology a lot of pent up demand and productivity driver and we're staying away from materials because of china. >> all in all sounds like a 1.5% gdp, 2% gdp viewpoint. nothing to really get us out of this malaise in the near future in the stock market or economy. >> i think we need to see in europe they are making progress. we need to see more. i think people want to see a real severing of the link between the sovereigns and banks. lend the spanish banks the money and don't have the spanish government on the hook for it. that would be helpful for it in europe and progress on the fiscal cliff in the u.s. if we can get those things we may be a bit cautious. >> more digging in.

alec, thank you. i'm going to go over this europe situation is so important. that i'm going to go -- >> you're going to go over there? >> i'll check it out. write the whole batch off. write it off. i'm signing it now. irs, if you have a problem with that, you come and see me. you know where i live. call me. no, i'm not going the write any of it off. you don't joke with the irs. you don't joke with them. but i do think -- i'll look around and see how it's going. >> my grandfather was an irs auditor. >> really? member of the -- >> wow. that's actually -- >> coming up bp suspends a costly alaskan project. stay tuned. ed. the sweet spot

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and michelle caruso-cabrera. becky is off today but join us live from sun valley on thursday. along with these three special guest, warren buffett, alan simpson and erskine bowles with a very special "squawk box". we're calling searching for solutions, avoiding the fiscal cliff. and making headlines this morning, bp is indefinitely suspended a $1.5 billion

offshore oil project in alaska. company citing cost overruns and technical set backs. good. you're not sure about it, don't do it this time. brent crude falling to $99 a barrel. the drop comes after norway's government intervened in a labor strike and order ad last minute settlement to avoid a full closure. the strike began on june 24th. cut oil production from the world's number eighth exporter by 13%. >> the futures right now are indicating a higher open. here's the energy market. you can see that crude oil and brent are lower as joe talked about. okay. so the dow opened higher by nearly 67 points. s&p higher by seven, nasdaq higher by 12. ten year yield was 1.5%. the dollar was weaker across the board. now it's mixed. flat against the euro, a buck 23 is what the euro will cost and

price of gold wasn't moving that much but higher and still is by $4.83, 1593 per ounce. cme and futures pick. kevin, how are you? >> good morning. >> alcoa going to do anything for us? >> okay. i think this important level 1353, 1355, i think any news that focus back towards the present growth situation, earnings situation, we actually like the market above this little level. so it's an important opening and the rest of the picture is quite quiet. for all that happened last night accelerating the bailout, currencies, the dollar only moderately lower and more importantly the treasury market after a big surge on monday after that employment, quite quiet again. we think this might be an interesting u.s. session as opposed to walking into a big

gap which is what we're used to. >> back to alcoa. do you care about alcoa? we talk about whether it should still be in the dow at this point because of this kmarkt cap. is it a good enough indicator for the rest of the earning season or how are you trading the earning season? >> us future guys, there's a lot of news for others but not for us. but it certainly kicks it off. i don't think it's relevant, you know, to anything that we're going to do today, you know, from our perspective. but it does show that you're now entering into several steady weeks where headline information, both at the beginning of the session, at the end of the session is going to dictate your risk. and so, you know, it is something that causes bumps. you either like to take down that risk in a headline, especially in the afternoons, but as far as all coulda i think it kicks it off and says okay get ready the next two, three weeks will be bumpy. >> do you know that you didn't

do the buttons on your collar? >> didn't do them. joe, trading all night this is rough. >> have you been trading all night? is that what we're supposed to think. is your employer watching? is there at that reason? >> employers? >> these are flying out like that. so you knew that? you made a conscious decision i'll go on national tv and not button my collar. >> it's a look. >> yeah. i was downing it an then they called five seconds i said forget it. was it that bad. >> no, it's fine. >> it can be an iconic thing. it can be his thing. >> there was a time when i, you know, to look hard you wouldn't do the top button and people said -- someone famous once said it doesn't look like you're working hard it looks like you started drinking early. doesn't look cool. >> looks like you had a couple. >> if you could ever achieve

5:00 shadow you would have that. >> i can get a 5:00 shadow going. don't do that. >> that's not a good look for you. >> messy. no, it's messy. >> you look like 5:00 shadow at noon. >> you look like rip torn. >> have you paid attention to the futures this guy that attempted suicide and any talk about that? you haven't heard about this case? >> yeah, i rather not. you know, that's a tragedy. >> kevin, for you, a spread in lichtenstein is more important. >> it's not my sandbox. i'm not saying it's not important. i'm sure it's important to someone. but it doesn't work for me. but do i think that it does, i guess the one nonfashion point i

would make today is that we have been getting very used to coming in to the session with gaps both in the treasury market from overseas information. now we're coming in quiet. this is chance for the u.s. to take over the momentum in the trade instead of watching it. >> he said gaps. >> gaps. >> mind the gap. >> easy. >> he's not dressed. all right. >> i don't know what to tell you. have a great day. >> they've seen this before. you're back to normal. much better. >> do you want me to -- >> terrible. >> no. >> you should be sweating. >> i feel like i'm sweating. drinking a little bit. what time is it? >> 6:36. >> if you have questions about

anything you sheer on "squawk" shoot us an earn mail. squawkbox @cnbc.com. ♪

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welcome back. there are the u.s. equity futures right now indicated to open about 70 points higher. had a couple of sessions that

weren't so friendly to the bulls the last couple of ones that we've been watching making headlines out of "washington today". the house will debate legislation to repeal president obama's health care reform law. meantime the senate is drawing battle lines for the debate over the president's proposal to extend the bush era tax cuts but only for those families making less than $250,000. good to know all these elected officials on the republican side are going to repeal health care with no chance of it passing in the senate and then in the senate they are going to do something about extending the bush tax cuts only for those making less than 250,000 and going absolutely nowhere in the house. they will do things between now and november that have no influence on anything but they will be there with industrious looks on their face.

>> they will make it clear they stand for something. we would be far better off if our legislators met less. the minute you become a legislator you like to legislate. you think you must make laws, there should be less legislation in the world. >> it's not all about, i don't think, trying to be of service and trying to do good. i think it's about walking into the dry cleaning store in your district and having people go oh, congressman -- >> they love that. >> the salaries are nothing to write home about. the benefits i guess are pretty good. but these people with campaign contributions, and the idea -- worrying about how their vote will affect they are re-election prospects that's all they care about is going back and feeling that power and prestige. >> doesn't matter what party you belong to. >> right. >> what would they be doing otherwise? >> it's not for me, obviously. i don't know what they rather do. i mean they would have to go

back to their humdrum lives, i guess. >> if they weren't trying to legislate during this period what would you have them do? >> they are not trying to leverage at legislate. >> what is the cure for the paralysis of your government? >> he's saying get something done. >> you don't want anything. >> i don't want anything. meet every other year that's a good start. >> you need a budget. >> every two years. israel has two year budgets. >> provide for the national defense. >> absolutely. but they don't spend their time doing that. they spend their time doing lots of other stuff that's not related to what they should be doing. >> these statements that they are making, i mean the repeal of obamacare, and then the, you know, the senate could pass the extension with no chance of it going anywhere. just an exercise -- >> both parties are making efforts to something that's

unachievable. >> not going to happen. >> still to come on "squawk," hot, dry farm conditions and hotter commodity prices. plus mitt romney helped finance his small start up that turned into an office supply giant. that's right. staples co-founder tom sternberg talks politics, private equity and much more. a "squawk" special coming up later this week. searching for solutions, avoiding the fiscal cliff. the two men that proposed a solution, alan simpson and erskine bowles. simpson-bowles, those are the two guys. they will join warren buffett and becky quick this thursday morning from sun valley. say tuned.

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we talked a lot last week about the god particle. this is a good explanation. it allows for consistency

between theoretical explanation. have you ever seen what it looks like when a proton is slammed into another proton. one redeeming quality of this newspaper is the science times. and that is, you can't actually pick it out but that's what you see when you see a proton slam into another proton. i read last week about the cern. i forget how big it is. is it a -- it's different -- i think it has to be in a different to get it going so fast that it collides. anyway, if you haven't seen a proton-proton clicks that's what it looks like. it's beautiful. beautiful illustration. >> it is pretty. >> that's nature.

>> did you go see fireworks at all? is the carbon footprint too big on those? >> too much? >> no, i didn't. i was in aspen last week in colorado because of the drought. >> they didn't do fireworks. >> they were worried things could catch on fire, so there were no fireworks. >> even in bloomberg city. >> over the hudson? >> i'm sure he will eventually find a reason to, you know -- >> prohibit them. >> not too big, less than 32-ounce fireworks, who knows. >> we were going to talk about corn, corn is having a high time because of the 16 ounce issues. >> that's true. your story? >> i have two quickies if you'd indulge me. >> how can you do union contributions as a quick one? >> duke energy today, jim rogers coup at duke energy, the regulators down in north carolina are going to be looking at this and there's actually a big meeting. >> good. >> it will be interesting to see

what happens there. >> if i was a progress shareholder or a board member, i would not -- >> the question is if you were a regulator would you have a problem because it was sold one way and switched. >> i don't like people that welch on deals and that's a a total -- >> political spending by unions far exceed direct donations and here is the two points, i don't know if we can see it there. >> it is good that you are doing this because that is not the consensus thinking. people think the direct david koch is a much worse person. >> two things, "organized labor spends about four times as much on politics and lobbying as generally thought, finally shining an aspect on labor's activity often overlooked. the result is labor could be a stronger counterweight than superpacks that raise millions from wealthy donors in many cases to support republican

candidates and causes." i will say there's a political slant to the piece, having said that, it's interesting if we really could take money out of this xhecompletely would that h or hurt? >> unions often have people on the payroll who oh on campaigns and hand stuff out, they campaign for a candidate. you're in a union and your dues are paying for a particular person to go work and do that. >> i've said it repeatedly, i have a huge problem particularly with public unions participating in the campaign system. >> did rupert put his name on the byline? >> i think they probably got a phone call about a day before. we should just check out rupert's twitter feed. i assume we could sketch this back. >> "please see the article --" >> yeah. what have you got? >> if you are a "squawk" anchor you may not live as long as the rest of the country.

it says if you sat for less than three hours a day, would you live two years longer. >> right. >> you guys sit for three hours a day every day. >> it's going to, i thought this is the opposite of what i was told. i was told i had to move around. >> yes, you do, you should be sitting for less than three hours a day. >> sitting more. >> hyo i know the game, video g playing is probably bad is. >> and tv watching. >> along with high fructose corn syrup, a nice segue, trying to get into this. we have another segment to talk b the dry, hot conditions in the corn belt are parentally showing no signs of letting up. jason rose is an analyst for u.s. commodities. thanks for joining us this morning. appreciate it. >> good morning. >> so we've been talking about this. is this bloomberg's fault that

corn is having a problem because the 16 ounce drinks are too small in how do you explain what is happening? >> this is clearly one of the most impressive commodity rallies in history. one thing that we have to watch in the commodities section that in the corn market, the u.s. produces 42% of the world corn market and the last five weeks in the grain belt we've been in a deep furnace with high scorching heat, and what this has done to the corn and bean markets is, it's dropped the yield substantially from our record crop that we were anticipating. >> we have china seeing a lot of strong demand, we have the s soybean market is part of the problem.

how long do you think it will last? >> the weather markets are anywhere from two to three to four weeks and i think this year it's clearly all about the weather. what we saw in the china market is that china continues to have a huge appetite for our soybeans. china continues to buy 62% of our soybeans which is not letting up. china, they do raise their own corn and they continue to buy our soybeans. the market right now at these levels we've had, like i said, one of the biggest rallies we've ever seen in history. about 30% to 40% rally. we're very mature right now at these levels and weather markets usually stop, you know, bull markets have bull, get bull news every day and as soon as we stop getting bull news then the market usually goes down. >> jason, who is your weatherman? >> we usually watch the european market or european, you know,

the weather systems. >> that answer is wrong. it's al roker. >> oh, okay. >> jason roose, thank you very much. david einhorn will talk to us about his big investments, and latest flphilanthropic mome. and tom stemberg as well, we'll talk business and politics and everything in between.

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off and running on business and taxes.

>> this isn't about taxing job creators, this is about helping job creators. >> why tom stemberg disagrees with the president's latest tax plan. >> if you impute this higher tax and think this won't affect the cost of capital emerging business is totally naive. >> seeing the other side of economics. >> give people the ability to challenge conventional wisdom. >> and the brand new inductee to the squawk blue chip aboard. going all big on einhorn. >> wow, that was a big end. >> he's setting his sights on poker, business and education, it's another "squawk" exclusive interview you can't afford to miss. the second hour of "squawk box" starts right now. ♪

>> good morning and welcome to "squawk box" on cnbc on tuesday morning, i'm andrew ross sorkin with a long with joe kernen and michelle caruso-cabrera. eurozone finance ministers will give spain an extra year to achieve its deficit targets. spain will have until 2014 to achieve a bummet deficit of 3% of gdp, part of the deal to bail out spain's banks. china's trade surplus jumped to $. 1.7 billion in june, from $18.7 billion in may, the latest figures show the u.s. overtaking europe as the top export destination for chinese products. and finally, intel going to be spending more than $4 billion to buy up to 15% of asml, maker of equipment that prints circuits on to semiconductors. asml and its rivals have been

seeking new investments as they develop the next generation of chipmaking equipment. quick look at the futures board, the dow looks like it would open up about 70 points higher, the nasdaq about 12 points and the s&p 500 up about 7 points higher. blackberry maker research in motion in face shareholders in waterloo, ontario. john fort joins us on set with a preview. waterloo? come on, you couldn't make this up. >> his name could be napoleon i guess. he's been the ceo for just six months but enough to lose the confidence of shareholders who will gather in waterloo for the company's annual meeting at 10:00 a.m. last quarter the company logged a half billion-dollar loss and chartered a crippling product delay. heinz inherited a mess. rimm's shares lost over 49% of

their value, in favor of app driven touch screen devices supported by apple and google. heins said rim didn't need a better turnaround, but then he said it was in order. he seemed to straddle the defense weeks after he announced nearly a third of the workforce, followed up with an interview saying that rim might have been a troubled company a few weeks ago but "there's nothing wrong with the company as it exists now." the survival is dubious at best. i've seen death spirals before and if the tech death spiral were a gymnastics move, heins is executing it with olympic precision. >> i think the minute you have to say the company is not in a

death spiral it's like when a bank says we don't have a run on the bank, there's probably a run on the bank. same thing. >> if he's watching i want him to know my blackberry broke over the weekend. >> i'm having trouble with mine, too. >> these things used to be the most reliable things in the world. i can't charge it anymore. i kid you not. >> my e-mails are ten minutes late. >> that's an nbc problem. >> it's a blackberry server. >> not the charger. >> i've tried different charger. >> e-mail is still far better own the blackberry than the iphone. you carry both? i carry both. >> i do. >> what do you think will happen? >> i expect he'll say rim is not in the death spiral and have lots of angry shareholders. >> they have bankers around the table, lots of things going on. >> there is this crowned jewel of canadian business. >> the canadians aren't going over to the iphone? >> a lot of their patents have to do with stuff like the

keyboard which just aren't that valuable anymore. they have this network which has some security benefit but it's like who is that asset really valuable too. people used to talk about nokia as a buyer, not going to happen, microsoft is buying things like perceptive pixel, not like rim. it's really a tough road. >> explain the canadian part of the business that makes it supposedly more valuable. they're not using iphones up there? the population is this big compared to here. >> just a couple of years ago this was a pride point for canada that rim was based there. lot of times it's harder for companies like that to get hostily taken over. it's a treasure. or it has been. >> the world used to think about that with airlines, business after business after business that countries hold up as national treasures. in france, yogurt is a national treasure. >> that you can't go there, but you're going to argue with that?

>> it's just a stupid, silly thing. >> greek yogurt is popular. >> you know it's dominated by the turks. the greeks only have 25% of the world's greek yogurt market. >> they can use all the help they can get. >> thank you, mr. fortt. tom stemberg, managing general partner at highland consumer fund and co-founder and former ceo of staples, and maybe most importantly one of the reasons he's here, an outspoken and important surrogate of the candidacy of governor romney but you know something about business, obviously, from staples and bain capital helped you start staples as well. >> they did. >> okay, good. we're going to talk to you not as much about staples but more about your advocacy for the governor, and let's start with this. i was trying to figure out how i can say this. you've heard the term "raining cats and dogs," right? >> um-hum. >> there is something that i've coined a term it's called a

shihtzu storm, raining down from the sky. the romney campaign has been through that type of storm every since you know eric fernstrom went on and said it's not a tax, it's a penalty, and then the governor had to come back and say i disagree with that even though fernstrom was apparently thinking what the governor's opinion was, he came back and said it is a tax. this shed light on a bigger issue and you've heard from rupert murdoch, people like jack welch, that are republicans and probably want the president to lose. they're all saying they don't know if romney's staff has it in them, he should get rid of some of the people that are smart and nerdy and long time friends but they don't have the fighting instinct. how do you respond to that? >> i don't think it's true. we listened to this throughout the prime maeary season, many p

at this table suggest he wouldn't win amongst the others. joe you were skeptic. >> i was very skeptical. >> harwood and i said he would have the domination wrapped up by march, that's categorically not true. not me. >> michelle said she was. >> i'd see it that way, too, the same conservatives grousing all aening lo. >> these guys did a great job working through the season and winning the nomination. mitt is playing his cards thoughtfully. i think he knows when he's going to take big, bold steps. i don't think it's premature to do it now. >> you think it's premature. >> you do? >> i do. >> people do not pay attention to the election until later. >> the bold step, what would it be, when would it happen? >> i'm not planning that.

they are. anything specific you flow out there, 5,000 people get upset about it and there's no reason to do it. >> you've had back-to-back months of abysmal job numbers. he's at 8.and it's been above where he took office the entire time. >> it's worse than that, because the patient rate is down. >> you look at the average and i'm looking at real clear poll tingz, obama versus romney, obama 47%, this is rasmussen and gallup, 47 romney, 44.9, all this happening still down in the polls in trade, still has obama at around 56 last time i looked for re-election. that is troubling to some that with all this happening in his favor that there still seems to

be a general -- >> again, i've developed some confidence in this team, they've slogged their way through a very difficult primary season. they won. i think they're going to win again in november. i think the facts that you point out will be very, very important. the american people understand that if the economy doesn't get going after four years of one person's leadership, you need to get somebody else at the wheel. and i think we'll elect mitt romney president for that reason, among others. >> i've heard some republicans saying it's not enough to say that obama's policies are wrong, that as you heard, even republicans are saying you're going to need to hear a plan from -- but here's the thing. if you were to run on, okay, repealing obama care is number one, reforming the tax code is number two, and reforming entitlements is number three, that's all you need. >> he said all three of those things. he said all three of those things time and time --

>> if you're looking for a government program or expect romney to come up with a government program to fix the economy he needs to say that's not the way it works. >> he needs to explain i'll let lower taxes and let the private sector create jobs. we're not going to run trillion-dollar deficits, we're going to balance the budget, we're going to repeal the obama care and the taxes that come with it. >> will this resonate with the american public? in other words if you don't give the american public like some change, hope type ideas, they may not want to hear go back to what republicans did, less regulation, lower taxes. they might not buy that. that may be why there's a bit of a, why he's stuck in the mud here. >> you're right, they may not buy it. i think mitt is a very convincing, persuasive salesperson when he puts his mind to it. >> is he rope-a-dope now? laying until -- >> i think mitt will lay out a

vision for this country, it probably starts again, i'm not inside the campaign, they're not sharing their strategies with me, i suspect around the convention speech he will lay out his plan for america. >> should he be out more? should he be here today with you or not? >> i think -- >> i think he could have made a great case after friday to come on and talk about -- >> he gave a great speech in new hampshire what he thinks is going on with the economy. >> a romney circuit canceled who would have come on that day, you would think talking points to go crazy on that report that dame out. >> he's been very articulate saying this performance by the economy is not satisfactory, and that we have got to get our job growth going again. there are so many aspects to it. it's complicated. we have to reform our corporate tax rate and lower our tax rate, incentivize people to bring money back into the united states and change our method of taxation to be like the rest of the world.

we have to reform the entitlements. >> who is your favorite veep? >> i don't have a favorite. mitt's comments are an intelligent one, typical mitt fashion they analyzed the last 120 years and figured out only one vice presidential choice ever made a positive difference, which is lyndon johnson with jack kennedy. other than that, there have been a lot, sarah palin the most recent who have hurt their candidates so -- >> rob portman is safe? >> first, do no harm, second most importantly, his most important criterion i want a vice president who can step in and be president the next day. and certainly rob portman fits that description no question. >> except for h.w. bush, no one has had more government business than rob portman. >> you think you need business experience as a veep? if you want somebody who steps into his role and has some of the same capabilities he has, whether you actually need

someone who has been in business? >> i think president obama was wise to pick a washington insider who knew his way around and joe biden to help him. i suspect mitt will make a similar choice. >> that's whey imagined as well. >> good to have you here. >> i thought you were on our side. >> i'm attacking you from -- not really attacking you but trying to get you to -- you've heard it has been, has it not been a shihtzu storm the last two weeks? >> it has. the fact of the ma thor is i don't think rupert murdoch is going to decide who the next president is. he has his own pr and spin problems. he has a few of his own. >> in new jersey he didn't say a whole lot and ran against the other guy. christie wasn't clear about what he was going to do. if he ran against i'm not corzine and he won. still to come, a successful investor by day and high stakes

power player at night, david einhorn, talking sfotocks, the economy and his efforts to save the nation's troubled students. and steven dubner of freakonomics fame.

nice little shot of times square there on a tuesday morning. we are presenting another blue chip award and goes to freakonomics, the original by steven dubner and steven levitt. it inspired a high profile documentary film and freakonomics radio. steven dubner is a writer and former editor at "the new york times" magazine, other books "confessions of a hero worshipper" and "super freakonomics." how big is super versus the original? >> the original is bigger. the original has done about 4.5 million worldwide and "super freak" is up to well past a million but we have a little ways to go. >> more on the international?

>> you know, it's hard. different books are different -- you know, some books, some business books that you barely hear of here explode in south america. so it's bizarre and local so ours does very well in some countries you wouldn't expect. >> now that everybody seems to care about economics in this country, if you could write it again or going to write the update you would do what differently? >> i'll be honest with you, i don't think we'd write about the markets that much because that's not what we do very much. we describe human behavior incentives, how people respond, how incentives fail and backfire. we write more and more about the financial markets and the political environment because it's too tempting to not. there's a million people writing in the mainstream of stock markets and politics. it's not what we do. we do a different kind of weirder lower hanging fruit, trying to figure out why politics is so bad, trying to

figure out incentives, trying to figure out campaign spending. you guys, everyone is still convinced that campaign spend something massively important in electoral outcomes and if you look at the data it's just not. so the candidate who spends a lot more money often does win the election. >> the front page of the new york times says romney outdoes obama in fund-raising? >> it's a news story not because money will help you win the campaign because that's a fallacy. it say news story because the guy who ends up winning usually raises more money because he's a more attractive candidate. what this story is about is a lot of people think romney is a much more attractive candidate. if you look at the data, the average congressional candidate could double his or her spending and gain about 1% more of the vote and similarly could have your spending and only lose. so our thinking about how campaign spending matters is anti-diluvian at best.

>> nice! >> it's sad to see people throwing money at guys that are going to lose. no one gives money to somebody if they think they're going to lose. >> exactly right and the myth is perpetuated by the fact let's be honest, if it weren't for political spending a lot of local tv stations would be crossing their fingers and praying for whatnot. >> my understanding is every voter in wisconsin was sitting at home, how do i feel about scott walker? please tell me. what should i do here and the money came in and they went, oh, he's not a bad guy. he is a good guy. i will vote -- the idea that they were swayed, how many were changed by the money? >> the most interesting is we really don't know because the people in the best position to answer that question have a strong incentive to not answer that question. they sell the political ads and the political handlers. it's very much in their interest -- >> to make you think it works. >> it's an industry like every other industry. >> we need as much political

advertising as possible. >> i've never heard a candidate say i read this research in "freakonomics" and apparently campaign spending doesn't matter that much so don't send me your checks. i haven't heard anybody say that. >> is there any freaky thing about the jobs these days? >> i think the biggest fact that we should acknowledge, i know you're here representing romney to some degree, the degree to which the president of the united states affects the macro economy and the job market is again wildly exaggerated so this is harder to argue empirically. campaign spending i can show you the data. in terms of how much the president affects the economy is harder empirical argument because the market and our economy is complex. the fact is, however, if you talk to people in the white house, if you talk to economists, on and on, what you see is that candidates have to, during campaign season, talk about how much they will do, then they get to the white house and they're looking under the

console for those magic buttons. where is the ad jobs button and where is the fix education button. the buttons don't exist, so it's this again fallacy that president candidates like to perpetuate that they have a lot of control. the fact is that washington doesn't control the economy, the president can do some things fiddling around the margin so it's a bum deal. >> when you say the consumer confidence does stem in part from leadership in the white house and if you have consumer confidence which you don't have right now, things are better? >> i do. one thing from economics and behavioral psychology and economics is that uncertainty is a killer of everything. it's a confidence killer, a jobs killer. human beings make very, very bad decisions under uncertainty. that's the difference between risk and uncertainty, guys who can measure risk we can put a number on it and operate in our best interests. uncertainty however throws us all into this primitive state where we make panic choices.

>> you got another work come. >> we're working on probably "think like a freak" more tutorial. if you want a sexual chapter we'll work on it. >> we'll have you sign this book on the way out. we appreciate you being here. say hi to your co-author there. tomorrow we'll be handing other nou another squawk box award to paul krugman.

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the the nfib is out with its latest small business optimism index. bill unkeberg is chief economist at nfib. good to he so you. >> good morning, how are you doing? >> it's called an optimism index, is there any optimism in here, any good in this? >> i guess we should call it a pessimism index today. the three-point decline is a large decline so the index now falls to 91 and change, which is if you want to find those readings in history you look at the last five years. that's where you find readings this poor. so there's really not a lot of optimism. what we saw was a major decline

in expectations for sales and state of the economy six months out, so that went down and of course if you don't think things are going to be very good you see hiring plans fall, you see capital spending down, you see inventory investment fall to nothing, and that's not good. those are the gdp numbers so it just was a poor survey. >> we were showing people the index outlined in blue and you can see it's fallen dramatically in the last month or so, sore since the last number. this survey before or after the health care decision? >> well, basically it's all before. we mail 10 tnc,000 interviews oe first day of the month and health care came at the end. so the health care outcome is not really in the numbers. it will be in the july numbers and if the highway bill meant anything, that will be in the july numbers. >> what do you think you'll see in the july numbers as a result? >> other things could happen to increase optimism although i don't know what they are. i would guess since most of the

population wanted obama care in some part or in whole to be taken down there's more disappointment than there is joy about the outcome, it will be a negative for optimism. >> do your survey members see the health care reform bill as a tax? >> we don't ask that question. that's a semantic issue. they're going to take money from you, you can call it a tax or a gift, it's a forced gift. fundamentally it's all in place. you can name it what you want. semantic games are going on here but it certainly is a tax, going to pull resources way from small businesses. remember these small businesses don't issue stock. they grow based on the profits they can generate in the firm. that employs half of the private sector workers and half of the private gdp at least when it's

working. >> so we let people in on how this works. you survey small businesses on a lot of things as you mentioned, of about inventories, whether or not job openings are hard or easy to fill, what your inventory levels are, what you think credit or business conditions will be in six months. only one you surveyed them on improved. they expect easier credit conditions, and yet that's still negative. why do you think there's an improvement there and is it high enough to actually get things started again? >> well, i don't think it really matters too much again because if you look at one of the other questions we ask, which is whether or not all their credit needs were met you find that 31% said yeah all my needs are met. 7% said no, they weren't and the all-time logos back to 2000 with 4% so we're not very high but together 63% said who wants a loan? do i hire a worker that can't pay for him or himself when i have no customers, buy more

equipment when i can't sell the output? there's no interest in the loan because there's no good thought for investment and getting the money to pay it back. >> do you think we're in a recession? >> i don't think we're in a recession. we have a number of things that still work in our favor, one of them is population growth, get millions of new people in the country every year, that helps us, a floor on growth, they buy things and drive things and live places. >> are the rest helpful do you think? >> i don't think so. to get a recession you have to have another big shock of some kind or another. well what's going to shock us these days if war breaks out in the middle east is anybody going to be shocked if a couple of european countries go down, who is going to be surprised about that. so there's nothing that really would shock us, but it would take a major increase in the savings rate i think really to push us back into true recession, where gdp actually declined so we're just going to crawl along. we're in maintenance mode,

that's what our small business owners are. they fix things. when the roof leaks they fix that. they do what they have to do, but there's no expansion in the numbers. there's no reason to be optimistic, and so no spending to go with it. >> bill, thanks for coming on. we appreciate it. good to see you. >> thank you. coming up, david einhorn and next hour the tax battle in washington, paul ryan will weigh in on president obama's plan. >> they actually look alike a little bit. >> yeah, those two, to extend the bush tax cuts for those making less than $250,000. keep watching "squawk box" please. want to win ♪ [ breathes deeply ] ♪ this is where the dream begins ♪ ♪ i want to grow ♪ i want to try ♪ i can almost touch the sky [ male announcer ] even the planet has an olympic dream.

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we're back on a tuesday morning playing poker with noted hedge fund manager david einhorn who took third place at the world series of poker's big one for one drop tournament, raking in an astounding, are you ready for this, $4.3 million. he was playing on behalf of citi year an education focused

non-profit organization, they do some important work, we'll talk about that in a second. joining us on set in a special "squawk" exclusive is poker extraordinaire david einhorn and michael brown, co-founder and ceo of citi year, named one of america's best leaders. thank you for being here. poker world you won but you got bluffed at the very end there. can we talk about it? what happened? >> it wasn't at the very end. the very end i lost on a hand, the other guy had a little better hand than i did but there was a hand where i misplayed, i should have checked and called what he was doing and he outplayed me. >> have you ever won that much money? you put up a million bucks. >> no, i've never won that much money. this was probably the biggest poker prize tournament ever. >> and how often do you play poker? in the underground things in the city or what are you doing? >> all together including going to charity events, playing with

my kids at thanksgiving and stuff like that, maybe ten times a year. >> so in these tapes of you playing you're wearing a red jacket which is the citi year icon amazing charity. we did something two or three years ago. >> a citi year breakfast. >> city year is like an urban peace corps, recruit young adults ages 17 to 24 giving a year of full time service serving the highest poverty schools in the country helping to address the high school dropout crisis. every year about a million students drop out of high school. that's the bad news. the economic effects are staggering, it costs the country over about $1.5 trillion over the next decade about the 10 million students that will drop out absent intervention. we know where the young people are. 12% of the high schools in the country produce 50% of the dropouts and we know what they need. city year corps members go into the schools from 7:00 in the

morning until 6:00 at night and keep them back on track. we'll say yes to a lot more schools and students that need city year. i want to thank david publicly, an incredible achievement, 48 players and to come in third and most were professional poker players. >> what are you doing behind the sunglasses? >> do they read cards? you can't see through the cards with those. >> actually i had a hard time with the glare. there was a lot of tv and the lights were there. i couldn't see the cards so i got the sunglasses to cut down on the glare. you don't want to look around what was that card there. >> so you're very interested in education. do you have a position on school choice, charter schools? >> what is interesting about city year and i think the charter schools are great, there's high performing charter schools and you know how to education anybody. we've proven that which makes education a solvable problem but what's really good about city year is whereas the charter schools it's conflicted.

it's the teachers unions on one side and new rules over here and new schools. i think in order to fix the public education problem, we have to fix the existing public schools, and what's exciting about city year is it's not offensive to teachers unions. it's not offensive to any of the existing constituencies that are sort of behind the failing public schools. it's just an added resource that comes in. >> what if they're failing because of the unions? i don't want to ruffle anyone's feathers but what if that's the root cause to fix the public education system you need to deal with -- >> schools that fail should be allowed to fail. >> that that is the problem, not that you're not going to offend them. >> it's able to improve the culture within the school. it's built to make the environment nicer for the kids, gives the kids a better opportunity to succeed within the school. >> i went to one of the breakfasts and i literally cried. it was unbelievable. it was extraordinary. while we have here we have to talk about markets and what's

going on in the economy. you wrote a piece about two months ago i want to say and used this metaphor about the jelly doughnut, the fed as the jelly doughnut in terms of stimulus and what they're doing. where do you think we are now? >> jelly doughnut number 41. and there's a point where you have too many jelly doughnuts. >> we're going to qe5 at this point, you think this is doing nothing? >> i think it's actually counter onproductive, yeah. i think having the very, very low zero rates is depressing to people. i think it deprives savers of reasonable incomes and ability to forecast a reasonable income and it cuts down on consumption. i think all of the stimulus, it drives up food prices, it drives up oil prices and lowers standards of living and ability to spend on other things. >> if you had a conversation with ben bernanke? >> raise the interest rates to 2% or 3% level something like that. >> you have a number of stock

picks going on right now going into earnings season. you expect this to be a good period? a bad period? what are you thinking? >> i'm hoping it's a good period for our lungs. i kind of walked into that. >> you have been a big bull on apple. >> yes. >> are you still there? >> absolutely. >> stock's come down a little pit. >> it's coming back up. >> on a relative basis. >> it fluctuates. we're not in apple for a quarter. we're two, three years into the apple investment and the way it seems headed it's likely we'll be there for a good while longer. >> you had a big short on green mountain, which worked out so far. >> i noticed i came into the studio you served last time green mountain in the back room. now it's flavia. >> i don't know what the story is. >> maybe you did that to impress me, it worked. >> that call happens and you see the stock move. are ayou amazed at your own power? >> it's weird. >> you open your mouth on a

phone call and they don't know what the question is and if you're right but it's doomed. >> sometimes it's much ado about nothing honestly. >> what is, you? >> the kind of reactions. >> going back to apple for air second, where do you think it goes? you're in it for a couple of years. >> we've been in it for a couple of years. >> what is your target? >> i think the stock is substantially undervalued. >> it will be a trillion-dollar company. >> i would expect. >> first one. >> i think it's, you know, the best big growth company we have. it is the dominating brand in the area that it is and trades at a multiple below the average in the s&p 500. i think that's extraordinary. >> you called lehman, right? i don't know if the libor scandal means anything to you but do you have views on what this could do to the banking aboutis? i was going to throw morgue noon the mix in terms of how you're think being wall street. >> i don't va any opinion about

the libor thing, it is what it is and it's nice whenever they clean up some of this stuff. >> more broadly you've written about wall street and wall street culture and some of the issues you think about too big to fail, you look at what's happening to jpmorgan, finding out more about the credit loss views from the oracle in. >> i don't know about oracle. >> were you surprised by the jpmorgan news when it broke? >> i didn't know anything about the subject. >> when you read about it you thought? >> it sounded like somebody took a very big position in something. >> david's a man with few words but the words that he says do -- >> sometimes he says nothing like just now. >> i've been instructed to ask whether you have a position in herbalife. >> i haven't said anything about herbalife. >> hold on, who instructed you to ask about herbal life? >> i got the ghost in my ear. >> i think it might have been god, i'm not sure.

and you've heard that song, "i want to meet her someday." >> impressive that david is one of the people who fundamentally researches stocks, doesn't trade on momentum and picks individual stocks to win or lose. that's admirable in today's world, trade today, sell at the next minute world. >> i think it's really fun. >> you go deeply into the financials, deeply, deeply. >> or into the operations or wherever the, we need to go. >> great debate over amazon. you've been, have some thoughts on that? >> i don't think it was such a debate about amazon. i was pointing out that amazon is tough on its competitors because amazon doesn't seem to feel compelled to make a profit and it's hard to compete against somebody who doesn't feel a need to make a profit. >> is that a good investment long-term or bad investment long-term? >> it makes it tough for the competition. it doesn't say anything about

amazon one way or the other. >> you don't own amazon but not short on amazon. >> no. >> so when you made that comment which was about a month ago? >> it was at the rish zone. >> he's doing a great job, horrible jo be? >> with amazon look at the dynamic it creates for its xet, to. >> the office and electronics guys how they suffered at amazon's hands. >> do some housekeeping on herbal life, did you ever have a position? >> yeah, we haven't said. >> you haven't said. >> yes. >> the stock got hammered almost immediately in seconds. >> we haven't said and i'm not going to say today. >> bringing it back to education, views on for-profit education companies, there's been a number of other hedge fund managers who have been short that world. >> we were a few years ago and it worked out nicely for us. we've left that. >> do you have a broader view

on -- he really is a man of few words. >> i think these are, this is a very tough business model. i think that huge percentage as the money goes into marketing, a lot of it goes into profit margin. the quality of the education generally isn't very high and people are being charged $30,000 a year of loans saddling them for the rest of their lives, nonforgivable loans, the student loans and i think it's a lot of the kids who wind up in the programs turn out to be victims. >> the business was so reliant on government subsidy. when you look at a business and say if the government subsidy went away, would you survive, and the answer is no, then you clearly aren't providing a product that anybody would normally pay for except for having incredible health. >> the kids say the classes are 5,000, they'll give you a loan for 7,000 so it's $2,000 of spending money so the kids go

out and spend and owe 7,000 to the government. it's a horrible thing. >> michael, you have views on this? >> my view is we need more human capital in education today. even a great teacher with 25, 30 kids that are off track is not going to be able to meet the needs of the students in high poverty schools. we're seeking to bring national service in its scale and call on america's youth, which are volunteering for city year and americorps at record numbers, over 1 million applications to americorps over the last two years alone so it's a high yield, low-cost way of meeting educational needs. >> there was an editorial in the paper this morning, i don't know which it was, maybe in the "new york times" about a national year of service after college. do you think that's something? >> i think it's something the country should consider. >> mandatory by the government? >> not mandatory. i think we should inspire young people to serve and the good news is, right now they're waving their hand and saying they want to serve. there's only 80,000 positions in

americorps but over 582,000 applications last year. >> michael did you see that piece out yesterday or the day before, the number of students the increase over the past 40 years and the number of teachers increase and how it's a multiple of the student population and how the thrust of the piece was that teachers are stoetally overbilled and ineffective. was that a flawed piece? >> i have to drill down the data. in high poverty schools there isn't enough human capital. you can't ask a teacher to stay from 7:00 in the morning to 7:00 at night. you need a second set of caring adults with the kind of energy that young people bring in and they create a near peer relationship with students that can make the difference. >> david, i don't know bernanke will listen to you. >> i wouldn't expect him to. >> i wonder what we would do

since it is going to be bad, how do we play that? >> i own a lot of gold. >> if you told us your herbal life position i'm sure bernanke would listen. >> we got to go. david thank you for being here, michael you do very important work at city year. we appreciate you here. later today the winner of this year's world series of poker. >> what is his name, antonio esfandiari, you're just going to skip it or blow him off? >> first of all we had david here and second i didn't want to mispronounce his name. coming up, stocks to watch ahead of the opening bell in the next half hour, stephen pagliuca. ♪

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coming up a showdown in washington over taxes. president obama outlining his plan yesterday, house budget committee chairman paul ryan will weigh in on the white house proposal but first a private equity power player, we'll talk jobs, the economy and politics with stephen pagliuca of bain capital, after the break. lend the pannish banks the money and don't have the spanish government on the hook for it.

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...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. it's a showdown over taxes. it's a showdown over taxes. ♪ president obama outlining his tax roh proposal yesterday. >> we don't need more top-down economics. we need policies that grow and strengthen the middle class. >> paul ryan will take his shot. a private equity power player, stephen pagliuca of bain capital joins to us talk markets, the economy and of course the race for the white house. and scott cohn's ready to unveil cnbc's top states for

business, he'ehe'll kick off th countdown with number five as the third hour of "squawk box" starts right now. >> welcome back. did you see him? welcome back to "squawk box" here on cnbc, first in business worldwide. i think iron horn's glasses he has enough money to buy glasses that can see through cars. you can bluff so much better. >> right. >> the other thing i said was when you get over that $100 million mark for what you're worth it's easier to bluff in a $10 game. >> maybe even $100. hurt me, hurt me good. i say that to you sometimes. i'm joe kernen -- >> only at night. >> that's not true. >> this squawkward moment --

>> brought to you by michelle caruso-cabrera. >> there you go. >> becky, hurry! becky is off today but she will join us on thursday from sun valley -- we appreciate you, michelle, sun valley, idaho, with warren buffett and we'll attack the approaching fiscal cliff with simpson and bowles or bowles and simpson, whatever you prefer. guest host is sttom stemberg. surrogate for the romney campaign, up about 56 points on the dow jones industrials after a couple of sessions that weren't very kind to the bulls so we'll see how this plays out today. >> let's get you caught up on other headline this is morning. former barclays ceo bob dimon agreed to waive his long-term

annual bonus according to the testimony of the barclays chairman in front of a committee this morning. he was expected to receives about $31 million instead it will be $2.3 million or $3.1 million. chipmakers are prominent among the stocks we're watching, asml holdings jumping on news intel will spend about $4 pll to acquire a stake that will grow as high as 15%. asml is a maker of machinery that prints circuits on semiconductors and advanced microdevices warning of weaker than expected second quarter sales and expects an 11% drop compared to prior guidance of 3% increa increase, amd blaming conditions in china and europe for part of its sales slowdown and micron technologies is planning to buy bankrupt alelpida memory.

eurozone ministers aagreeing to give spain an extra year to reach its deficit reduction targets. madrid must cut its deficit by 2014 and setting the parameters for spain's ailing banks. european equities are higher across the board. the cac is higher and dax is higher by 81 points. u.s. private equity funds raised $86 billion in the first half of 2012, a 27% increase from 2011 and the best first half since 2008. joining us now bain capital managing director and boston celtics co-owner steve pagliuca along with guest host tom stemberg. good to see you. >> great to be here. >> are you really happy for lebron? can you express happiness? you're tactful about a lot of things. how happy were you it finally

happened for him? >> i was not happy. that's a clear answer. i'll stick to that answer. >> maybe the last one, but all right. >> that seventh game was a heartbreaker. >> here's where i go from here. >> that's a warning. >> no more mr. nice guy. >> i should have worn my sunglasses today. >> i love when you come on because you are honest and you're at bain capital and you were hired by mitt romney and you have a history of being actively involved in politics. what i want to ask you and i'm not going to ask you who you're going to vote for. you think a lot of in are mr it romney and obviously different things result in how you vote. the attacks that you see on bain, i'm going to read from paul krugman, who will be on tomorrow, mr. romney the governor didn't get rich producing things people wanted to buy, he made his fortune in

financial engineering in many cases left workers worse off and in some cases drove companies into bankruptcy. we're seeing this again and again and again and democrats, cory booker or steve ratner or others have said, used words like "i'm nauseated by this attack." all is fair in love and war? >> if you look at u.s. political history there's always hyperbole, always a fight. thomas jefferson in 1800 called adams a hermaphrodite, i don't know what that is but probably not a good thing. >> i think that's both. pseudohermaphrodite are medical conditions. >> he wrote articles in the paper written under a different name but that's political hyperbole. the real bain capital is a company that's built companies. we've increased sales of our companies in the last 30 years $80 billion. >> has it resulted in an

overemphasis on outsourcing? has it shipped jobs overseas? >> absolutely not. i think what bain capital does is we go into companies, we try to find new products, so for example we bought physio control, it had negative $100 million in earnings, going to be shut down by the fda. we dame in, turned around it, technology for a small defibrillator and it became the leading small defibrillator. you should have one on the set for some of the people you talk to. >> i guess you would say that even some of the people that have said they're not comfortable with the attacks have said that certain parts of the business are fair game at least to talk about in an election year, would you say that? >> i would say in an election year you should talk about it.

>> bain capital -- >> is it net positive for society? then it's not true, then at tacks are not true. >> no, they're not true. >> they're not true. >> we go out and talk about private equity, what it does is goes and invests capital. private equity has been a positive force to make our companies better. how did i get involved in bain capital? i was going to get a doctorate to be an economics professor. i couldn't afford it. my father went to school on the gi bill, an italian bill. i got a summer job at bain & company and i was amazed at the great things they were doing with businesses, making them more competitive, growing businesses, finding new products. that's how i good into this. >> you should still grill him on the dividends. >> when you hear the candidate

you supported, what you do for a living, how does it feel? >> it doesn't feel good. >> when you go into that you're going to get the hyperbole so our investors know us, we have 1 million employees. >> you let it roll off your back, just politics. >> it's just politics. >> steve, one of the big issues, this is what you see in the papers when they talk about private equity and use bain as an example, they talk about dividend recaps and the idea of the special dividends, money coming out of these firms before money is made and then in some cases it creates a disconnect between the interests of alignments. in certain cases we've had situations where firms like bain have taken money out of the firms and had problems later.

that is the crux of the argument probably against private equity. how do you think about that issue? >> i think it's a poor argument. companies on the public stock market pay dividends every day. these recaps are dividends and when you look at the track record overall we have less than a 5% bankruptcy rate of the country so 95% have not gone bankrupt, positive record so it's a technique that get money back to investors just like dividends or the public markets. >> it getsz to t to the whole if heads you win, tails you win. >> i think that argument does not disconnect it at all. we put enormous amounts of equity at risk, bain capital puts a lot of equity in themselves, the partner. they never want to lose equity for the investors and for the company. >> outsource and insourcing thing i think is ridiculous. there's a company called corporate software that bain

invested in around the same time they invested in staples. corporate software sold a lot of software to companies in america and they expanded to sell largely american made software in europe, they have europeans selling it. this is creating american jobs, not hurting american jobs. the president is calling that outsourcing. >> maybe this question is to you, maybe it's to you. private equity, your goal, job creation or returns foreign investors. how should romney be articulating that message? >> i'll answer the job creation. private equity's goal is to build great companies and the misnomer is you really make money for your investors by growing companies. you had einhorn on here talking about apple. apple, why is apple so valuable. it's growing quickly, coming out with new products so private equity realized a long time ago, i've been doing this for 25 years that it's all about growth. >> steve, you have to actually disagree with the notion that

the profit incentive is a productive part of an economy to say that a private equity company, by enriching sharehold shareholders, the only way you can make partners do well is if the company's eventually flourish, hire more employees and the employees pay taxes, you're able to get more government services. to try to draw a line somewhere and say here's where it goes off the rails, but it's just a lie. >> i've argued and we've said -- >> apple is a profitable company. >> you will see people, the president himself will say as commander in chief or as president i'm not here to maximize profrtits. they aren't mutually exclusive. >> i think romney should embrace all this and say you know what? i'm not going to argue i'm a job creator. i am a great fixer. i am a great grower, that's what

i do. >> does it translate to being a good president though? >> that's created the debate. >> does it -- and tom would say that he's going to eventually say that. he's just at this point -- >> i think mitt is a great fixer. he inherited $2 billion deficit in massachusetts, turned it into a balanced budget at $2 billion rainy day fund. he has fixed that. he fixed the olympics which was a disaster. >> the job creator creates the whole debate and puts bain in its place? >> the debate about private equity, i think mitt wants to talk about what he wants to do to fix the country. >> you really have to sever that out political hyperbole from reality. we're proud about all of the companies we've grown. wesley jesson had a technology to do color contact lenses but were losing money so we expanded into clear lenses and tripled the size of the company. >> do you think the government, a lot of times i try to jibe

someone's political beliefs with the things they said. do you think overall that the government or the u.s. can be run more effectively as a private equity type or as a redistribution mechanism to be a non-profit organization? i don't see how a lot of times how people can be democrats when they talk like you. >> lawyers would say that's a leading question. >> you understand what i'm saying? if you run the government not as a redistribution mechanism but as a profit-making enterprise? >> that's a very interesting question. i think i'll leave that for the political pundits. the government could be helpful for the economy to create jobs in the following ways, number one, we've really got to get the deficit under control, if you look at the crisis going around the world today, the european countries have huge deficits, driving down demand, hurting our ex-portsz, hurting global trade so we need a five to seven-year

plan. simpson-bowles will be here to talk about that. >> go on. >> number two the folks from city year talking about education. the education system needs to be fixed. the real way for job creation is to get a more educated workforce. it's going to be sufficient for us to compete with other countries investing in engineering. >> school choice in. >> i'm not talking about school choice. i'm talking about programs that will fix this educational system from top to bottom. we're not creating enough engineers and graduating enough people out of high school. >> how do you arrive -- >> look at the things like research triangle park. public/private partnerships can help job grow. >> we have to wrap but wilbur ross said it has been harder to raise money from limited partners because of the debate. i'm curious what your experience has been. >> we raised a couple million

dollars. our investors have been with us forever and they know our track record. the people on the street going out for the fourth of july separate the political hyperbole from what the facts are so we're really happy. >> thank you, steve. >> great to be here. >> you continue to do that and i appreciate it. >> maybe we'll take that thing back from miami next year. >> i have no idea what you were talking about there. coming up the wait is almost over, scott cohn will reveal number five and at 8:30, house budget committee chairman paul ryan will join us to weigh in on president obama's plan to extend the bush era tax cuts to families who make less than $250,000. it's very important to understand

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let's get the countdown started this morning beginning right now and running all day on cnbc, we are revealing america's top states for business in our six annual exclusive study. senior correspondent scott cohn is live at the top state which we'll not reveal just yet, we've been playing this week not all week but all day and he'll give us number five, scott? >> reporter: andrew, we've had a lot of inspired guesses on twitter and thank you all for all of that. some of you, well, are very

imaginative, very sharp eyed. you may be right, you may be wrong. to find out watch all day. we rank all 50 states for competitiveness. we're counting down the top five. without further adieu, let the countdown begin. north dakota, the peace garden state joinseur top five for the first time riding an economic boom powered by oil. the home of the back in shale comes at number 15 jumping from 13 last year. north dakota's best category, its economy, the fastest growing in the country, second overall, just behind wyoming. but north dakota has some weak spots, finishing near the bottom for technology innovation, as well as access to capital. unemployment in north dakota is practically non-existent. the lowest in the nation at 3%.

the top individual tax rate is 3.99%. the top corporate rate is 5.15%. the sales tax is 5%. north dakota's largest private employer is the altru health system, a community-owned health care company serving north dakota and northwest minnesota. while energy is coming on strong, the largest industry is agricultural. imagine 3% unemployment. it's basically full employment there, but in our study, that cuts both ways, it's good in the economy category but it means there are fewer available workers so north dakota is experiencing some growing pains. we've reported on that quite a bit over the last year or so. we're giving you hints as to which is the top state for business. one of the hints is that it's raining in the top state as you can tell you about a yesterday we gave you the first hint which was grape expectations so you know it was in the barrels behind me. the second hind, legendary

lights, legendary lights. that could mean an awful lot of things and that's why we're diabolical with our hints. you can tell us what you think, the hash tag is #topstates. if you want to tell us what you think in more than 140 characters go to topstates.cnbc.com and coming up on "squawk on the street" we'll reveal state number four. >> is that cigarettes, tobacco? >> i think it's northern lights. >> oh, legendary lights. >> everybody makes wine now, there's great wine in ohio, that gives us nothing, cohn, right? >> reporter: there is not great wine in ohio. >> there is good wine just about everywhere. >> you just told us it's not ohio. >> reporter: not necessarily. >> it's a pun. it could be so many things. >> reporter: it could be. >> it's much easier -- >> reporter: i like be, it coule

light beer. >> ten states i could give you, it's not illinois, it's not -- yeah, so it's raining there. of course that could be anywhere. all right. >> call roker and find out where it's raining today. >> you mentioned roker twice today. are you still sucking up to him because of one thing that happened on that show when you said something to him? twice today. i don't think i've ever mentioned al roker in my entire life? >> i'm an al roker fan. >> the third time! >> big endorsement. >> god i hope it gets back to him and hope it's worth it. president owe ba in outlining his plan to extend the bush era tax cuts. i haven't heard him take this stance before, for those making less than $250,000, we'll get the republican response from the house budget committee chairman paul ryan, and starbucks is pushing into tea with its cazo retail stores. it might find some stiff

competition from david's tea, the canadian tea retailer started four years ago and is making a strong push into u.s. markets. we're going to talk to the co-founder. you knew that at 8:40? >> spotify. >> see, there you go. >> you know what spotify is? >> no. al roker likes it. [ male announcer ] summer is here. 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. ♪ the mercedes-benz summer event ends july 31st. ♪

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welcome back to "squawk box." amtrak will make it possible to go from new york to philadelphia in 37 minutes, part of a $150 billion improvement program funded by the taxpayer. right now the phattest trip between the two takes an hour and 15 minutes. you'll wait a long time for this train. amtrak says the superfast trains will not be in service for another 28 years or so. its plan will also need substantial financial support from the state and federal governments, that's you and me. andrew? coming up, we've got a showdown in washington over those bush era tax cuts. the president presenting his plan yesterday. up next, we'll hear from house budget chairman paul ryan on

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good morning and welcome back to "squawk box." among the stories we're following, $220 million in

customer funds is thissing in an iowa brokerage. regulatory group says it can't account for the money as paragrin financial group and ordered the company's accounts frozen. meantime, this is a serious story pfg telling clients founder and chairman russell wasendorf attempted suicide yesterday. the national futures association has information it may have falsified bank records. cnbc's rick santelli is in chicago and has more on the story this morning. >> reporter: andrew, these stories are never good. i'm not sure this story is any different than the madoff story in certain except for a much diminished size. there may be some fraud, there may be some regulatory capture. when you look at russell wasendorf sr., he loomed large in the industry, had a very good

reputation, was one of the pioneers in electronic processing to put orders into exchanges electronically versus open outcry. the group was incorporated in 1990 and they were in chicago headquartered until i think about three years ago when they moved to cedar falls. now we don't know how mr. wasendorf sr. tried to commit suicide, i think a car is involved so who knows but there were comments by a hospital in iowa that he was admitted. the amounts are hard to quantify but you pretty much nailed it. suppose he had $380 million to $400 million in seg funds, makes him about the 37th, 38th largest futures group so it's not humongous but size doesn't matter. looks like bad things happen with statements maybe going back to 2009, so when you look at it in a chronological fashion, my guess is it's another one of these offshoots where the crisis

caused a scramble in a scheme where money just is missing and yes, seems to be 5 million accounted for but the 225 to 400 needs to be there. a magazine online created by his publishing group -- >> can i have my microphone, please? rick we're not clear, you highlighted the question at the beginning we don't know whether it was a madoff situation, never true or something has gone wrong recently and led to this possible situation here, right? at this point we don't know what's going on over there. >> listen, it used to be in chicago and people talk. at least in my opinion it looks like much of this seems to be pointing towards a little bit after the '08 crisis. if it goes on before that i'm sure we'll learn. another issue the nfa pretty much shut them down to

liquidation only. the nfa was their dsro, which is their designated self-regulatory organization. every one of these futures firms has an entity that goes in to monitor the books so they did call it out, they'll answer questions to something that may not have been found earlier. >> thank you, rickster. >> thank you. >> president obama outlining his plan to extend the bush era tax cuts for those earning less than $250,000 a year. >> so i'm not proposing anything radical here. i just believe anybody making over $250,000 a year should go back to the income tax rates we were paying under bill clinton, back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot. >> we are now joined by congressman paul ryan, where is

he? there he is. you're chairman of the house budget committee. i had something else i was supposed to say but don't want to because i want to get to this. maybe speechwriters and new speeches cost money and therefore the president took the speech that he's given at least six or seven times about the bush era tax cuts over the last two years and he ran it again, because i've heard all of this, congressman, and i know that you in the house are not going to do this this way. it's so obvious to me, jobless, i wouldn't want to talk about jobs either obviously but here we are, we're going to go again into this tax, 200 or 250 and above. chuck schumer will say people in my state aren't rich at 200 but get slapped and say i back the president and doing the same thing over and over again. >> that's the point i was just going to make, joe. first of all this is the same

movie we've seen before. >> saving money on speeches. >> saving money on speeches. he's distracting the country. don't forget that these tax increases he's proposing are for more spending, not even for debt reduction. all of the tax increases don't pay for a fifth of his proposed deficit spending. never mind the fact 80% of businesses in america file as individuals, nevermind this is a big tax increase in successful small businesses and job creators. we should take money from them and spend it through government and that's a better idea. >> congressman people at home and i don't know how to look at the 3% that the president's talking about that are affected by -- i hear so many different facts and figures about who is subchapter s, who actually has business income, who would actually be affected by it. i saw on nbc news last night, in the report they said the president knew he'd be hearing about small businesses creating and we an answer for that.

they sort of did his work for him. >> if you reduce it down to the millions of people who file it looks like a very small statistic but if you look at all the businesses that create jobs who file their taxes as individuals, it's hugely impa impactf impactful. >> it's a big number. >> the most successful of the companies that create -- >> exactly. >> the thing that gets me more irritated than anything, your party, you were going to spend the next couple of days voting to repeal row ba ma care. >> that's right. >> knowing the senate is not going to do it. we don't care what you're doing this. he's doing this -- >> is this andrew? okay. i kind of sensed it was -- >> he's doing this, knows that's not going to get passed by the house. you're doing the other thing, know it's not going to get passed by the senate and wondering why he pay you guys. >> we announced last month that this month we're going to pass a one-year extension of the entire tax code and then have a fast track procedure for 2013 or

fundamental tax reform. >> the fiscal cliff. >> we'll deal with the fiscal cliff and get to tax reform, broaden the base and lower the rates and guess what, joe, andrew, there are a lot of democrats who agree with us, just not the one in the white house so we'll have democrats voting with us here in the house and if they ever have the vote in the senate on extending all of the tax cuts for a year so we get the tax reform. >> why obama care? >> we'll get democrats on obama care as well. we believe we need to show the country that we don't think, that the last arbiter of this is not the supreme court, it's the american people through their elected representatives, and so if you give us more elected representatives to fix this problem, we will fix this problem in 2013, meaning a senate, a house and a president and we'll replace obama care which we think is a job killer, it will increase health care costs, blow a hole in the deficit. we think we can replace it with consumer directed patient-centered health care at the root cause of inflation which helps us with job creation, helps us with quality health insurance for everybody

and helps with us our debt problem. what we're saying is the final arbiter is not the president, it's not the supreme court, it's the people through their representatives and that's why we're having this vote this week. >> you think having a symbolic vote matters? >> michelle, i do believe it matters, because we're telling our constituents here is what we do if you give us the ability to do it, we'll do it in the house and the senate and we'd like help in the election and the president, just like the tax cuts. we're going to extend the fiscal cliff for a year so we can get tax reform next year. unfortunately we don't see the senate following suit. we know if that bill hit the floor of the senate it would probably pass and so we're trying to put pressure on fixing the fiscal cliff the right way and unfortunately the president has chosen more of this envy and division, more of this class warfare, the politics of division and distraction because there is a terrible economic record. you saw the latest jobs reports. poverty rates at an all-time high, a record he can't run on, distracting the country in order

to try to win this election and we want to call him out on it and say there's a better way forward. we have better ideas on health care, better ideas on taxes, on tax reduction and growing the economy. >> if he had made it a million bucks, would you agree to it? >> andrew if you go to wisconsin, industrial parks at the outskirts of every one of our towns, nine out of ten businesses which make over $1 million, have 50 to 150 employees, they're the rich people, the ones who pay those taxes. 90% of our businesses file as individuals and you know overseas which in wisconsin means lake superior the canadians lowered their tax rate on businesses to 15%. the president wants it as high as 45% next year. it's a job killer. it kills growth, kills small businesses, entrepreneurial growth. save more money and stop subsidizing wealthy people. why do we need entitlement programs? >> did you go to the retreat? were you vetted for vp?

>> i went to the utah thing if that's what you're talking about. >> were you vetted? >> by 800 people who vetted me in talking about our economic policy i guess. >> i wonder whether romney, whether you've spoke on it his person, beth, whatever her name is. are you, do you know? you're only a 4% on intrade to be the veep and portman is over 0 30%. >> he's a great guy. it is not in the rohment know campaign's interest for me to comment on that. it's not going to do them any favors. don't underestimate the importance of the role of congress. i have an important role to play in the house t makes a big difference. >> i don't know about that. >> and i'm a big fan of rob portman. he'd be a great pick. >> you said you'd change your hair style because your wife wanted you to do that. >> she's very smart, went to wellesley.

>> with michelle. they knew each other. >> exactly. thank you for coming on. i appreciate it, congressman. >> you're welcome. >> hope to see you in here again sometime soon. coming up a retail chain with steep prospects for growth, co-founder of david's tea will join us in a few minutes. "squawk box" on thursday becky will be back and join us live from sun valley, idaho, with warren buffett and they'll tackle the looming fiscal cliff with alan simpson and erskine bowles, the bowles-simpson solution everybody talks about, on "squawk" on thursday. stay tuned, we have a lot more today. tdd# 1-800-345-2550 the spx is on my radar.

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welcome back to "squawk." david's tea is a fast growing tea retail chain that started in canada and now expanding to the u.s. the chain grew from one little store to 76 stores in just under four years. can the tea stores rival their coffee competitors? joining us now is david's tea co-founder, david siegel. thanks and tom stemberg i should say is staying with us and sits on the board of david's tea's, one of his big investments. david, do you compete with starbucks? how do you think about this? >> well, i mean starbucks does premium coffee. we do premium tea, so we have over 150 different flavors from all over the world that you can have either hot or iced, and our

staff is very passionate about helping you explore the world of tea, and it's very different than coffee. coffee you need it in the morning. it helps you get going, whereas tea is much more versatile. it can be energizing, it can be calming, it can help you digest after a big meal. it can help you relax before you go to bed. >> right. how much do you have to educate the public about the world of tea on a relative basis to coffee? because coffee people think of as a cultural thing. >> everybody in america drinks coffee, few people in america drink tea. >> tea is the new coffee. you go to the grocery store and you have five different varieties of earl grey and english breakfast and chamomile. people don't realize how many different tastes in tea. we have matte from south america and roy boss from south africa.

there is a whole world of taste. >> what is your feel on this, a starbucks or half a starbucks? >> more consumption off premises, leaf tea mostly off premise and romance people into the wonderful tastes of tea. my wife went in there, by and large you take it home, make it when you go to the office and the tea market unlike the coffee market is growing in high single digit rates per year globally and in america it is trailing many other countries for consumption but for healthens are. >> what did they convince your wife, starbucks got us up to $12, $15 a pound. go ahead. >> the time we got through buying paraphernalia to make it with and the travel cups so we spent about $50 or $06 in the sto $60 in the store. >> tea has been around for thousands of years and there aren't that many new flavors.

celestial seasonings did this, marketed the bolder panache to it. it's marketing, isn't that? do you have anything different than before in terms of tea? >> yeah, it's product and it's service. we have grape lens, and read my lips, these little candied chocolate lips with mint. >> sounds like marketing. >> luscious water we willon. >> sounds like marketing. >> the teas you get peach and lemon in stores, with us, watermelon, gogi, and there's exotic tastes and you get to engage your senses. >> those of us on morning tv, which has the most caffeine and does it rival coffee? that's all i really care about, to be completely -- >> no, it's different than coffee. green teas, black teas, there's matte and guiusa. coffee gives you the jitters. tea will give you a different kind of boost in the morning. >> you don't serve any coffee at your place, because i was going

to say -- >> no. >> i was curious if you'd ever considering selling coffee at a tea store. >> we are the tea experts. we have over 150 different varieties and gifts and accessories that make steeping the tea easy so that's our specialty. >> tom you invested how much and how much do you think you'll get out of it? >> i think it will be an exciting investment. you seldom see a return on investment level, starbucks would give similar returns and the explosive growth and what we've helped add to the team will be able to achieve i think this could be a billion-dollar company. >> is this a company you expect would go public that you'd sell? david, what is the exit? or to tom? >> go ahead, david. >> we're focused on service and product. we have great partners and we just want to build a great company.

>> i think we'll go public. it's a pretty sexy space. >> david, thanks so much. we'll drink a little bit of tea this morning. >> thank you very much. coming up we'll head to the new york stock exchange for the latest buzz on wall street.

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welcome back to "squawk box." down to the new york stock exchange. jim and david are joining us. watching the euro roll over. kind of impact on the markets when you watch the open? >> it's very interesting to' when you had the spanish deal announced between 4:00 and 5:00, you saw the futures jump rather dramatically. europe jumped. this time there was an accelerated program. all these things are way too small. it really doesn't matter. $130 billion. >> you know, china also is interesting to me this morning. i don't know if you guys is have been watching it. of course, that trade surplus number. largely a result of imports coming down which may be a

reflection, of course, of the consumer pulling back and china, let's not forget about that. >> a lot of consumers there. by the way, it's so programmed that people sell yum. china slows down, they're going to eat less kentucky fried chicken. let's sell yum. a patented trade the shorts have been doing, hedge funds. makes a lot of sense. >> speaking of china we just did a big tea segment. you into tea? >> yeah. look, i am -- i am not a -- i am a guy that says slower growth in china is directly related to europe. michelle, you've been to europe numerous times. you know that china is the place that they import from. >> we're seeing it here, too. we'll talk amd, of course, top of our show. >> amd, you better not go mako.

>> what do you make of the case of the guy who attempted suicide in the last 24 hours. are we looking at another one of these situations that could destabilize confidence? >> i thought rick santelli said it all. it could be a junior madoff. look, the lack of confidence. if they could rig libor, they can -- it's kind of like it doesn't -- i'm yawning. >> good to see you. see you in just a few minutes. coming up, we're going to get some parting shots from our guest host, tom stenberg. "squawk" back in two minutes. he's a nobel prize winning economist and columnist for the new york times. paul krugman, a "squawk box" blue chip book award. don't miss "squawk box" starting tomorrow 6:00 a.m. eastern. rn.st that powers sound decisions.

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tom stenberg. we haven't really talked about all the -- you know, the variety of businesses that you probably have a feel for with what you're doing and your connections, obviously, still at bain. it's a 1.5%, 2% economy globally? >> i think we're going to bumble along here. obviously a little economic growth would be great for our portfolio companies. i'd love to see it. i fear with uncertainties around obamacare, the new taxes that are coming and the fiscal cliff and this current leadership, we're not going to get the kind of growth we'd all love to see. which is why i'm working as hard as i am to elect mitt romney as president. >> this was a, people argue, i've heard the worst recession since the great depression. we'll hear more of that as we go forward. it was a credit contraction which is different than the '80, '82 where inflation got too

high. is it really something we have no control over? >> i think these problems are fixable. i think simpson-bowles had a broad approach. the deficit and the uncertainty it creates for investors in america. a government that's spending like it's out of control. starting to spend like france, on its way to greece. we've got to reverse the trend and get fiscal responsibility back in washington, d.c. >> you think you're not going to lose your house, you think you're not going to lose your job, then you feel better about making long-term plans. >> it's confidence. >> the latest numbers on right track, wrong track. i mentioned earlier. 33/63. 30 point difference. track. >> 33% of the people think we're >> yeah. >> very tough numbers at this point. i think it sets up for what is on the right track. 63% think we're on the wrong going to be an