presidential candidate who will make this an issue, i actually think they'll be rewarded. people are starved for truth, leadership and solutions. they're not stupid. they're ahead of the politicians. and i actually think it's better than 50/50 and i'll try to make it happen. >> that does it for us today. right now, time for "squawk on the street." good monday morning. welcome to "squawk on the street." i'm carl quintanilla with melissa lee, jim cramer and david faber live at the new york stock exchange. friday the 13th ended up being pretty good for the bulls, both the dow and the s&p rallying to snap that six-day losing streak. take a look at the futures. setting up for a lot of earnings over the next five sessions. bernanke on the hill both tuesday and wednesday. as for europe, dealing with a lot of news involving libor over the weekend, which we'll talk about. for now, all the major indices

modestly in the red. >> our roadmap starts with the first big bang to report its earnings. citigroup beating estimates. . >> morgan stanley downgrades general electric to equal weight saying the key reasons to buy the stock are more of a 2013 story. the industrial giant post earnings this friday. >> is more china stimulus on the way? comments from chinese leaders over the weekend may hold the fate of u.s. companies warning of weakness. >> and nokia cuts the price of its flagship smartphone in half just three months after the launch. but can the lumia 300 keep apple and samsung from stealing even more market share? shares of citi moving higher in the premarket. the bank recording second-quarter earnings of a dollar a share. forecast called for 89 cents. revenues just shy of estimates. as somebody said, it's a good thing they have a traditional banking business because the wall street business was tough.

>> they don't want to be in the wall street business. i think they're making it when you go behind the scene, they're saying, that's for someone else. we want to dominate south korea and mexico and big parts of latin america that are not socialist or going socialist. they are literally the bank that's called "everybody else." wells fargo was extraordinary. what a great conference call. jpmorgan, much better than i thought it would be, particularly in june. now citi comes out with just a fantastic quarter versus what i thought. >> and the comments about the dividend made over the weekend, at the end of the year, they're going to ask regulators whether or not they can increase the dividend which is a penny a share. but i think from an investor's standpoint, that could be a real catalyst in terms of capital appreciation and matching up with the other dividends that the other large banks are offering. not only is it the turnaround story, but you have that dividend reinstate zblmt and a lot of the weakness that looks like weakness in the banks, now

under $200 billion, that sounds like a lot, but i remember when it was 4$400 billion. it will be down to $100 billion in 18 months, i hope. when you have a business that is a turn the lights on business in south korea, when you are literally the largest company in mexico, you have noneuropean, non-western europe -- they're very small in -- business, that could be a dominant business worldwide now that the european banks are pulling back from emerging markets. >> and they have stressed emerging markets. that's their theme. that's what you'll hear out of vikram pandit's mouth anytime he gets a chance to peek about their competitors here in the united states. deposits were up 6% year over year. loans at citicorp, you're still dealing with citi holdings, but 10% up at citicorp in terms of

loans. positive signs there. they did have a reserve release, i think it was $924 million. i'm looking for all my little highlights here. one of the laughable moments -- $984 million -- >> what was funny about it? the book value is 51 now. >> doesn't that make you laugh? look at the stock. >> from 95. >> i said, wait a second, is that before the split, was it after? what did i miss here? book value, 62.61 -- >> are you questioning the book value? >> no, i think it speaks to the fact that investors in this market regardless of what you see from these banks are still not willing to say, i'm all in. >> and the day they are, what happens? will we get a dramatic move in citi? >> i don't know. >> you said on friday that friday was about fear of a different kind, that is the fear of missing out on a rally, led

by banks, in this case. is this -- what about goldman tomorrow? what about morgan stanley on thursday? >> it was a tough call. everyone's leaving that. that's the business no one seems to want to be in. i went over wells fargo' quarter line by line. they own this country. it's very clear now that the wachovia acquisition was market share gain. the numbers there are amazing. both wells and jpmorgan directly contradictory to the retail sales we're seeing on a national basis, really saying the amount of lending, the amount of home buying, the amount of refi is extraordinary. it's almost like this bernanke reads these, he has to feel pretty good. it's obvious our banks are so much better than the rest of the world's banks. head and shoulders above everyone else. >> you wonder about that. they do reflect an economy that's not at least in decline, at the very least shows a big growing. make you wonder about the calendar. did they start to see things slow at the end of june? has it been 16 days, wrr wherever we are in july -- i

don't know -- >> wells and jpmorgan really indicating that things were linear to up. it's hard to sit here and say, what do the bankers see that we don't see in this raw data? if. if we decided that all cared about was washington, we would slit our wrists. if bank of america is good, we have to rethink. >> that will be the litmus test your you in terms of the strength of the economy? you will rethink your thesis? >> i don't want bank of america to be the jcpenney of banking meaning that everybody did well -- that's what i need to see. bank of america does well, we can say there's two economies.

there's data out of washington and the data we get out of the banks. >> what about viewers who saw a story in "the times" about barclays and potential criminal charges lining up and saying, this is going to go on for years and in a bad way for big banks? >> great question. i think people think that the justice department was asleep at the wheel during the mortgage crisis. they're not going to be asleep at the wheel this time. the hearings that happened last week were about as embarrassing as anything i've ever heard. basically just saying, you are a liar, you are a liar -- when you hear that, you build a record and it's easy for the justice department to go after you. >> from the investor standpoint, much more focused on the civil litigation and penalty side of things and/or potential for some sort of worldwide settlement, what it will cost the banks. someone who equate it with the mortgage putback issue, for

example, bank of america which then slowly but surely its litigation reserves went through the roof. even jpmorgan added $2.5 billion to its litigation reserves in its first quarter. it does appear to be a different case and perhaps a more difficult one to really prove, although again, there are people still trying to figure this out since it is such early days. criminal prosecution will be interesting. but it is the civil side of this that really could impact investors' perceptions of the group. >> there's wells having to talk about putbacks. it's obvious to me the government-sponsored enterprises must have made a determination, listen, we have just been way too lax. wells fargo mentions putbacks from 2006 to 2008. 2008 was supposed to be a good vintage, so to speak. it looks like the vintage is just one more somewhat spoiled vintage, don't drink the wine from that year. >> right. still dealing with the ramifications of that, although

it does seem to be getting encapsulated in the valuations which are all below book value. >> morgan stanley downgrading general electric to an equal weight from overweight, it's moving to the sidelines in light of ge's recent outperformance and equipment orders and tough comps in energy as well as aif invitation. risk/reward seems to be balanced right now. but there is weakness. we've heard from cummins. >> i think people misinterpret. there was a tremendous truck surge. "mad money" went to the bakken last year. that was an amazing imbalance between how much oil that was and how to get to oil to the market. people are now using trucks. natural gas, they had to use trucks to bring fracking sand and fracking water. the ge downgrade on the energy

exposure they have doesn't cite wind as being something that's going down. but a lot of the energy business that is ge has could be weaker. the real battleground here is aircraft. is aircraft really peaking? we have a lot of people who listen to airbus who said, there's a problem. i don't think it's peaking myself. >> we just came off the farmborough air show. those numbers sent boeing higher. >> the long-term forecast unbelievable. then there's the margin target debate over at the ge that the company's been fighting with the street over for some time. but there's still downside risk to that. >> the headline, is ge an expensive industrial or -- that was a terrific question they asked before mike neil came into the finance division and said, we're not going to lose money anymore, we're going to be a positive for the company. this piece, i felt -- this is more of the stock's moved up, let's go to the sidelines -- let's like 3m now.

3m is a remarkable company. >> but it does play off a little bit of that theme that we're going to hear more and more about, about concerns about a global slowdown intensifying. when they say, we're currently moving through a mid cycle slowdown, we continue to find the late-cycle infrastructure footprint attractive. that's an overriding theme and one we'll hear more from as this idea of a slowdown, regardless of whether it's being shown by the u.s. banks that are all reporting, actually is taking root. whether it be china slowdown, india, brazil, europe or the u.s. >> this could be brazil, india and china. >> but ge trades 11 times their 2013 eps estimate. slight premium to the group. 11 times? >> tangible book for citi, 51.50. >> i remember when it was 40

times. >> i know. how about the intel downgrades? intel is selling at a frightening nine times earnings. how much risk is a there for a stock that sells at nine times earnings? >> full disclosure, i still have ge. >> i think we all do. >> that's why we're downgrading and saying such bad things, because we're masochists. >> there's nothing to be done at this point. the pain has been taken. >> futures moving lower after friday's rally, concerns about slowing global growth returning to the front burner. wen jibao said this could be more rate cuts ahead. after ford and nike a lot of people still believe as china goes, so will the global economy. >> the china stock market,

there's not a lot of enthusiasm for china in any single way. i thought it was interesting that they say, we're working on something bigger. that made me feel like, if we do get a big stimulus, the same companies that people have been saying, i don't trust, could be coming back to life. >> the cabinet meeting is on july 18th. there's some talk that it could happen out of that cabinet meeting. it could some as soon as this week. the question is, how big will it be? it will have to be an order of magnitude large in order to have any impact the way it did during the financial crisis. >> do you think the focus will be domestic? international is being crimped by european sales. >> in terms of the stimulus? >> yes. >> definitely. i would guess that's what they are -- that's what they care about. they're not doing it for us. >> if that's the case, i think that a coach that's been thrown away, a kfc, yum! has been thrown away. you could see a sudden burst and no one's looking for it.

those stocks have been very heavy. the china surprise, as you referenced earlier about my show, "mad money," is there's fear that something good could happen. and that fear tends to translate by 11:00 today into buying as opposed to selling. >> do you feel, though, that there's a fear of being short but a fear of being long also? >> i think that -- >> when it comes to missing the boat on this particular story? >> i don't know that people fear being wrong. i think the short trade has a bad feel to it. we get one piece -- i was thinking this weekend, can you imagine if we got one positive piece of data out of europe? one positive -- just one day where spain had better receipts or one day where italy is going to reduce its borrowings in the second half. could you imagine if we got a positive piece of information growth out of europe?

>> that's not today. that will be a great day. >> why don't you rain on every single parade? >> we'll have sangria, tapas and whatever you want on that day. the price for nokia has been cut to 49.99 from $99 with a two-year contract. the spokesperson in talking about this price cut said this is a normal strategy put in place during the life cycle of most phones, which seems -- have you heard, jim, of apple cutting the price of the iphone three months after it launches? >> no. >> it's unprecedented. >> and it would be normal when they start giving it away or when they pay you to take it. this nokia has become a

footnote. it's not that relevant. you can subsidize it all you want with verizon and at&t. nobody seems to want this phone. i'm not saying that siri's on fire anymore. we got a negative piece on siri. i thought it was discriminatory. i thought it was misogynist. i believe that nokia is just one of these things where it's dead on arrival. microsoft operating system, microsoft -- i did find one user of this -- i have found one nokia buyer. i found one that's very satisfying. >> steve ballmer. >> i may be in the minority. he's the ceo of microsoft. it would be amazing if we were using an iphone. >> that's true. >> would he walk around with it in a paper bag so it's not seen?

>> yeah, the people insulting my blackberry. i don't know which brings more tears, r.i.m.'s chart or nokia's chart. >> but it's still too early to buy. groupon, nokia, research in motion -- it's still too early. we're clearly getting there. >> really? >> there will be a day? >> there will be a day. that day will come. >> is that the same day where we are going to have sangria and an italian dish -- >> that's going to be a big day. >> it's not today. >> we got an official announcement of a deal, $14.25, human genome is going to be acquired by glaxo. glaxo came unsolicited with an offer. they shared a number of drugs so it appeared difficult for another potential buyer to come in.

hg was exploring other alternatives, trying to stiff-arm glaxo for a bit. but they got that deal done. $14.25 a share, plus cash. >> that plus par pharma. >> it's crazy out there. >> just put a little bit -- not even asking for a silver lining. how about is zinc lining? >> it's pure madness out there in m&a land. >> you're just relentless. sheesh. >> bring on the sangria. that's what i say. >> we'll see what kind of day today is when trading gets started. a lot more "squawk on the street" in just a moment. [ male announcer ] how do you trade?

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"the new york times" "the new york times" breaking up siri in review because of, quote, major communication issues. the review says she frequently misunderstands what i'm saying, is unavailable and often responds with the same repetitive statement. that brings us to this morning's "squawk on the tweet." this morning, we're asking you, what would siri say about her bad review in "the new york times"? tweet us, @cnbcsquawkst. i know you love siri. but there are some issues. my niece who's 8 years old, wanted to know what a portuguese man of war is. so she asked siri? siri pulls up a picture of a porch.

p-o-r-c-h. >> when you first meet someone, you go head over heels. first weeks, sometimes it's even months. you settle into a relationship and it's never as exciting. >> and she responds with repetitive statements, right? >> honeymoons don't last forever. i've got news for you. >> but you tune her out, then, i would assume? >> i still speak to her in the morning. she still wakes me up. we still brush our teeth and all that kind of thing -- >> but is it like charlie brown and the parents? >> it's a little more -- yes. in the end. it's a little bit more like ralph cramden and xaelgs. sometimes you want to send her to the moon. sometimes a little companionship is -- >> there is nobody else. >> that's what i mean. adam and nobody. eve looks pretty darn good when you get those comparisons. >> my wife tries to tell siri to give her memos, reminders and

after the fifth attempt, i'm like, just type it in. >> right it down on a post-it. >> i thought he was going to tell a hennie youngman joke for a minute. >> you have to enunciate. sometimes you come home and you don't want her, you hit the wrong button. it's not all beds and roses. let's wait till the first verngs see what happens prenup! >> wait till you hear what cramer has to say about one stock in morning. another look at futures as we discount down to the first session of the week. between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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♪ ♪ just about four minutes before the bell. let's get cramer's mad dash ahead of the open. longstanding disagreement between mastercard, visa and merchants finally getting settled. >> no matter what they do, it will so no wrong. here's a very big settlement, billions of dollars. deutsche bank, jeffries says you have to buy these and capital one. mastercard and visa very flatlining of late. you're going to see some of the banks -- mastercard and visa is going to present a nice tone. >> given the retail sales number today, that's an argument that can be made --

>> someone might say, we should seal these. don't sell them. i think they go higher throughout the course of the day. >> we'll get the opening bell right after the break. a lot more "squawk on the street" after this. nouncer ] this is our beach.

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there's the opening bell. and a look at the s&p 500 this morning after that monster rally on friday. they managed the save the gains for last week. atlas resource celebrating their open. here at 9:30 on the east coast, the imf out with its global economic forecast. and steve liesman has details back at h.q. >> the imf saying in its update of its january forecast that it does this time of year every year downside risk continue to loom large. the biggest risk being the

european financial crisis and the u.s. fiscal cliff. it saw a slightly better q1 but a worse q2 compared with the january estimate. that's why there's only .1 points adjustment here. let's look at the individual countries and what the imf seeing going on here. the u.s. is down a tick. but look inside the euro area. germany up, spain up as well. the uk, though, down 0.6% to 0.2%. a lot of action in the emerging economies. downgrading india, brazil and china with the middle east and north africa being one part of the world that's being upgraded. the imf citing financial downside risk to a forecast that wasn't changed very much. but if things don't change, there's going to be more drastic changes to the forecast in the coming months. >> a lot of this was telegraphed

by lagarde is few weeks ago. any temperature here? >> they're saying the u.s. has to solve the fiscal cliff problem, must resolve the debt ceiling and europe has to follow through on its policies and promise that the market won't believe europe. we could have more adverse shocks to the system. lagarde's been pounding the table to get policymakers to follow through on their promises. and they're also urging the emerging nations to be prepared for adverse shocks from the advanced economies. >> steve liesman back at h.q., thanks, steve. we'll talk more about the imf forecast when we talk to the analyst in the 10:00 hour. big week of earnings getting set up. a lot of banks, a lot of tech. bernanke on the hill. are you getting a shopping list ready if, in fact, the numbers disappoint? >> i think some things have to be resolved this week. we have to find out from

coca-cola when they report what happens if the currency's really against you? do we just decide, this is not something progressive louse. we really have to worry about the impact? we have to find out whether the drought -- is the problem with the food chain going to cause inflation? when it comes to these telgz companies, we have to find out where the valley is so deep that we can look through it. when it comes to the banks, citi, jpmorgan, wells have set the standard so high that it's almost hard to see that every bank can possibly beat those. interesting what steve liesman was saying about imf and emerging markets. we're not seeing that big falloff, at least from what citi is saying. but what is the progression? april, may, june. if someone says june is bad, another negative.

shopping list, too early. i do point out if china does something good this week, you're going to have to change your view from a little more negative to a little more positive. >> you would imagine that there would be a rally that was springloaded to the upside if china introduced some -- it would have to be a sizable stimulus. >> light. >> this idea of currency is one we're going to cover a lot. talk this weekend by barron's -- >> that would be the best thing for europe right now is sort of the consensus view on that situation. david woo, bank of america/merrill lynch talked about this notion that a weakening euro is probably what the eurozone needs in order to solve its prices. take a look at the results of an s.a.p. last week, the currency helped them. they're a european software company but it's currency that is helped them. >> any of these companies we've

talked about it could go the other way. >> one of the things not to lose sight of is that this decline in the euro is incredibly bullish for their incredibles. we're always looking for anything positive about europe. that decline in the euro is going to -- >> particularly for germany, which continues to -- >> one day we could come in here, and you could say, today's the day. >> for sangria. don't forget the tapas. >> one good data point and we're going to be eating and drinking -- >> yes, we will. and you want to go over there before things start going up and you want to do some buying. >> i'm ready. >> maybe real estate, maybe some retail sales. i will tell you when. probably going to be october 4th, maybe 7th. >> okay. >> at 12:00 noon eastern time. >> yes. you want certainty, i'll give you certainty. >> make sure you're right. >> write that down.

>> bob pisani is here on the floor with more on what's moving this morning. >> happy monday, guys. the big discussion this morning, one was china, the other retail sales. china down 1.7% on the shanghai index. there may be a couple of indexes around the world that have been worst performers this year. but china's negative. remember, germany, s&p, we're still positive. spain's been a weaker performer, italy has and maybe brazil. but other than that, china's probably the worst-performing stock market in the last couple of years. and that's a real concern. the talk here -- you guys have mentioned it. there's going to be big infrastructure announcements coming on the line of what they did in 2008. that's probably all they're going to be able to do at this point because cutting rates isn't helping. the other big topic was retail sales. i was disappointed by this. down 0.5%.

the weak ennis since 2010. now we have three straight months of retail sales decline. i was looking for gasoline prices to come down. sntd everybody? turns out they did come down. gasoline sales were down 1.8%. but wait a minute, usually you get more money in your pocket, you're going to go spend it somewhere else. well, where was it? we didn't see it. people weren't saving money because gasoline prices were lower and going out and spending it somewhere else. that suggests a much more cautious consumer. now we're going into the back-to-school season. what does that mean? a lot of the retail guys i talk to trade retail stocks this morning were very worried by these numbers because it implies the consumer is going to be very cautious, implies late buying, a lot of discounting, pressure on the margins for the retailers and it means ultimately pressure on earnings. as for citigroup, good enough again -- jim was right.

wells fargo had good enough, as did jpmorgan. nomura said this is not bad considering the environment. there was capital revenues that were a bit weaker. but that was expected. loans and deposits grew. we saw expenses were lower. everyone i talked to brought up expenses getting under control as a major factor for them. and credit quality is beginning to improve. good enough three times in a row for the banks. >> let's head to the bond pits. rick santelli's at the cme group in chicago. good morning, rick. how are you? >> i'm a lot better than retail sales was for the month of june. whether you looked at seasonally adjusted, non-seasonally adjusted or put on really dark sunglasses, the number wasn't a good number. you can see evidence of that of how the ten-year traded. intraday, we're hovering right now, should we close here, basically now all-time closing yields, at least all-time with respect to anything that isn't ancient times. if you look at a french two-year, this one really gets me.

seven basis points. look at this year-to-date chart. do you think safe harbor might have dangerous liaisons with reality? look at this chart. how did the dollar index fare on the data? not well either. the dollar index has been doing better of late but there's always another fed meeting, always the idea that some think we need more accommodation like charles evans in chicago. but he doesn't look at things like unemployment which seem little affected by the accommodation we already have. but we want to watch that dollar index in particular and the dollar versus the yen is under pressure. back to you. >> thanks so much, rick. let's check out the energies and metals action. over to sharon epperson at the nymex. >> commodities traders are watching the dollar index very carefully as well and the fact that it has weakened a bit is one of the reasons why we're in positive territory for oil and why gold has not fallen even further. we are looking at some support also coming from the perception that we will see more stimulus

coming from china after over the weekend china's government talking about the recovery which has been slow to show some momentum. we're also watching what's happening in terms of the net long positions in crude oil, both for u.s. oil futures for the wti contract and the brent crude contract. we have seen money managers cutting their net long positions. we'll see if that stems the rally in any way. but you still have the geopolitical risks out there, namely iran, renewing its threats to block the strait of hormuz over the week. and talking about a new pipeline coming from abu dhabi that's the first pipeline to bypass the strait of hormuz. that may be relieving some of the upside pressure that we're seeing on oil prices due to some of this geopolitical momentum. but also india, india's top buyer of oil, mrpl, has decided it's going to buy a boatload of its crude from saudi arabia for july. so that is something that lets you know that many out there are

now bypassing iran altogether in terms of where they're getting their crude from in light of the embargoes that are in effect. back to you guys. >> thanks very much, sharon epperson. there are some deals. glaxo bought human genome sciences. about a $2.9 billion deal. the shares trading below that, as you might anticipate. no other bidders expected here to top this, given hg went on a sale process. it was unlikely they were going to find anybody anyway because these companies do share drugs to begin with. now glaxo will have full control of drugs. the price tag, the deal itself, as i said, reflective of sort of

a caution that there is in pharmaceutical land. but a willingness to do strategic deals of a certain size where you're not betting the company but you are at least gaining control of certain therapies that may be beneficial to your overall bottom line in the future, talking about $200 million in cost synergies to be fully realized by 2015. you see it right there. it was a very large premium at the outset to where the stock had been trading if you go back to what they would claim was the unaffected stock price. so glaxo did persevere there. we also had one other deal today. tpg, as you look at human genome, tpg buying par pharmaceuticals for a significant premium there as well. again, of that size that fits with private equity in that case, and typical of what we've been seeing. >> do people have to do deals -- sometimes i look at this par pharma and you think, tpg, you have to give them a lot of money. they have to feel motivated to do something --

>> the private equity firms are sitting on funds that they have raised that are significant in size. they call the money as needed but they need to put it to work. there's a time line they're operating under and that's the way they generate returns and oftentimes fees, by actually putting the money to work. doesn't mean they want to do in it a manner that's not going to be beneficial. but, yes, there is pressure to get invested, no doubt about it. >> meantime, we have sad news to report this morning. former morgan stanley global market strategist barton biggs has died at the age of 79. in a memo sent to morgan stanley employees, ceo james gorman said biggs was an independent thinker, colorful writer and one of the pioneers of emerging markets investing. and our firm benefited from his vision. we send our condolences to barton biggs' family. between listening to the numbers... ...and listening to your instinct duff & phelps finds

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>> interesting day setting up. down 54 points, a lot of discussion, jim, about bernanke. i know it's tomorrow. and he'll meet if house on wednesday. ron paul, maybe some fireworks. but at the meeting of august 1st, people are wondering if he's going to set the tone for jackson hole and like he did a couple of summers ago, lend the promise of some potential policy. >> the last we heard were these note that is came out and it was kind of a split, let's wait and see. and subsequently, the june numbers have just been abysmal. if they look at wells fargo, they're not going to say that. if they look at jpmorgan, they're not going to say that. but in general, the spending seems to have gone down. the data's just not that good. we would like to see something a little more which says, hey, last time we came here, things were okay but they deteriorated. and not only that, but the inflation picture's gotten a little bit worse. but it's food -- we have to

worry about the consumer and how much spending power they have. i'm looking for something that's a little more dovish. >> if this year continues to mirror last as it seems to, especially as we've moved in from the spring/summer period -- it was the week of july 25th, the s&p began that 17% decline last year, if you really, only coming out of it right towards the end when we got ltro. >> gold is down another three bucks. still $1,588. is gold still the canary in the coal mine as to whether banks will reflate? >> i think it's a judgmental merkel. every time merkel truly plays hardball after every single one of these -- some could say that merkel is the reason we still have a problem. the intransigent that is she constantly shows shows up in gold. she says, we're not going to reflate, not going to reflate.

as long as she's out there, we're going to have this long-running drama. obviously things are weak in europe. but she does not stand for anything, to me, other than strength in germany. >> we should point out, retail, as you might expect, is particularly weak today. i noticed jcpenney, which we like to keep an eye on, $19.64, down 2%. lows, by the way, down over 3% this morning. home depot down almost 2%. >> lots of people saying that numbers are too high, home depot. and i think home depot's been a terrific situation. but maybe this month of june, not so great. i don't know how much to put credence in jcpenney. target and walmart -- >> on a tear. >> target's been incredible. >> incredible run. >> incredible profit taking, too. >> it's moving down with the group. >> wells fargo is higher on the session. that's a continuation of friday's very good price action. jpmorgan, cannot be said the same for them.

it's down by 1.5% this morning. that was that day, friday, the gains. >> i think a lot of people -- they have to sit down and let -- they sit down and look at this wells fargo quarter. i think what you're going to see is that this is a company that took a lot of share and is now cross selling. they do all this cross selling. they have $1 trillion mortgage servicing business. once they're in your house, they start getting other business. they are just a well-run company. they also are a company that's done a lot of work with the hart program, with trying to reform mortgages. wells fargo is a very well-run company. david gets tired of me saying that this company is -- >> i don't get tired of it. but you do say it -- >> sick and tired. >> okay. that's not true. not true. i'm always happy to hear that it's a very well-run company. >> and they do banking. one of the points they talked

about was that they've profited from buying power, they are looking for more pullbacks of other international banks. citi is going to be saying the same thing. as the stock comes in, i think people are going to say, hey, it's not that bad. and i think they can reverse that. i do not like citi as much as wells fargo here. my charitable trust owns jpmorgan. i continue to think that jpmorgan has turned the corner on the fiasco. but with people saying this libor criminal prosecution, i think it's going to be -- >> not to mention open questions still on the london whale and some of the -- things that were raised on friday that we discussed in terms of fraud or -- >> the more you dig jpmorgan, obviously there are still people gunning for it and thinking it's not turning around. i think that's a mistake. >> dow's down 62. last several mondays have not been good. but we'll see how we wind up today. "squawk on the street" is coming right back.

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simon hobbs here with a look at what's coming up at 10:00. >> hey, welcome back, carl. david katz is going to be here to talking about the financials. and citigroup, we'll have the judge who presided in the raj rajaratnam trial weigh in on what jamie dime season alleging happened at jpmorgan. really, jamie? and if you've read today's imf forecast, it's a little bit like having a bucket of cold water poured over yourself. we'll talk to their analyst, olivier blanchard. >> see you in a few, simon. now to "six in 60," we begin with apple. >> people worry about a hole in apple's earnings. they say overlook it. could help the whole market. >> sandisk, it's going to miss?

>> these little component companies are all struggling because of flash overdue. >> goldman takes cheesecake factory from a hold -- >> we're getting differentials between the different restaurants. cheese ba cheesecake is a good one. >> and exxonmobil? >> this one's had a nice run. >> target price for f5 lowered at morgan stanley? >> this company is integral to the cloud. >> supervalu, goldman upgrades? >> that's a victory. time to cover. they can restructure. >> for more on those names, sots.cnbc.com. what's coming up tonight? >> we're all over this ipo market.

there are deals coming, we're going to look at them and decide whether you should be in them or not. >> keep hearing that manchester united may be a tougher sell than people may think? >> maybe there's a lot of loyalty -- people love soccer. >> that's true. see you tonight, jim. when we come back, business inventories. a lot more "squawk on the street" in just a moment. [ 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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may business may business inventories up .3%, close to expectations. underscore the importance of all the data today. june retail sales is going to be the tombstone in terms of the retail sales data for the second quarter. in about two weeks, we'll have our first look at second-quarter gdp. and we'll get a couple of months' worth of these inventory numbers and they will be part of the adjustment process for whatever that first look at second-quarter gdp turns out to be. in terms of interest rates, fives and tens, record territory, 3/1030s, not far behind.

carl, back to you. >> rick santelli, thank you so much. let's get to the roadmap for the next hour. citi out with quarterly results today leading off a big week for bank earnings. matrix chief investment officer david katz on how to play the banks and other seshgdzs this earnings season. and whether jpmorgan tradertrader s hit loss. we'll talk with the judge who oversaw the raj rajaratnam trial. and the imf releasing its global outlook, downgrading to 3.5%. we'll talk to its chief economist in a few moments. >> glaxosmithkline will acquire human genome services. it ends the hostile three-month pruitt of the textile business. visa and mastercard have reached a settlement with retailers over allegations the two companies and banks

conspired to fix credit card fees paid by retailers. the agreement still needs to be approved by a judge. the u.s. justice department considering criminal charges against several financial institutions related to the manipulation of interest rates, according to "the new york times." right now, a panel of uk lawmakers are beginning questions of adair turner, the head of britain's financial regulator as well as barclays' former chief operating officer, on their roles in the scandal. we'll bring you the highlights as they happen. >> this could be a much bigger story than a lot of people on this side of the atlantic are assuming. it's huge in the united kingdom. the civil part because you've heard $300 trillion of interest rates swaps that could effect most people's mortgage here in the united states. if you could create a case that those that have yet to settle, the other banks -- actually affected ordinary americans, those civil charges could be huge. >> there are a lot of hedge funds that are going to pay for

a lot of legal advice to give them a sense as to what the liability could be. the same with the mortgage putback issue. there were beneficiaries for libor being lower than it otherwise might have been. but if you're a municipality and you entered into an interest rate swap, you may have a potential claim. it's very difficult to figure out where this may be going. but there's certainly a possibility of a liability. >> and barclays lost its three senior executives and they've come forward and cooperated. they are the people who are likely to have the least penalties of all of the banks because they came forward at that stage, assuming that others were in it up to their necks. and there are some american names bandied around. >> yes, there are. let's talk about one big bank, citi kicking the week off with better-than-expected second-quarter earnings. what can we expect from the rest of the financial sector in the markets in the weeks to come? let's bring in david katz. david, great to have you with us. >> nice to be here. >> i want to ask you specifically about citi's earnings.

citi just turned into the red and it had seen a pretty strong gain early on in the session, at least. i'm wondering how you interpret citi's result. are there weaknesses in the earnings that perhaps we're not aware of? >> i think everybody knew what was going to be going on with a lot of the banks' earnings. citi did a very good job on the expense side, the capital markets business was down. that's going to really be what's going on with a lot of the banking group. capital markets have been weak this past quarter. there's going to be some net interest margin compression. but they're finally going to get some help from the mortgage business which is picking up. credit trends continue to be better. it's going to be a mixed bag for the financials. >> you've been an investor in jpmorgan for a long time. is there a sense of disappointment that not the very strong earnings and some -- with the london whale loss, is put to bed at this point, that the gains from friday aren't able to stick and they're not translating to morgan stanley

either, between citi's results, jpmorgan's results and wells fargo's? >> that would definitely not disappoint. the market has been schizophrenic. some days it wakes up happy, some days, sad. we wouldn't read too much into that. for the last two or three quarters, regardless of what the banks have done, the stocks have traded lower or not really had an uptick. and after the fact, they will start to move better. if you're an investor we would not buy a bank in front of the earnings. but if you like the earnings, we would buy into that. jpmorgan had a good bounce on friday. we'd use today's weakness as a buying opportunity. >> in terms of some of the other major earnings to come this week, i'm wondering, which ones do you think are most keys? for instance, coca-cola? >> if you have european exposure, there's a great likelihood you're going to come into the low end of

expectations. currency is going to be a mixed. for the pharmaceutical company, it's going to be a negative. it's going to be a treacherous earnings season. we think ultimately the market is going to be higher. we would use any weakness to add to names that you like. but we don't have a lot of high expectations for the upcoming quarter. >> the pattern in past earnings seasons has been for estimates to come down ahead of the numbers and companies to beat. is that going to repeat itself this quarter? >>. >> the estimates can come down. and the stocks have come down in industrials. but earnings are coming in at the low end of those estimates. we think this is not going to be a quarter where 70% or 75% of the companies beat. the preannouncements this quarter have been the highest they've been in the last four to eight quarters. you want to be cautious in terms of earnings. but a lot of these companies are down 10% or 15% into these earnings and at some point

during the earnings season, the market's going to look beyond the headline number and look to the rest of the year. we think the economy is slowly on the mend. you have to put it in perspective. stocks are at 11, 12 times earnings. and interest rates are at 1% or 2%. we think stocks are attractive relative to the interest rate environment. >> david, i read over the weekend that the earnings yield now on the s&p is 7.3%. is that right? >> well, there are lots of different ways to look at the earnings. we're using an 11 to 12.5 times earnings number. we think there are a lot of pockets of high-quality businesses that you can buy at 9 to 11 times earnings. so if you focus on fundamentals and you focus on p/es, you can buy some great businesses at very depressed prices. >> i was focusing more on the yield that you could get -- if it is above 7%, that's -- for those that need an income, that's an extraordinary important figure, isn't it?

>> the dividend right now is about 2.2%. but you can buy some really good companies that are paying 3% to 4%. the earnings yield is the reciprocal of the p/e. depending on where you're calculating that p/e, it's 11 to 13. >> david, thanks so much. >> thanks a lot. >> david katz of matrix. still to come on the program, we'll sit down with the judge who presided over the raj rajaratnam trial. he's going to weigh in on the potential legal implications surrounding jpmorgan's allegations that some of its staff may have been involved in criminal activity. stay with us. well the kids wanted a puppy, but they can be really expensive. so to save money i just found them a possum. dad, i think he's dead. probably just playin' possum. sfx: possum hisses there he is. there's an easier way to save.

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there you have the dow heat map. we also want to bring your attention to the yield on the ten-year. the yield on the ten-year has actually set a new record. the previous record low was 1.437%. so presumably it bounced up. >> unbelievable. perhaps a story we don't focus on enough. i know we mention it. but it's shocking. >> kaminsky stands by his call for a sub-1.00% by the end of the year. >> that's the story. he's been right so far. >> incredible. 1.445. federal investigators are looking into whether jpmorgan traders hid losses.

the losses are associates with risky bets on corporate debt come to be known as the london whale trades. what are the legal ramifications for those traders? the judge who presided over the insider trading trial of raj rajaratnam, richard holwell, good to have you back, judge. good morning. >> nice to be back. >> what's the exposure here? >> the exposure is hard to predict at this point. it's going to be a regulatory free-for-all. you have seven or eight agencies investigating these trades. you would expect the s.e.c. to investigate the issue, not so much of did they make a mistake when they made their trades. but how is it all of a sudden that 60 days after announcing that the losses were $2 billion, all of a sudden they're approaching $6 billion. the issue for the s.e.c. is going to be, who knew what, when? was there a nondisclosure of material information, that's

classic bred-and-butter investigations. surprising the d.o.j. has jumped in so soon. >> you are surprised they jumped in so soon? >> yes. >> they introduced this idea -- although it was unclear from the comments made by jpmorgan executives on friday. they introduced the idea that there was fraud, if you will. that misrepresentations were made, fair market value was not reflected in where they were marking these positions. i'm curious, how far down the road is that towards actually really allowing for criminal prosecution? >> well, of course, the issue is whether the traders accurately marked the investments they had out there as they were trying to unwind this investment? and they're very judgmental, those questions. and the internal investigation that jpmorgan conducted itself concluded that the traders were not being frank in evaluating the losses that they had experienced and were likely to experience.

that is a classic nondisclosure. it has the potential for certainly being a civil fraud. as i said, it's unusual for the d.o.j. to be interested in something like that. and i suspect that there's something we're not seeing here. we know that there is a very hot and heavy investigation of london traders with respect to the setting of the london interbank offered rate, or libor. and it's pure speculation. but i wouldn't be surprised if they're at least looking for some connection, because after all, the jpmorgan's individual crisis is a question of the action -- or reaction of london traders, the libor problem is a london trader problem, largely. >> what could the connection be, though, in your view? why would you connect the two? >> well, the allegations against barclays are not only that

barclay traders communicated with the folks that set the libor submission on a daily basis, but they also communicated with traders at other large banks that helped to set the libor rate. jpmorgan chase is one of those large banks. we have no idea whether there was any problem with morgan but they're certainly going to be looked at closely by the fbi and the d.o.j. in that regard. >> does it seem to you like -- we've seen some big settlements with big banks in the past couple of years, where the amount is $500 million. does this smell like something in that ballpark? >> certainly not if the problem is limited to misreporting the amount of the loss on the london whale trades. if it's deeper than that, then i think past penalties will be very little indication of the exposure because you're talking about trillions of dollars in market value with all of the

interims set by libor. no one will be able to figure out what the banks' exposures are anytime soon. >> can i come back to the central question at jpmorgan? it is quite unusual for an organization to say its staff may have been criminal without actually accusing anybody within that organization of doing anything criminal. there's clearly a rush on the part of jamie dimon to isolate the c-suites. very little we could do about it, criminal activity. if that criminal activity is not proven and they continue to go through hundreds of thousands of tape and they're not able to pin it on anybody, does the fact that they've said that there may be criminal activity in itself mean that the civil penalties against it may be greater? >> i don't think so. i think they're now reacting with extreme caution. when they announced two months ago that their losses were going to be $2 billion, maybe $2 billion, you have to think that

that was vetted by 20 lawyers. before they made the statement. and now they're in the unfortunate position of having to say, never mind. >> but presumably, that's why they're saying. they had a false impression. he came forward. he's got to say, stuff was hidden from my by criminal intent rather than saying, actually the way we run our business is so bad -- >> does it ring-fence the liability that the company has -- puts it squarely on the shoulders of the traders -- >> it is certainly an attempt to ring-fence the liability. obviously anybody who was aware of the underreporting would be exposed. i'm not so sure it's clearly criminal liability, certainly is s.e.c. securities fraud-type liability. the difference between the two really is just a question of how intentional it was, the conduct. >> and they were marking them at not what was a fair exit price. we've been talking about the jpmorgan trader and we've also mentioned libor.

i want to come back to you on the libor scandal because a lot of investors are going to try to figure out if there is a civil liability here, if we could end up with some worldwide settlement from all these bankss that similar in some ways to what's been pursued on the mortgage putback issue. i'm curious if you have an opinion on where this may go -- talking penalties and money. >> the civil cases have been collected into the southern district of new york here before judge naomi rice bookwall. they've been going on for a year. it's a situation where the civil damage actions precede the regulatory investigations. in terms of exposure, the big issue that i don't see really resolved yet is whether the problems that barclays admitted to, that is working within its own banking institution to impact the libor submission

every day, was part of a conspiracy with other banks. barclays does admit in their statement of facts that they entered into in connection with their nonprosecution agreement, they do admit to having contact with other traders at other banks. it's not clear whether there is symptomatic of an ongoing deep problem or was simply a situation where on one or two or three or four occasions, these improper discussions took place. if there's a conspiracy, if all the traders at the banks were doing this, then you'll have what's called a sherman antitrust violation, not a securities fraud violation. sherman antitrust violations provide for troubled damages. it's a whole host of other issues the banks would face. >> finally, as someone who is well-versed in banking scandals of late, does the libor story make your head swim? does it take your breath away? >> well, if it has legs, it does. the government, of course, has

been accused for several years now of not doing enough to attack the wall street problems. and attorney general holder, i thought, has been quite straightforward saying, we looked at a lot of this stuff and a lot of this stuff isn't criminal. if it develops that there is an interbank problem here, that's criminal and nobody is going to argue about that. even the banks themselves -- if they find that there is this agreement among traders at various banks will have to stand up and say, this is -- we have to clean this up. >> judge, thanks for coming in. >> my pleasure. >> richard holwell. still to come, the international monetary fund is out with its world economic outlook. we'll talk to its chief economic analyst. and win fifty thousand dollars.

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you have eps beating the street by four cents a share, the stock's up 1%. but revenue is down 2%. publishing advertising revenue dropped 8%. and, david faber, i'll send it back to you with this -- looking at the story here coming out of reuters, $20 billion in ad revenue has been lost in this industry, not just by gannett but by everybody over the last five years. but the stock is up. tv did rise. just continued tough times in the newspaper and publishing industries. back to you. >> been a couple of big changes there, this internet thing has been a little bit of a problem. >> yeah, what is that? >> interweb is what they call it. >> thanks very much, brian sullivan. want to update our viewers on a couple of deals we're seeing this morning or have been announce this had morning. both in broadly speaking, the pharmaceuticals arena, let's call it, human genome sciences agreeing to be sold for $14.25 a share and cash to giant glaxo.

that, of course, ended what had been an unsolicited offer from glaxo, originally at $13. they were pursuing them by a lot of different means and being resisted by hg for some time who went out to see if they could solicit any other buyers. they're talking about $200 million in annual synergies starting this 2015. you see human genome is now right near -- it should close pretty quickly, the $14.25 a share target. the other deal is trading above -- not target deal. it's trading above the price. s that par pharmaceuticals which agreed to be acquired by tpg, the very large private equity firm. that transaction value, about $1.9 billion. $50 a share. you see it there, a bit above. why? the agreement does include what is now almost automatic in a private equity deal, mainly a go-shop provision which will allow third parties to take a

look at this company until august the 24th of this year. while there are no guarantees, they'll get a superior proposal and i have not spoken to anybody who can indicate one way or the other whether there's an expectation perhaps this bid would be superseded. nonetheless, it is trading a bit above that. we did see a go-shop which almost always -- hardly ever results in another bid. we did see that happen with quest software when dell came in with a bid above management. back to you, simon. in 24 hours' time, ben bernanke will be on capitol hill giving his version of how he sees the economy and the prospects potentially of q.e. 3. is now a good time to be buying some of these risk assets, some of the commodities that hedge funds have been exposing themselves to? we're going to talk about that after the break. stay with us.

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♪ here are the stories we're squawking about. dean foods, one of the biggest losers on the s&p of getting hit with another upgrade to a market perform from outperform. the firm citing rising milk prices and possible deterioration in the retailer promotional environment. ford is recalling some

vehicles due to a carpeting flaw. the recall affects more than 8,000 vehicles built between march and the beginning of june. and the chip sector getting weighed down after texas instruments was downgraded from a market perform. the dow is down 59 points. let's go to chicago, john brady joins us. good morning. >> good morning, simon. >> if there was one thing that people should keep front and center moving through this week, what is it? >> well, simon, the real trade this week will most likely be in two-year treasury yields. if you look on a comparative macro basis, two-year treasury yields in the united states are roughly around 23 basis points. you compare that with other two-year yields, germany at zero, japan at nine basis points. and the argument can be made that two-year treasury yields in the u.s., even at 23.5 basis

points are rather attractive. ahead of chairman bernanke's testimony tomorrow, the money market industry is all awash with this idea of maybe the fed cutting on excess reserves. we think the market's got an little bit ahead of itself as the fed doesn't want to destroy the money market industry. however, there is talk that perhaps the fed will get i.o.e.r., similar to what the european central bank did last week. but we think two-year treasury yields will continue to be volatile in trade this week. >> were that to come through, there would be a capital appreciation at the short end of the curve that people should be up for, they should be positioned for, as essentially everybody is chased to try to find yields somewhere, albeit, as you say, .223? >> we argue that it's back up closer to 25, 26, 27 basis points. probably a better buy on a pure macro view.

at 23, 23.5, they seem to have this i.o.e.r. story built into it, this cut in excess reserves. and we think if the fed chairman disappoints, there will be that back-up, that lower price in higher year in two-year notes over the course of the week. >> john, thank you very much. >> thank you. gold is trading slightly lower this morning. investors awaiting fed chairman bernanke's testimony on capitol hill this week to see if there will be another around of quantitative easing. sterling smith joins us now. >> good morning. >> obviously another round of quantitative easing would be pressure on the u.s. dollar, which would be supportive of bouillon. how do you interpret what the chances are for another round of easing in some fashion? >> i don't see a big chance of easing in some fashion. i think the fed has been working hard to signal it in their notes and making notes that it's there

if they want to use it. but looking at the price of gold, you have a market that's losing interest. the market is having trouble finding any stability on the upside. there's very little buying support coming in. you see it continuing to decline, pressing up against that support at 1,550. given the current political environment, i don't think we're looking at any round of quantitative easing anytime soon. >> in terms of the buyer who once bought gold because it was once viewed as a safe haven, has the u.s. dollar or the treasuries, have they become the new gold, so to speak? >> well, gold never performs well directly during a crisis. when there's a problem goshgs back and look at any number of one of a problems, gold gets hit hard. gold performs best after there's an inflation hit. treasuries have always been the choice during a direct panic and during a direct problem. i think gold is dead money right now. if the market breaks at the 1,550 level, we could be trading with a 1,400 handle very quickly

because the buying interest is drying up. china's growth is a little bit slower than expected, so asian buying is a little bit slow as well. >> where do you see this money, then -- if gold is dead money, where are the incremental investors going into within the complex? >> i think right now, you're sticking in treasuries. you're turning around, picking your equities specifically. in the commodity complex, the interest is in grains. the temperature is rising a lot faster than gold f. you look at corn and bean prices, that's where we see strength and upward momentum. summertime is always a hard time for gold and metals in general. until we move closer to the election, i think gold sits and could possibly break lower and maybe noticeably lower. >> what is noticeably lower, sterling? >> trading at 1,410 and if we break that 1,550 level, i think we're going to find some stop/loss selling in there. any incidental buying we have will dry up.

>> 1,410 would be noticeable. sterling, thank you. >> thank you. >> on that note, dow's down 58. want to get a market flash from brian sullivan back at h.q. >> want to quickly follow up on mbia. we talked about it last week extensively. the stock took a hit because they were expected to be denied being able to make an interest payment on some debt coming due today. the new york state department of financial services did approve that 14% note debt interest payment from mbia. we talked about it extensively last week on "street signs," also this show as well. but they went ahead and were allowed to make that debt payment. again, that stock is now up about 3%. a slight recovery for mbia. back to you. >> thank you very much, brian sullivan. when we come back, siri of apple fame getting panned by "the new york times." and nokia slashing the price of its lumia phone. who's really winning the war of the mobile phone? that debate coming up a little bit later. back after a short break.

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for a body in motion. ♪ welcome back. take a look at shares of facebook, down over 3.5% this morning. that stock's retreating below that $30 a share barrier. the company will be reporting its first quarterly earnings as a public company next week, or on the 26th of july. i lose track of what week we're talking about. but july 26th. >> very heavy volume apparently on the move down as well. >> and take a look at shares intraday of citi. had been trading higher. dip below negative. now strongly higher by 1.7%. s that also translating to some gains that are sticking in terms of bank of america. that's up more than 1% at this hour. and wells fargo also working on extending friday's big gain with

a 1% gain in today's session. coming u on the program, the imf is seeing a slowdown in the global economy. where is the biggest threat coming from? and what are they going to do about it? they are players within that process. the chief economist will join us shortly. but first, rick santelli's working on the next hour of "squawk on the street" in chicago. hi, rick, morning? [ male announcer ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ]

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time now on this monday for "squawk on the tweet." "the new york times" breaking up with siri in a review because of, quote, some major communications issues. the review in the paper today says siri frequently misunderstands what the reviewer is saying, sometimes she's just unavailable, often she responds with the same repetitive statements. our question to you this morning -- what would siri say about her bad review in this morning's "times"? ralph rights, siri says, the time in new york is 9:24 a.m. and another says, i'm getting my english brother to have words

with you. and another says, siri would say, sorry, i don't understand. and another says, i asked siri and she was very humble saying, it's nice of you to ask but it doesn't matter what i think. interesting. shows you how we talk about technology moving so quickly all the time, some of this voice-activated stuff is going to be stickier to perfect. >> but it learns as it goes. if you start putting bad stuff in, it reverberates around. i think it's a bigger issue in the uk where there are more accidents. it's a learning process. depending on who speaks to it and what they say, it goes back into the cloud -- >> it is still technically in beta testing, i believe. that's where they began it and they continue to say they're updating it. that was part of the story as well, where the author of that particular author also made an comparison to google's voice recognition technology in android and said it compared favorably. of course, they don't have a siri that you just ask them something --

>> "fortune" quoted some engineers saying if steve jobs were alive today, he would have lost his mind because of all the problems that siri has had. >> i didn't know siri was a man in the uk. >> i didn't know that either. the imf chief economist will join us after the break with his global forecast. but first, rick santelli, what's coming up next? >> i'll tell you what, this guy works hard, doesn't he? here's what i think, i think whether it's timothy geithner or central bankers that are part of the bang of england, i can't believe there aren't more questions about who knew what when. i know crisis creates breaking of many rules like the rule of law. but it seems like there's not enough outrage. therefore, at the top of the hour, we're going to have enough outrage to spread it around the world. ♪

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facebook not seeing any news on them. but the news is that facebook shares are back below 30 bucks a share. currently trading right now -- where are they at? too many names here to follow. $29.55. down about 3.8%. again, no news. i'll keep digging. see what i can find out. still, facebook back below $30. third time since mid june that's happened. >> thank you, brian. the international monetary fund is out with its world economic outlook. and theismf says it's seeing a slowdown in the global economy and europe remains clearly at the forefront of its thoughts. joining us is olivier blanchard, the chief economist at the imf. good morning, sir. >> good morning. >> this was like taking a cold shower when i read it this morning. you're taking down your estimates for the second half of the year and it's very stark. emerging markets this year grow 5.6%, 5.9% next year.

the developing world, just 1.4% now, you think, this year. and 1.9% next year. that's with two big caveats -- that europe does what it needs to do, you caveats, europe does what it needs to do and monetary easing in emerging markets actually works. that's a pretty pessimistic view of the world. >> well, it is pessimistic. i think you have to put it in context, which is the recovery continues. but yes, it is weak. in terms of revisions since april, they are small revisions downwards. so it's not the end of the world. but clearly that's not a very strong recovery. you're right. it is based on assumptions which may or may not turn out to be right. >> those assumptions are huge. >> the crisis will slow down, the u.s. will avoid the fiscal cliff and emerging markets will do the right thing. >> you also say that the ecb has room to do more, to buy spanish

and italian debt, another ltro with low collateral or qe-style asset purchases. are you asking the ecb to do more? >> no, we're sending a general message this time at that level rather than in the articles we have with them. the message is euro countries doing the best they can, taking strong fiscal measures, structural reform. they may need help. they have to be able to finance themselves at reasonable interest rates and therefore the euro members have to do whatever is needed. now who does it in what form can be discussed. these countries are doing what they can. it may not be enough. they may need help, both banks. >> the utmost priority is solving the crisis in the euro area. the imf is not a passive observer there. i mean, there will come a point

where potentially you're going to have to put the credibility of the organization on the line if spain or italy asks for a bailout. what are you going to do about greece? the reports are it's failed to implement 210 of its 300 budget-saving requirements. three-quarters of the country in a poll overtime weekend want to rewrite the deal that you already have with them. moody's says greece may exit. how far are you willing to bend for greece? >> well, we're not at that stage yet. we had a mission on the ground. they have come back. it's clear they didn't quite fully satisfy everything we wanted in the recent past. i think the first issue is how to get the program back on track and then we can see whether there are any adjustments to be made. >> but there are bills due in greece and way off track. that's the issue. can you give them more wiggle room? >> well, we'll see. we're going to discuss with

them. >> over what sort of timeframe? >> we have a team going there, i think, on the 24th and they will be there for a few weeks. they will sit down with the authorities and see what can be done. >> can i ask you, finally, there's a the loaf discussilot degree to which when we have the spanish bailout, a deal by friday, 100 billion euros for the banks, the degree to which other creditors should be suppressed. ecb seems to be getting harder in its recommendation to the finance ministers. where are we going on that very important topic for professional investors? >> well, i think that what you're referring to from the ecb is a leak, so i'm not going to comment on it. in general when you recapitalize a bank, you get what's going to happen to claim holders, shareholders being first and then junior creditors and so on.

so i think this will have to be seen in the context of bank recapitalization in spain. it's a very general issue. on this we don't have a clear position yet. >> olivier, i don't want to be too granular but talking about downward revisions to u.s. growth, expectations citing europe for one, also the fiscal cliff here on our own capitol hill. i wonder if imf's view have erecorded since lagarde's comments. >> this is politics. i know if the fiscal cliff were to happen or the u.s. were to jump off the fiscal cliff, this would be a major macroeconomic event. i mean, our forecasts are based on fiscal consolidation of about 1.5% of gdp. this would be a 4% fiscal

consideration. this would kill growth if the u.s. next year, kill foreign countries next year. this is a very major issue and i very much hope they find a solution. >> when you say kill growth, are you suggesting any failure to address the cliff means an automatic recession in the states. >> i think if the u.s. fell off the fiscal cliff and had fiscal consolidation of 4% then, yes, i'm sure we would see negative gr growth in the u.s. next year. again, we think they will find a way. if this were to happen, yes, this would mean a recession next year. >> chief economist of the imf. >> thank you. >> tough stuff. talk about silver linings or zinc. >> we hope they figure it out as they often do with backs against

the wall. plenty of people in washington tell you they may not figure it out. it's going to be an obama problem in terms of if he loses and having a lame-duck session of congress and it's not january 1. are if they are on the road to fixing it, it will be fine if romney becomes president as well. whoever, whether he's re-elected or whether it's romney, it's going to be the issue for many people who are making the decisions about spending money in this country. >> yeah. of course some suggesting it's already having a dampening growth to some degree because of the expectation. >> john malone while you were away saying exactly that, saying that's one reason why britannia treasury is trading where it is. >> meantime city, watching it closer, thought it might be petering out. >> holding by 1.25%. look at new lows, rim, research in mowings, 8.5% on that stock.

hewlett-packard, got clobbered after lexmark warned on its printing business, printing an important line of business for hewlett-packard. that's feeling impact. general electric on the morgan stanley downgrade that's one to watch and down 1.25. >> we'll have jeff harte on to talk about city, also in the b block. we'll talk to the man who wrote the siri review in the "times" today. meantime what's coming up tonight on fast. >> ceo of zil okay, what he's seeing on the front lines. also making a move on procter & gamble. one says he's a a negative effect. what does this mean during the week purchase i love the piece in the journal about how no company is too big for an activist whether pelts and

ingersoll or bill and p and g. >> we went down this with hg but p & g is the largest. it's an interesting strategy mr. ackman has embraced. you point out his activist campaign and them versus his investments sometimes the two are not the same. jcpenney has not gone well so far. target did not go particularly well. mcdonald's, the end of the year he failed on the campaign but stock went up. gcp, general growth, incredible move there that he made. we'll see where this goes. p & g the fact they hire pr firms, they are always going to do that, some disenchantment, break the glass, whether it comes down on the ceo is the question. unclear whether he has anyone to replace him within the company. >> tonight see you. finally do the european close for the first time in a couple

week in half an hour's time. meanwhile if you're tuning in, here is what you might have missed early on this morning. >> announcer: welcome to hour three of "squawk on the street." here is what's happening so far. >> i think the importance of keeping employment up and the economy growing is going to be the important thing, not inflation. >> i believe that we can achieve a grand bargain that will deal with the demographics, provide a secure safety net and adequate defense spending for less than 24 to 25% of gdp. >> reporting $0.95 a share and that is versus expectations of $0.86. >> i don't want bank of america to be the jcpenney of banking meaning everybody did well -- that's what i needed to. if the market does well, we can say there's two economies, data out of washington and the data we got out of that.

there's fear something good could happen. the fear that something good could happen tends to translate by 11:00 today into buying as opposed to selling. >> the opening bell and a look at the s&p 500. >> capital markets have been weak this past quarter. there's net interest market compression but they are finally going to get help from the mortgage business which is picking up. you saw that in wells fargo. trends continue to be better. mixed bag for the financials. >> even the banks themselves. there is agreement among traders in various banks who stand up and say we have to clean this up. good monday morning, welcome to the third hour of "squawk on the street." let's get a check of the markets on monday. dow negative to the tune of 60 points or so. interestingly last seven mondays have been negative for the dow and six of the seven times managed to have a rebound on the following tuesday.

see what this brings us. meantime s&p 500 down three points to 1353, dow down. retailers fell for a third straight month in june thanks to slowing demand jcp, abercrombie, american eagle trading lower as a result. facebook down 4% as well, down for the first time below 30 since mid june. time for the road map, citi beating expectations, sort through the numbers, looking ahead to the big banks this week with one of the street's top analysts. apple's siri panned in the "new york times" while google gets glowing reviews. check in with the man who wrote that review. former s.e.c. chairman harvey pitt waist in on jpmorgan's multi-million dollar trading blunder. what it means as a whole. we've heard about the fiscal cliff, what about the mansion cliff. why high-end real estate could be one of the industry's most affected by a lack of compromise in washington. all that and more is coming up

in the next hour. start with citi trading higher after second quarter estimates beat estimates, joining us on cnbc news line. price target of $49. jeff, good morning. always good to talk to you. >> good morning. nice morning. busy morning. >> for you, yes. so the cfo says they are satisfied with the quarter. are you? >> yeah. i think it's what we realistically could have hoped for. there's always a lot of noise and tough things to analyze for citi especially with the large international franchise. we keep seeing credit quality get better, which is important for citi group. trading revenues were okay. equity trading quite as good. expenses they took quite a bit larger litigation and kind of

restructuring charges i thought but the overall expense number still came in below my expectations. so i think it's still a very good story, it's just kind of taking longer time to really develop as far as into the share price, i would hope. most of the trends i want to see are continuing to be positive. >> loan growth, you allude to it. strip out some of the citi holding numbers, it's happening faster than i think. people are giving the economy credit for. would you agree? >> in general. granted we're only two or three large banks into earnings season. but a lot of the commentary out of management team sounds a lot better than economic numbers we're seeing. if some of that shows up into better loan growth than i think we're expecting, that would be interesting to see how that plays out over earnings. in theory the banks have fingers on the pulse of the economy probably more than the somewhat backward looking economic numbers. specifically from citi today,

you know, they are talking on the conference call about feeling better and better how things are going in the emerging market not worse and worse. i think they were a little more conservative with their outlook before. sounds like for citi group things are moving the right way in the emerging markets as opposed to on the verge of falling off like i think some people are concerned of. >> right. jpmorgan and wells on friday. citi today, we've got to get through goldman, morgan stanley, bbt during the rest of the week. have these three big guys set the tone or have they set the bar so high others will have a problem keeping up? >> you know, i don't think they have really set the bar too high. i think what we're seeing is some of the capital market stuff wasn't as bad as we feared, which is a plus. i don't think they are going to be unique in what they are seeing in the credit markets. we knew net interest margin and pressures like that would be coming. i suppose the one thing that will differentiate the money banks from standard regional

banks, they are the big mortgage originators right now. we're still seeing a lot of volume, very strong margins in the mortgage business. so there are some things that will repeat. i think the main issue, they should be relatively good earnings season for the banks. i say relative to expectations. a lot of these stocks are really beaten down, expectations are pretty low. >> finally, jeff, panda talking to the telegraph in the uk suggesting they may ask regulators to let them hike the dividend. anything would be a hike, basically. is that likely? if you were a regulator, would you let them do it? >> if i was a regulator, looking at what i look at on citi group, i would have approved a capital plan. looks to me like they have a ton of capital. especially after the surprise of getting out of jpmorgan who did very well on the stress test, i think the fed will be awfully careful about who they let or if

they let anyone return excess capital. from a citi group perspective, i'm not expecting them to request much in the near term. when they apply for next year's c card test, expect them to be conservative. they will be looking to raise the dividend as well as buying back stock at 2013. unfortunately probably 2013 out of 2012 story. >> we hear that a lot. it's a 2012 story. >> doesn't become a 2014 story. i don't think it will. that's one of the concerns out there, keep moving things out. >> jeff, have a graeat day. talk to you later. jeff harte. gary comiskey may have spotted a hidden gem. how nice to have this time with you. >> great to see you. just missed the judge over here busting my chops, chatting with summer interns. >> chatting with summer interns. >> i was giving the speech to the summer interns about how to be successful in business.

vic from panda says stock is a compelling value. surprise surprise. great to see you. great to be back. truly missed you. the ipo market as you know since facebook has been -- let's be kind and call it a disaster. really, it's been nonexistent. the truth is when i thought about it over the weekend call, great history in terms of investing, buying ipos, the few we bought when nobody talked about them, wasn't specials related to them on tv. basically nobody cared. with that in mind there's an ipo priced later this week, goldman saks, barclays and jeffries. under five star, i don't know if you've been there. next-door neighbor jessica bought this nice pink floyd glass she tells me at the store. why do i bring this to your attention? again, nobody talking about ipos right now. i always found using that peter lynch methodology in terms of

investing, you try sometimes, especially in a deal like this, invest in what you know. i don't know. i spoke with major suppliers over the weekend who tells me the business is doing fantastic, much like the dollar stores. this is the kind of place you go, think you'll spend five below but spend 30 or $40. tremendous growth, tremendous reordering. great inventory management. not a lot of talk about it. something you may want to take a look at and consider if you're an investor in ipos later this week. later, before we do go back. i mention peter lynch, obviously a legend, i wanted to mention barton biggs, who passed earlier. he was one of the original cnbc guys. when i first came out here almost 20 years ago barton was another guy had was one of the originals. what was great about barton, i know you know because you interviewed him so many times. >> yes. >> i learned the skill, now that i'm on this side, that side, if

an anchor asked him a question, instead of a different direction he would look at the camera and say, that is not what i said. he always had that attitude, i'm going to say what i'm going to say but don't put words in my mouth. something a lot of people talked about. he had a very strong opinion, not always right but right more than young. in the investing business you hit 600 you're in the hall of fame. that's why he's in the investment hall of fame. >> to put his legacy in context, gorman in the memo talks bow pioneering investment thesis which in the '70s was not a clear thing. >> absolutely. msf, morgan stanley emerging market closed. i think i'm going to date myself on the spot. mid 1990s when that fund was the only way to invest in the market, all biggs, his philosophy, he cretted that asset class. >> we'll miss him. as we said earlier this morning,

our thoughts go out to his family. we'll chat with you in a moment. good to have you back. >> good to see you. >> rick santelli with the santelli exchange. he promised outrage, see if he delivers. >> remember, outrage isn't about decibels, in this instance it's about facts. mull it over in your brain. you know, in the spring of 2008, there was a lot of e-mails that have now become at least for the most part a lot of it is blanked out but open for public consumption. they have been on pretty much every financial website, cluster stock, economist, forbes, i'm sure on ours, as to some of the information that was coming out as late as friday 13th regarding e-mails from the federal reserve, some from tim geithner, some from the bank of england with the notion that central bankers had a pretty darn good idea there were issues regarding libor.

let's think about this from a different vantage point. let's think about this as taxpayers. let's think about the government and lack of due diligence. so when we had that vote in october for t.a.r.p., where congress was basically giving a green light to a program ill fated, ill designed, hurry up, catch up -- hurry up, less spend three quarters of a trillion dollars, how much due diligence did they do for our role as taxpayers in basically bailing out the banking system. obviously zero. here you have regulators like federal reserve bank of new york highly aware there were issues. did they put stipulations in that from this point forward this behavior has to be modified as part of the conditions for those checks? no, they didn't. did they come up with some type of indemnifiation clause. highly question. leave this liability permanently embedded as a time bomb to go off four and five years later. shame oun.

where is the press with the outrage. i love my sunday shows. what did i learn. things like jet skis are un-american. oh, yeah that's what i learned. things like outsourcing un-american. like hell it's un-american. what's un-american is we now have federal reserve bank of new york and treasury taking heightened importance in regulating us in the future through dodd/frank. shame on their legislation. they were aware of this, did nothing. they paired off merrill lynch, decided whether lehman could live and they knew all the facts and we're not more upset about it. i don't know what that says about who, what, where, when. all i know is it's wrong and they need to do something about it. back to you. >> rick santelli, i think that's what you promised. thanks very much, rick, send it for the market flash, dow down 47. hey, brian. >> not a lot of talk about air cap, an aircraft leasing company. last week the stock rose,

reporting flight global the company may have hired advisers seeking strategic alternatives. the company said back in may it was looking to do that or thinking about doing it. today the company said we have not hired anybody, there's no direct talks with anybody. wells fargo is out defending the company today. air cap, big aircraft leasing. they keep your fleet, carl, i know how it is. >> i try. i've got to get around somehow. brian sullivan back at hq. siri getting two thumb's down from "new york times" which says google voice search, the superior voice command system. is apple falling behind in the phone wars? we'll talk to the reporter who wrote that review for the "times" after the break. we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more.

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we've been talking about "new york times" breaking up because of sir issuing, quote, major communications issue. joining us on cnbc, nick builton, lead reader of the technology blog. nick, good to have you. a great and entertaining read. i wonder what gave you the idea to do it. sounds like the frustration you have with siri has built up over a reasonable period of time. >> yeah, when i first saw siri demonstrated at the apple conference, i thought it was amazing. the technology looked fantastic. it was essentially love at first sound, if you will.

over time it hasn't worked the way it's been advertised. there are a lot of consumers frustrated with it, too. >> obviously it's rare for us to talk so much about a misstep from this company. >> yeah. >> do you think it's a mistake to release it soon, a company still in beta, would you have done that? >> apple understands what their competitors are doing. they know google working on it. they bought sri, the company that made siri, with the anticipation of using it in the phone and so on. they really kind of wanted to get it out there and get it into user's hands. one of the big problems is not necessarily the way it understands things but when it doesn't work. people would be okay if it sometimes got things wrong. most of the time what i see, ask a question and it takes 10, 15 seconds for a response. >> yeah. as for myself, i don't think -- i might have used it a few times in the early days and sort of

saw what you're seeing now and really just typed things at this point. interestingly you site gene munster the analyst who did tests on siri, in a quiet room not on a crowded street she could only answer the question a third of the time. >> a number of studies done, a survey which was interesting from a research analyst group, one of the things they found, 10% of apple customers unsatisfied with it. those people gave it 5, 6, 7 out of a 7 rating. you are seeing a lot of people that are now looking at this new google product, google voice search, which is actually quicker and often more accurate. >> you have glowing words for google voice search. what is different about it other than it works better? >> well, what they have done is they have really incorporated into the google search experience. one of the examples i site

ironically in the column when i asked google voice search tim cook, a results page with picture of him, ceo of apple, ask siri, it responds after 10 seconds and says i don't see tim cook in your address book. so you can see they are actually creating this experience that is built around search. now, apple eventually wants to get there. some of the new releases we're expected to see, ios 6 in september, incorporate some new search figures. right now one of the biggest problems is not the features but the fact the service just doesn't work properly. >> are you convinced that long-term the refining of this kind of product is going to get better? are we still in the early innings? >> definitely still in the early innings. google if you look -- sorry, apple, if you look at what they have been doing with the phone, they are definitely trying to eliminate google as a partner on the device. the next version of the software

will have a maps section, not google maps. all these things where they are essentially trying to create their own ecosystem that doesn't include google. one thing will be search. siri will be the answer to that. if apple wants to go head to head with google in this space they need to get it right. >> nick, great to talk to you. anyone who hasn't read the review should go to the "times" website and take a look. we'll talk to you later. thanks so much. >> thank you. >> nick builton of the "new york times." don't forget to tweet us. we're asking what do you think siri would say about nick's review. our handle at squawk@cnbc.com. back after a break.

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coca-cola, johnson & johnson. now to rick santelli chatting retail sales and gdp with ira harris. >> ira is back from vacation,

the world is a safe place to invest. retail sales wasn't very good, whether you look at seasonally adjusted which i reesed at 8:30 eastern or nonseasonally adjusted. if you look at the 27th, a week from friday, whe we get our first glimpse of second quarter gdp. estimates around 1.5%. not anymore. most are doing a beeline within firms or business groups to knock it back under 1%. thoughts? >> the economy cannot get traction. we saw it in fmoc. they are starting to get concerned. the textbooks say we ought to be getting traction but austrian stream seems to be holding it's weight. feds are starting to get nervous. seeking out as fmoc said, other tools. they don't tell us what the tools are. >> charles evans going to have a bigger hammer of accommodation. >> i don't know, rick.

>> ecb did something we haven't done. french wo years under 10 basis points, under 8 basis points. we see our two-year doing a beeline, trading 22 basis points. to me that's the market telling me that they think the federal reserve is going to quit paying money for deposits, paying the rate for deposits. >> i think that's what they are hoping for, to see if it will do something. as we saw ecb removed interest and excess reserves. what's happened, the money just moved into things like french two-years. >> some french two-years but dutch are negative. >> swiss out to five years. >> swiss are very negative. money is seeking a safe haven, not having the intended effect that the central bank wanted. i think people are starting to get concerned about that worldwide. >> looks to me like i see cnbc is going to be hitting this topic throughout the rest of the day. many research groups well below to 6.7.

do you think gdp will be that weak? >> coming down harry reid and quick. talk about one two, one four. probably looking at 1%. >> real quick, real quick. he's worried about corn. sore we. different vantage point, we're out of time. real quick. >> i worry about the grain market here only as its global effect. china needs a lot of grain. they have already bought everything from south america because the south american was dwindling, they made sure they had these as brazilian real depreciated. >> watch corn prices could get even more parabolic. carl, back to you. >> rick, before we go, a buddy of ours has a bet whether french yields will go negative. will they? >> i think they will for sure and it's scary. remember, if you have a big puddle of water and pull the plug from the middle it recedes from the edges. to think you're seeing flight to safety in a country that has a a

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as we watch falling yields in the states, same thing happening in europe where the close is 20 seconds away. >> if you look at the headline figures coming out of europe with the close on the equity markets not so dramatic with the exception of spain.

bear in mind today netherlands selling three-month paper that slipped further into negative territory. there's a huge amount of nervousness around on both sides of the atlantic. you see that again clearly, more clearly on fixed income. here we go. >> the european markets are closing now. >> so a lot of europe is trading around the flat line today. this is a huge week for spain. make no mistake, on friday, the rest of europe is expected to sign off on its $100 billion bailout for the banks. on thursday they have to get that or merkel has to get that through a vote in the german parliament. she probably will. she won't do it with the majority, just absolute majority. in the midst of that interesting to see if you see session charts today, holondon, frankfurt and madrid, stocks took a pummeling during the course of the session unusually, face downward pressure when the rest of europe wasn't bad. a lot of the banks are down, barclays in negative territory,

spain notable for losses there. let me show you some of the big spanish stocks at the bottom of that bank here. the big oil giant, tea holdout r firemen, nurses, austerity protesting, the imf this morning said spain will not meet its deficit targets this year or next, not counting in that 65 million. importantly ecb said it's willing to see senior bond holders take losses when banks not systemically important fail. that has been blocked by the finance ministers. that won't be for spanish bailout. but nonetheless it is something that will make the markets relatively nervous. also let me take you from madrid now to london and show you live testimony from the former coo of

barclays. he has been basically recapping the position in which barclays found himself or found himself saying bob dimon, former ceo told him in 2008, the bank of england, the regulator was putting pressure on bank to get libor rates down. this man here says coo relayed that conversation with dimon to the head of the money market desk. after relaying that conversation he expected the money markets desk to lower their libor submissions. he was asked directly by those members of parliament is that not an illegal act to manipulate. he essentially fudged the question and said, it was 2008, carl. there was a lot of stuff going on. it was the regulator that was on the phone. it was the uk regulator saying lower your rate. is that illegal if you lower your rates? let's bear in mind they have taken the half billion dollar charge so we know they are missing wrongdoing. >> fascinating stuff on that

front. thank you so much, simon hobbs. meantime at home procter & gamble seeking advisers to manage investors as pressure mounts for management change, asset sales. who that investor could be and what changes we could see from p & g. >> that is bill ackman. a $2 billion stake sounds like a lot but with a market cab it's a small percentage. huge move for ackman he's had bigger stakes, target but never targeted -- sorry for the pun -- of this particular size. why go after them? due to management portfolio, unlocking value. compare the one year of p & g to rivals, kimberly-clark, pg flat,

colgate palmolive. the biggest issues around p & g emerging market exposure. couple years ago this seemed like a good idea. now markets are slowing and stronger dollar further hurting business. then there's the issue of pricing. proctor raised prices in the last year and competitors did not follow suit. the company lost share. now overarching all of this, cost-cutting. most analysts think the $10 billion plant over the winter was late to the game. all of this sparking reports of intensified pressure on ceo robert mcdonald both from the board and perhaps more indirectly from ackman's presence. according to reports there are two business units that either need to ramp up innovation or possibly get sold. dura celibate rice could fetch a million dollars, although we have no idea who the buyer would be, pet food, $4 billion. one reference point might be irene rosenfeld of kraft. pressure ongoing her to do

something more out of the media than this ackman news and the result was a split of the company. wall street cheered that move. it's outperformed the dow in the last year since the announcement made late last summer. it's a we shall see with p & g, an array of brands, out of the food business but clearly ackman sees value and wants to unlock it. >> frustration over p & g manifesting itself. thank you so much. want to get to you. >> it was shocking. gasoline prices coming down all throughout the summer. i'm thinking this it great. great, great. people have more money in their pockets. translate, go out and spend more. wrong. i don't know what happened, it's not supposed to happen. retail sales, normally i don't go through this in this kind of

magnitude. traders were shocked. here is the good news. gasoline down, prices are down. that's what you want to see. you want to get those numbers down here. you have this money go spend it somewhere else. wrong, where is it? general merchandise, electronics, building materials. everything is down. prior month's numbers were revised down, people were gobsmacked. now the concern is we're going to have revisions in gdp. i know this was referenced before. i've seen numbers this morning. 1% second quarter gdp 1.1, even below that. numbers all over. revisions this afternoon. preliminary numbers are not very good. let's be a little more optimistic, a slow ipo market, gary mentioned a couple, five below. several out very, very hot that could finally get things going a little bit here. this is the hot one, palo alto networks. this is firewall products. any kind of security is a really hot product right now. they are going to price thursday

night. small deal, not that big, could potentially be successful. very, very hot, a lot of buzz, nyc on friday. a couple of other ones out there. you know kayak, right? remember all these travel websites. they are pricing thursday night. co-founded by expedia, travelocity, all founded this thing together here. that's going to be coming out. fender going to be coming out, guitar company. fndr, a nasdaq deal. thursday night. 10.7 million, 13 to 15. both of these are very, very small deals. so you're not going to see a big move. they are both very, very we will known names. keep an eye on that. we'll have a report on friday morning. how about the ipo markets so far this year. everybody said it's a lousy market, everything slow. if you compare the numbers not that bad. i want to thank my friends for it. 74 deals in '022012, $28 billion, 2012, 78 and 25.

looks pretty similar. here is the problem. remember facebook? facebook is $16 billion of the $28 billion. okay? in a normal year, yeah, as good as last year but a giant behemoth on the ipo market. bottom line is it's been modest ex-facebook. >> everything is ex-something. thanks, bob. gary comiskey with the latest on the facebook fallout. >> carl, i'm bringing you into this. you were out last week, this all broke last week. a number of disagreements, i won't call them arguments but disagreements among colleagues in terms of regulators, cftc. i must say e-mails were explosive on friday. i want to get back to a number of things here. can you give the cftc as much money as you want to. you can triple, quadruple, quintuple their budget.

it won't make a difference. you need to have people in these roles who understand the businesses. that being said, a great suggestion came my way friday by a member firm, managing partner of a member firm and said point blank we reached out to cftc, post madoff, post mf. we suggested a peer review system, a system whereby the member firms have to have their people one week a year do community service and go out and do a peer review of the various different firms. i can guarantee you, as i pointed out to the viewers last week. if i had the opportunity to go into these firms, knowing what we know after the fact and i having been in the business, if i went out and saw what was happening in these businesses, would i have known there was fraud? i couldn't say for sure. would i know something was up? absolutely know something was up. you can't put people regardless of whether they went to law school in regulatory roles if

they never worked in the business. it's a waste of time and taxpayer money. still heard back. we know bart chilton comes on when he wentz, gary gensler, if you can come and tell me you were not contacted by member firms suggesting a peer review system, then come on air and tell the viewers that you said that that's not factual. if that's the case, why not? i guarantee you this is a way to solve the great bulk of these problems. if we don't do something like this these frauds will continue. i can guarantee that. >> what was santelli's take on all this? >> i don't know. rick and i did not have an opportunity on air to discuss it together. he knows as i know unlike some people that have opinions about these things but have never worked in the business, rick worked in the business, i worked in the business, when you know that a peer is coming out to see you, you can't hide the kind of

nonsense you can hide with a regulator. right, rick, or am i crazy? >> no, you're right. it's even worse. i'll go back to the '80s. in the '80s i had significant roles in various firms interaction in a high order with compliance in a couple of things. nfa auditors never had a good reputation. those are auditors of peregrine financial groups nonclearing fcm. don't hear many good things said about that group of auditors even though they charge a lot of fees. the other thing, gary, is i like what cme said. they said over the weekend, the current situation where customer funds held at the firm level must be re-evaluated. i couldn't agree more. this isn't about regulators. tim geithner as we now know was well aware of issues regarding libor. he's a regulator. he did nothing about it. mr. gensler, a lot of issues, red flags about a lot of things, i don't see they did anything about it. you can put as many suits at these firms, it's not money.

it's qualification and intensity. they have no can do, will do attitude to find fraud. >> i guarantee call a peer review system will knock out most of these things. madoff, if there were peer reviews, madoff would have been uncovered, can guarantee that. >> guys, thanks a lot for that important. an important story as sad as it is. we'll talk to you guys in a little bit. when we come back, former chairman harvey pitt regardless jpmorgan's multi-million dollar trading number a few to look around on. "squawk on the street" back in a moment. . this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs.

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the halftime report panera up 173% in the last years. one analyst says time to sell. we'll find out why. pemco makes his case for why there's about to be a huge rally in bonds. it may be summer but toy companies are thinking christmas. why you should buy one of those toymakers right now. >> thank you, scott. losses from a trading blunder, now exceed $5 billion. company announcing on friday restating its first quarter results as federal investigators look into whether traders may have concealed losses. what's next for jpmorgan and could there be criminal charges. harvey pitt s.e.c. chairman with colorado partners joins us from washington today. harvey, good to see you today. good morning. >> good to be with you. good morning. >> you say your thoughts about jpmorgan are not very pleasant

in your words. what do you mean by that? >> well, i think they have not handled this with their usual aplomb and dexterity. first when the problem arose it was dismissed as a tempest in a teapot. seems to be more like ring around the collar, a problem that simply won't go away. it keeps getting bigger and the problems keep developing and emerging. so i think this has been not its finest hour in handling this problem. >> does it seem to you like the bank in the early days here shrugged its shoulders at a potential misstep or the notion they were fed bad information from their desk ab solve them. >> i think the important thing when under the circumstances a problem of this nature and don't know what it's dimensions are, start out by saying we take all

problems seriously. we're going to look at it very closely and we're going to fix it. we're going to correct it. i don't think you simply dismiss it and suddenly find now that you have to fire people that you've had to restate earnings, which is an admission of wrong accounting and face ongoing probes by a number of agencies. i think this has not been handled the right way. >> you say it threatens to become worse. what potentially makes it worse? >> i think the thing that makes it worse is we're now up at approximately $5 billion with a potential for another $2 billion in losses. in addition when this broke, jpmorgan lost about $25 billion or $30 billion in market capitalization. that's a loss for shareholders as well. all of that reflects badly on the way the problem was both

brought to light and then dealt with initially. >> and then on the libor side of the ledger here because we're all trying to get our hands around the enormity of that problem, you look at the geithner memo last week, we've had people on our air saying for years it was a squirrely number, very susceptible to manipulation. did you have suspicions about it during your time at the s.e.c.? >> i didn't have suspicions about it. indeed, i think most people in the industry and most regulators thought that the libor number was based on real fact not on manipulation or collusive behavior. this is unfortunately very shocking kind of information and the fact that geithner apparently knew about this and yawned about it is, in my view, devastating for the way the federal reserve bank in new york

took action with respect to these kinds of problems. >> what kind of odds would you put on criminal charges building asbestos. >> high. the justice department said they are investigating. there are clearly people under the microscope right now. i think the conduct, if it -- pe rna cious prchlt when you think you have it figured out, another wave. appreciate your insight today. >> my pleasure. >> harvey pitt in washington. when we come back, fear of the fiscal cliff putting homeowners on the edge. lodown in mansion cliff and its impact on luxury housing when "squawk on the street" comes back. so anyway, i've been to a lot of places. you know, i've helped a lot of people save a lot of money.

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fiscal cliff, a raft of fax increases if congress doesn't take effect to divert them. wealthy scrambling to put their mega homes on the market to avoid increased capital gains

risk fiscal cliff could bring. more on the mansion cliff. i love that, robert. what's at stake for the luxury home market. good morning. >> good morning, carl. thank you. there are growing fears the high-end housing market facing its own fiscal cliff, i call it the mansion cliff. brokers tell me they are getting floods of calls from high-end people wanting to sell homes quickly before taxes go up next year. let's do the math. if bush tax cuts expire, capital gains 15 to 20%, 28% obama care tax on top of that. that may not sound like much. but let's take a look at this mansion that sold in miami recently for $38 million. the 2012 tax right now was $4 medical on this home. next year if this guy had sold the tax would have been $6 million. that's a savings of $2 million. enough to buy a whole other mansion. now, the reason we should care about this is if the rich are dumping homes on the market,

inventories could rise, prices could fall, and that could snuff out a recovery in the high-end of the housing market. this very thing happened in 2010 when we had a similar tax year. inventories went way up and prices came down and the entire recovery on the high end stalled. so people are worried that the mansion cliff could be a huge overhang on the broader market this summer. >> i wonder, robert, if it's already putting some downward pressure on the initial ask as some of these homes get listed. >> absolutely. a lot of brokers say basically sellers are willing to take lower prices just to get this done this year. now, there are a lot of wealthy people still buying homes as good investments. i think you're right, this is downward pressure on prices and possibly upward pressure on inventories. >> when they say fiscal cliff is already a drag, it's no clearer than in that one example. robert frank at hq. thanks so much. keep those tweets coming

"the new york times" say there are major communication issues. what would siri say about her bad review in the "new york times"? our twitter handl handle@squawk@cnbc.com. at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade. ♪ i want to go ♪ i 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. dow is proud to support that dream

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want to get to "squawk on the street." "new york times" laying into siri in a review saying she frequently misunderstoods what we're saying, unavailable, responds with the same repetitive statement. we're asking what would siri say about her bad review in "the new york times." loan watchman says siri would say, sorry, i don't know what you said. i feel your pain, my voice sounds nice, says nothing useful like a magic eight ball. sam writes that's what happens when i live in a closed garden. touche for apple critics out there. let's get rick santelli takeaway monday morning. i know you're watching the euro, barons, get that euro closer to parity with the dollar. >> i know it sounds so logical. in the teetertotter world of dollar versus euro, i think these two punch drunk currencies

are going to go back and forth like today. weak euro sales, dollars falls, euro flies for no reason. things didn't get better in europe. seven basis points on french ontwo-year ecb removed a rate on excessive reserves. our two-year 22 basis points, our traders jumping to the same conclusion. follow the leader. maybe the fed will do the same thing as european bank on historic fives and tens. >> photos we have to see. >> ten-year, despite the equity markets, technical in nature we pointed out to people midday thursday. 1% on ten-year my target where it's going. peer review called. we got a lot of e-mails. one that rang true to me, they used to be a thing in the business called your word was your bond of that's not there anymore. then take a look at this photo. i