hi, everybody. i'm sue herrera. simon hobbs, tyler matteson. waiting for a live, exclusive interview with henry cravis. we're at the highs of the market, simon. >> we are, sue. this is quite a significant rally. we were in negative territory at the beginning of the session. gone up triple digits on the dow and 1374 on the s&p. that is the july high. if we can hold this, this could

add further to a rally taken us up 7% from the beginning of june, sue. more than through the show. >> the dow up. now to tyler in midtown manhattan with more on when's happening at the cnbc and institutional institutions delivering alpha conference. great ideas last hour, ty. >> yes, indeed, sue. i was just getting the instructions right there. and i would say that a couple of things that really stood out when we heard jim chanos talk about hewlett-packard, if you tracked the chart of that stock, when he started speaking, and saying that sometimes in tech value stays value for a reason, meaning the price goes down, the price went down by about 50 cents a share on hewlett-packard right then and there. one of the other panelists talked about maybe an erosion of the british pound. a way to short the british pound

as money flees the british pound in the years coming up. short platinum. some very interesting ideas across the board. rob, whom you know, sue, from blackrock, talked about investing in income. he was asked whether the income trade was really too crowded right now an he said, no, not really. given the amount of cash that's on the sidelines, he said that in his words they were getting ready at blackrock to declare a war on cash and lever, move people out of that low-paying asse asset and back in to equities like at&t he said, like verizon, like merck. earlier in the morning, of course, we heard from the secretary of the treasury. let's listen to one of the many things he said today. >> slower mostly because of the trauma from europe. the aftereffects of the rise in oil prices earlier this year and because government spending at all levels of the government is actually falling now quite

significantly and those three things are pretty significant drag on the recovery. but i think if you listen to most business economists or people in the markets now i would say most people think that the economy is growing. still gradually getting stronger. >> those three things that secretary geithner talked about, they'll do it to you every time trying to run a $14 trillion, $15 trillion economy. as you mentioned, sue, a very rare interview, andrew ross sorkin sitting down with henry kravis of kkr. he does not do these kinds of events very often and certainly doesn't appear on television more than once every halle's comet time. we bring you highlights of the remarks in time. an interesting day here. >> it's been and i'll be fast

tated to hear what he has to say. i know it will be fascinating with europe and china coming up in a few minutes here on "power lunch." for more coverage of delivering alpha, go to deliveringalpha.cnbc.com. we give you snapshots here and there but dot-com has more for you. as i mentioned, coming up, live and exclusive interview of henry kravis. the state of the economy is a big discussion and what's to blame is a focus as fed chairman ben bernanke returned to capitol hill. again, the fed chief warned of the upcoming fiscal cliff, but pushed back on the notion of no progress when it comes to jobs. >> i don't think it's the case of no progress. we had in the last quarter of '08 and '09 an almost collapse of the economy, a tremendous increase in unemployment. the unemployment rate went about 10%.

now it's true that, you know, the recovery has been slower than we would have liked but clearly we have made progress in unemployment and job creation. >> chairman bernanke also said raising interest rates prematurely would not give people higher returns on savings. he also said banks should be held accountable for the role if any in the libor interest rate fixing scandal. simon? >> it's a big day for tech on the rally and industrials after honeywell reported and investors working through bank of america's numbers that came out this morning. the stock currently down about 2%. kayla has more on that particular bank. kayla? >> bank of america turned a profit in the second quarter and surl passed a key qual goal it set but shareholders aren't convinced they can keep making money in the low interest rates. the rate of borrowing and lending shrinks profits and

tried to hedge against the issue and the trade lost $200 million and overall net interest margins fell 12% from q1 to q2 and while bruce thompson shade it shouldn't hit it so hard, brian ho moynihan played defense. he's talking about weapons of cost cuts. slashing $5 billion in expenses by 2013 and additional $3 billion by 2015. another lingering wall street worry is mortgages. the firm fighting fannie mae on putbacks saying only a percentage is bad loans and executives acknowledge publicly for the first time the subject of inquiries of regulators over its libor involvement and ongoing trend for the banks although one example has already been made. simon? >> thank you very much for that, kayla. sue?

on capitol hill, you know, the fed chief mentioned he thought housing was getting better. well, the new numbers on housing were out today and home starts did pick up a bit in june. diana olick is live in washington. hi, diana. >> reporter: that's right. the surge in single and multifamily starts and permits exceeded completed projects so more jobs coming for construction workers. that said, single family housing starts in june 539,000, seasonally adjusted annual rate, a two-year high up 4.7% from may and up near ly 22% from a year ago. they are still however 62% below the peak in july of 2006 and remember starts historically average around 1.5 million annually. multifamily was up 17% in june, month to month and up 29% from a year ago. that responding, of course, to a continued hot rental market. the northeast saw the biggest gains in single family starts but it represents a smallest share of the market. the south saw the smaller gains.

to keep it in perspective, new homes less than 10% of the housing market and some analysts are warning these gains could moderate in the second half of the year as broader economic weakness weighs on demand. simon? >> okay. thank you very much. we should mention that shares of vivus popping today, approving the company's obesity drug. seema mody has more on that. >> that's right. over 13 years went by without any weight loss drug approved and just in the last month two have won the fda's backing. the big question on the street, is there room for two weight loss pills on the market? anti-obesity space is large enough for multiple lines of therapy. according to the cdc, over 33% of adult americans are obese. moving on, so which drug moves in the higher sales? that's another question on the street. cowan is betting on vivus gip

the ef that sy and others say arena's partnership with a larger firm for a chance of success. the u.s. launch will be watched very closely by the street. many think it's difficult for the mid cap bio tech to pull off without a larger firm. trade earls could see a book profits around the drug's u.s. debut. now, taking a look at shares of vivus and the questions answered by the company and another factor, of course, at play is reimbursement. typically the treatments are not covered by the government or insurers. on the conference call, they said they're working to gain coverage in a year. back over to you. >> thank you very much. you know, the dow just hit a new high for the trading session, up 106. brian shactman joins us with a market flash. >> yeah. surge in the s&p and not being helped by jcpenney. a fortune conference, the ceo ron johnson said it might get

worse than better and sticking by the pricing strategy and said the board is totally supportive. obviously, investors are not. that downward slope when that hit the wires. back to you. >> thank you. coming up, this may be the interview of the day. one of the biggest names in finance ever. he never does tv interviews but talking with us today. henry kravis is straight ahead. [ male announcer ] the markets keep moving. make sure the news keeps coming with thinkorswim by td ameritrade. use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with in-depth analysis. it's an all-you-can-eat buffet for all things trading. thinkorswim by td ameritrade.

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rally as you can see today. important levels on the s&p and market and indeed for the network as we plug you in to the brightest minds in america for investing at the delivering alpha conference. sue, back to you. >> indeed. one of the brightest minds is coming up, simon. we are moments of andrew ross sorkin's exclusive interview with henry kravis but here's a bit about him. he's a true legend on wall street. who ranks number 86 on the forbes 400 with a net worth of $4 billion. he has led some of the biggest corporate takeovers in history. rjr, nabisco, samsonite. his firm manages businesses generating more than $200 billion annually. and employs 1 million people and $62 billion under management. and together with his economist

wife, he is also one of the most generous and active art collectors and if i lon tas tlos in the world. quite a resume. i would imagine he has a lot to say about the state of the global economy and i would hope, anyway, where he sees continued opportunity because that's what delivering alpha is all about. >> absolutely. it is. and i hope he brings some of that luggage and gives it away. he can afford it owning the company at one time or another. he is an interesting character, as you say, really a legendary pig your on wall street aenl another legendary figure, sue, was here. leon cooperman sharing his best ideas and last year he said buy apple and it's up about 50% since he said that last september. let's take a listen to what he said today about apple computer. >> would you sell apple right here?

>> no, no. i didn't recommend it. i generally don't recommend things going up 50% or 100%. lieic to find things down. i think apple's a su spesh company. several more years of superior growth ahead of them. no debt. sales less than 12 times earnings and realistically the growth will decelerate. >> looking pretty good there. apple down $1.38 on the otherwise positive day of equities. jim chanos sticking with the technology theme. he had some strong words to say of hewlett-packard. let's listen. >> how low can hp go, do you think? what kind of a move are you expecting? >> wait and see. i mean, if they're burning the amount of cash i think they will, it's going to get more and more problematic. you know the big product lines are pcs and printers and some

software services but they're in declining businesses. >> and if we have an intraday of the stock, it is back up to sort of where it was before he started talking about $19.40. but when jim chanos started talking, the stock off about 50 cents hitting an air pocket as he said basically among other things the big software acquisition, a big price for that of about a year ago. $11 billion. has not turned out particularly well. and that that stock had multiple headwinds facing it going forward. sue and simon, will join in here. like you looking forward to seeing -- >> go ahead. >> it was interesting because "fast money" right after the comments of jim has tony on, an influential technology analyst and asked whether he agreed with the call on the stock and tony said, no. not at this point. he said, jim chanos is right on

the call up until now and thinks that meg whitman is able to turn things around a little bit. he thinks that she is executing pretty well. that she is so far true to what she has promised and he thinks it's time to buy the stock and might be why we're seeing that rebound of almost 3% in hp. >> can i just mention, muse tic the ears slightly of so many apple shareholders a ento this market of what cooperman said. if you can get further gains on apple, so important for the market at the moment and accounted for so much of the gains as they are -- had them over 12 months, guys. >> indeed. i think you are right. >> i was thinking as you said there about tony saying that he disagreed with jim chanos. that's the heart of what's going on here. the collision of ideas and one person takes one side of the game, the other person takes the other side of the game. that's how you make a market and it's fascinating as i know both

of you appreciate to be here in this room with so many market players who really are actively involved in that collision of ideas. the sort of intellectual conflict between buy this and sell this. i like this, i don't like this. that's really on display here. >> and to be able to see them, ty. you know, so much of communication is nonverbal. to be able to sit there and actually, you know, get the additional information of watching them make their pitch and of course you can't if you're reading at best research notes which they don't write, of course. >> indeed. very, very true, simon. a quick break. a new daily high in the dow jones industrial average. we are up 107 points right now on the dow jones industrial average and the s&p has a very decent gain, as well. we're back in just a moment with more on "power lunch." ♪

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kind. tiffany a nice pop and saks in red. back to you. >> indeed. thanks very much. headlines in the m and a world. u.s. airways c eo ramping up pressure of a merger before the airline leaves bankruptcy. phil lebeau with the details. hi, phil. >> reporter: hi, sue. doug parker in washington, wrapping up a meeting. u.s. airways over six months, talk about investors piling in to a stock believing it will ultimately be part of a merger. up 127%. the c eo doug parker explaining why bankruptcy is the time to do a merger with an mr. >> the bankruptcy process cannot repair a structural network problem like the one of american airlines today. americans' network weakness and the revenue challenges can only be fixed through a merger and only through a merger with u.s. airways. >> most of what mr. parker said

today is all points outlining for sometime. amr, three of the unions there endorsed a union and amr exploring a merger of several different airlines, including u.s. airways. by the way, it has exclusive reorganization rights with the unions for sometime to come. this takes a while to play out and amr with second quarter financial results and the revenue, an increase of 6.5 billion. that profit excludeing charges of 95 million. when you include the charges, by the way, you're looking at a loss still of about $241 million. passenger yield there you see up 7.1%. don't forget this afternoon, during the closing bell maria will be talking exclusively first on cnbc with doug parker, ceo of u.s. airways becoming very public about the fact that they need to do this merger and do it now while amr is in bankruptcy. >> you know, amr, phil, says

they'll explore merger opportunities with several candidates. who would the other candidates other than u.s. air be? >> jetblue, frontier and a look at alaska air as well as virgin america. >> one you think is a better fit for them than u.s. air? >> no perfect fit. probably the best fit is u.s. airways and american. of the others, they come with issues. you know, we're at that point, sue. not many dance partners left out there for united to merger. >> very good point, phil. thank you. up 108 on the dow jones industrial average. when we come back, this may be the interview of the day. one of the biggest names in finance ever. never does tv interviews but talking to us today. straight ahead. h has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment

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important day for the markets. we have broken higher but not all gung ho. if you look at when's happening with commodities or the dollar there's a risk off environment. to explain what's going on, bob pisani joined us. >> we hit the lows literally at the low and essentially moving up ever since then. call it more belief in qe3 if you want. the s&p 500 broken out to a new

high. all right. the highest level since may 4th. not a multi-year high but 1375. a tad below that. that's the highest levels as i mentioned going back to may 4th f. you want to know when's pushing the market higher since then, well, here it is. this is what we emphasize. utilities and dividend. health care. one thing in common. that's a majority of them big dividend payers. more people forced in to the area. we see it with real estate investment trust. dividend payers also hitting a multi-year high, as well. big debate amongst people interested in home building. good numbers as you heard earlier on housing starts today. that's good news and some people arguing with 2% gdp or below, this year, may be as good as it gets and people arguing to sell the news here. that is very hot topic right now

but you can see the home builders down on a very good day and essentially sitting near three or four-year highs. >> that's the point. a huge rally out of q4. >> orders are great for them. they're capturing the new home pie right now and the main argument to keep buying them. slowdown in the economy later in the year makes it hard to argue for 20% increases in orders at least. >> thank you very much, bob. outperformance actually on the nasdaq. now the details of what's happening there. >> absolutely, simon. tech stocks going strong today. take a look at some of the standout names we are watching. making gains of anywhere from 5% to 7%. intel rebounding, as well. up 4% after it reported profit that beat the streets and cut the outlook and a little concern there yesterday. of course, about that consumer

demand of pcs and investors saying they like what they saw. also, emc, a big move in this name moving forward with the succession plan for the chief executive. also naming one of the top executives at the helm of vm ware. last but not least, yahoo!. not much going on there today after the company reported 4.4% shrink in profit yesterday. and also the new ceo. last but not least, i want to talk about earnings. big day of tech earnings after the bell. they're all much higher before the reports. back over to you. >> great. thank you very much. let's get to the nymex. gold prices closing right now. courtney? >> it is closing right now for gold. looks like closing at $1,571, $4 or so off the low. the markets again paying very close athengs to ben bernanke and different narrative today in the gold pit where yesterday ended mostly unchanged. bernanke did not give anymore

clues as to possible monetary easing. gold selling off. no need for gold as an inflation either. if you look at gold over three months, we traded in about $150 range waiting for more direction on u.s. fiscal policy and something bernanke would like to see. silver selling off. one differencemaker today, copper. a bit heer after the u.s. housing data this morning and still things did tend to end up a little bit. copper up about a percent. back to you. >> thank you very much for that. let's check in with rick in chicago. and see what's catching his eye with now 2 1/2 hours to trade. rick? >> well, you know, i guess a two-day chart of the benchmark ten-year paints the picture. you know, yesterday yields crept up with the stock market after ben bernanke's initial shock with both markets going the other way and today stocks continue up as evident by the second chart and fixed income

markets firm in terms of price hovering well below 150 in terms of yield. what is going on? many traders say well, maybe the fact that ben bernanke's trigger is something bearish on the economy. keeps treasury rates low and recreates hope of programs which seem to influence equity price and another theory is a half dozen nations have now experienced negative interest rates that maybe there's an additional demand to continue to come in to the marketplace of fixed income including our treasuries. last but not least, boy, how many people at the conference like securities outside of treasury? evident by this lqd. no matter which chart you look at. back to you. >> thank you very much, rick. let me tell you we're waiting for an exclusive interview with henry kravis from the delivering alpha conference. stay tuned to cnbc. pass pass t of money.

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. welcome back to "power lunch." brian shactman here. financials the laggards today. capital one dragging that down further. settled with the feds over credit monitoring product that is they have. to the tune of about $210 million. sue, back to you. >> thank you vur much. now to the unfolding crisis in syria. dow jones reporting that president obama and russia vladimir putin have had telephone discussions within the last hour about the situation in syria. and differences remain but it certainly brings to mind the fact that this situation is becoming even more serious and the rebellion is knocking on assad's front door. his defense minister and his brother-in-law were killed in an attack today. there have been reports of fighting in the capital city today, as well. nbc's richard engel just returned from syria. he's one of the few if not the

only journalist to see the fighting from rebels' side. richard, how long do you think assad can hang on given the escalation that we have seen today? >> it's hard to put a timeframe on it but the rebels themselves believe that his days are numbered. for the last couple of months the rebels carved out safe havens in rural areas. now they were able to carry out an attack not just in damascus but plant a bomb in the very room where the top government officials were meetling. initially, there were reports that it was a suicide attack earlier today during a national security meeting. the rebels say it was, in fact, a bomb that was planted in the room with an inside source who planted the bomb, something like operation valkirie and the rebels say if they can do that they can make damascus no longer

safe for bay bashar al assad himself. >> what significance do you attach to the fact that president obama and vladimir putin had phone kofrss? >> it shows the urgency. it show that is there's a real concern or a real realization that it might not last weeks. it might not last months. this could play out very quickly. once you start to see things unraveling, this conflict going on for 16 months now. when it goes in to the final stages, it could be a matter of days. it could be a matter of weeks and you don't know. it's the last few -- the last stage is always the most unpredictable one and the fact that they're talking i think is a sign of how unpredictable it is and how rapidly to escalate if the government leadership starts to collapse. we could see developments happening in days and hours.

>> thank you for joining us today. let's go back to the delivering alpha conference and my partner tyler matteson. ty, there's such a wide variety of issues that this gentleman who never really gives television interviews is able to speak to today. i'm listening closely to what i think will be quite a fascinating conversation. >> yeah, if anybody is a global investor, it would be henry kravis. as you alluded earlier. not only will he be talking about the state of the u.s. economy and where he sees opportunities here, but also, globally. and of course, a lot of the conversation today has been about the eurozone, the future of the euro. i would say sort of two cheers for the eurozone have been sort of expressed here as most of the speakers believe that it will survive and so will the euro. several saying that they thought that greece would be maybe the only country to drop out of the

currency union. and then, mr. kravis will certainly take us on a tour of asia, as well, where he's obviously been a smart observer and investor from time to time over the years. >> yes. i'd be fascinated to see what he says about the deal-making environment. the company has a lot of cash to deploy, certainly, and hearing from big a&m firms to rely on the credit markets to float debt for a deal to be done that that window is starting to get a little bit narrower than it was, say, four or five months ago. so i do hope that he addresses that issue. how easy is it to get deals done if you don't have cash? >> even though interest rates as we found earlier this week when mr. zuckerburg of facebook got the 1% refinancing deal, interest rates are very low, several of the people have talked here and something we have talked about from time to time, how little confidence there really is among investors

right now and that traces back to all of the things we talk about every day here, whether it's europe, the fiscal cliff, the election and unemployment in this country. some of the things that we all talk about every day. and it is basically a frozen an awful lot of investors in place. let's go inside where barry basano who's the u.s. ceo of deutsche banc is ready to introduce andrew ross sorkin and in turn introduce henry travi k >> i may not go as far as richard did this morning, perry, asset management is dead but will say that their role in closing the burgeoning asset liability gaps in the public and corporate pensions is probably going to be limited and certainly relative to the

participation of everyone here in this room. so, we are now going to have a conversation -- >> obviously taking a little while here as the ceremonial functions are getting done, sue. >> yes, but, you know, barry is such an influential banker and i think his comments just a moment ago about long form asset management and the state of that i think is very important because there is such a lack of confidence in some of these markets right now. that to hear him say that it's not dead, that there is still hope for that i think is quite significant. >> but what he's also importantly saying, of course, is that to fill the pension gap they won't play a role. in other words, the big money will increasingly rush in to alternative investments and more quick-running investments -- >> sure, to make the return, yes.

>> and stock market volatility, it means that we carry on with more volatile markets as they switch. >> yes, indeed. andrew ross sorkin is sitting down. >> thank you for being here today. i know you don't do this frequently so we're appreciative of you being here. we'll talk about a lot of things today. the economy, private equity. but i want to start in part because it might be fun to talk about politics and the state of private equity. back in november of 2011, in the midst of the republican campaign, we didn't really know where things stood at the time, you said this. you said, if romney is the nominee, hold on to your seats. they're going to describe us, if he's the nominee as asset strippers, flippers of assets, we just put a lot of debt out there. fire a lot of people and that's how we make money. mitt romney may become the single source of all u.s. unemployment by the time the election happens.

there is no doubt the administration's going to come out after mitt romney and the private equity industry. i imagine you have yet to be disappointed with that. >> so far they're on target. >> they're on target. i'm curious. you're supporting romney from what i understand. are you frustrated, when people talk about the image of private equity, are you frustrated that he has not come out more forcefully to defend the industry and what it does? >> well, look. first of all, i'm not sure he needs to be defending private equity per se. what i think the bigger issue is and where i think the discussion should be is much more on corporate america. because to me that's what it's all about. what private equity does, it buys companies or provides capital to companies to make them better. and in the end, it's not how well they do.

it's really how well the economy does and how well these companies do and there's long record of successes by many private equity firm that is have done a good job of improving companies. so, you know, should he have done a better job or not? look. that's really hard to say. i'm not an adviser to him. i'm not that close to him. but i knew clearly as you have rightly said that because he comes from bain and the private equity world he'll end up getting arrows shot at him. >> when you try to psycho analyze the private equity and how we got to this place and the public conscious there's not a great image around the industry, why has the industry itself, putt romney aside, not done a better job in terms of articulating what you think it does and why it is a positive for the economy? >> look, i can't answer why he

hasn't done a better job. i'm not his spokesperson. >> put him aside and the industry. >> first of all, the industry i think for a long period of time did a very poor job, quite honestly, talking about the virtues of making companies better, providing capital and long-term capital, it is working very well with managements. having an alignment of interest with managers. >> right. >> think back. 19 -- in the '70s and in the '80s, what private equity really did, it changed corporate america. because it started holding companies accountable. it had an alignment of interest and more importantly for the first time managers started thinking like owners. which i think they have to. give you an example. we owned a company in the oil and gas business and called union texas petroleum and in our first meeting that we had the

management comes to the board and they said, we were the board and they came to us and they said, we have this very big and very expensive drilling program and, you know, call it $150 million which in those days was a lot. and we said, you know, this is going to cost you $15 million. they said, what do you mean it costs us $15 million? you own 10% of the company. what do you think happened in they changed the way they did business. they didn't have $150 million drilling program anymore. they cut it down and i'm guarantee you they found more oil and gas with less money because all of a sudden they started thinking like an owner and there was a real alignment of interest. that is not -- that has not been communicated in my view as well as it should have been. that goes on for a long time. >> okay. different question then. >> we'll take a quick break and be back in a moment with private equity and much more of henry kravis.

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welcome back. henry kravis answering a question put to him by andrew roz sorkin whether the trust is

broken between main street and wall street. he says, yes, it has. the worst financial situation since the great depression but still optimistic. let's listen in. >> the financial community has to improve the image. the financial community has to be much more transparent than i think they've been. that's everybody. venture capital, you name it. and it's only then when you start working in partnership and instead of everybody pointing fing earls that's how we get it back on track. >> is it deserved, though? is the blame deserved? you think of the inequality. something that worry you or overstated? >> look. there is an inequality in this country. no doubt about it. there's people suffering and should be earning more money than they are. and then you see -- and it's not just the financial side. it's a lot of corporations where ceos paid enormous amounts of

money through the stock options or through big bonuses, et cetera. and so, we do have to pay attention to it. but -- >> how do you think about it? your business makes a lot of money. more than most traditionally. >> how i think about it is i want to make certain everyone at kkr, that's our business. everyone is a participant. that's how we have it at kkr. thank you for having that because it's surprised people that when we started kkr in 1976, george, robert and i had a vision that it was important for us to share everything we did. and it didn't matter whether you were a partner at the firm or you weren't a partner. everyone was going to participate in all fee income and all carried interest. that included secretaries. that included people in the mailroom, everybody at the firm. fast forward 36 years.

everyone at kkr is an owner. we went public and did it through an interesting approach, by merging our partnership in to kpe, the public vehicle that we had set up and it came with about 5 billion of assets, we said to everyone, every one of you are going to be owners at the firm and i'm sure a lot of them saying, yeah, sure, i'll believe that. it's important to us and the only way in my view you build a firm and a lasting firm. i they lot of people, andrew, quite frankly, surprised when it turned out that george and i didn't own what everybody thought we owned. we didn't own that much for a reason. we didn't own that much because we wanted to make sure that we built a lasting firm. and everybody's an owner. >> as we move off the issue of politics, there's one last elephant in the room when it relates to this and that's the subject of carried interest and i know that you have talked about the need for tax reform more broadly. but on the specific issue of

carried interest, do you believe that it is quote/unquote fair? >> i'll come back to exactly the answer i gave once before and i haven't changed my view. we need to change our tax code. we need to change the tax system and we have to have a system that's very much focused on pro-growth and pro jobs and if we do that, then everything should be up for grabs. that includes carried interest. that includes any other type of taxes. and everything should be open. and have a discussion. you can't pull out and i don't think you should pull out just private equity. and so to my way of thinking, you really have to look at the overall. the biggest beneficiary of carried interest is not private equity or edge funds but the real estate industry. do you think today is the time to start, you know, raising taxes in the real estate industry? i don't. but that's not my point. my point is let's change the tax

code and make it pro growth and pro jobs. >> an earlier panel about pension funds and we have talked about the pension crisis. many of the lps in this room and pension funds and there's a pension crisis that we're all trying to confront. when you think about the situation that we are in and you think about the type of returns that you're hoping to deliver alpha to, in terms of resetting peoples' expectations, i know larry talks about the new normal. what is the new normal in your mind? >> well, the new normal, first of all, is relative to what? you know, if interest rates wept back up and treasuries weren't 1.5 and 10-years up to 5 it's a spread over that in private equity, for example. now, historically, we have been fortunate and for 36 years we had an irr gross of 26%. compounded with 57-year hold.

today, we wouldn't tell anybody to do 26%. i don't think that's -- >> what's a realistic goal today? >> look, a realistic goal is some 700 basis points for private equity in our view of a benchmark. whatever you want. but take the s&p 500. we should be able to year in and year out over a period of time we will get our investors 700 basis points over the 13s&p 500. >> henry kravis talking about the new normal and what you can return to the investors. how to reform the tax code in to a pro growth and pro jobs tax code and also talking about the fact that the trust between wall street and the financial services industry and main street has been broken but it can be repaired. keep in mind that you can get more on delivering alpha on cnbc.com. go to the website. they have continuing coverage all day. we'll take a quick break on

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