pressure at this hour. that has a lot to do with what's happening in europe. european stocks falling sharply. investors growing more concerned that spain may need a full sovereign bailout. coming after a second region in the country indicating it will need government help. local media reporting half a dozen regions are willing to do likewise. spain's finance minister has denied the country needs a full bailout. the markets not buying that at this point. you saw the red arrows. spanish ten year trading at 7.515%. well above the level where people generally think they are is going to need some sort of a bailout. 7% has been that key area. again at this point 7.5%. just above 7.5% for that spanish bailout. greece's prime minister said his country is in a great depression. greece's international leaders are due to arrive in athens.

they are pushing for further cuts. athens wants to soften the terms of 130 billion euro bailout. the u.s. equity futures at this point, take a look. dow futures down by almost 140 points. the u.s. trezy success seen as a safe-haven. we saw that hitting record low yields and more on that in a moment. >> let's get through some of the other news this morning. some big news. u.s. prosecutors and european regulators are reportedly close to making libor arrests. reuters is saying individual traders will be charged with could lewding to manipulate global benchmark interest rates. and rake taking himself out of barclays chairman job. barclays is looking for exalternative jam candidates, shares falling on this news this morning.

in other corporate headlines, nrg energy buying rifle genon. nrg ceo david crane will join us at 7:00 a.m. eastern. you don't want to miss that. and nasdaq plans to pay out $62 million in cash, this is controversial to firms that lost money in facebook's bungled ipo. it modified an earlier plan for market makers and other exchanges. the new plan is $22 million larger. the biggest difference the compensation will be paid in cash rather than trading credits for rebates but as you can imagine there are people saying this is still not enough. >> we have another deal to tell you about. this one just crossing the wires. check out shares of nexen, symbol there is nxy. cnooc is buying the company for

$27.50. it's a 61% premium from the closing price. just looking through to find out some more. the company saying acquisition provides significant long term benefits to canada which are expected to include establishing calgary north and central american headquarters. also they will be managing nrein global operations and intend to retain the employees and raise cnoc limited shares on the toronto stock exchange. >> last time cnooc tried the last time they couldn't get themselves arrested or could by some people in washington who were so scared back in the day. >> i went over to china -- it was a few years ago and i spoke to the ceo of cnooc in china two

years ago and never will i do a deal in the u.s. or a u.s. oil company and he did the next best thing which is our neighbor to the north. >> does this send a message to washington? >> the way this is laid out, this press release all those highlights i took are at the very top of the press release. this is what it does for canada. this was intended to send a message that by the way canada will benefit and the united states you guys missed out on this. >> he was very bitter about that experience. >> this is part of his larger play. they are just on a tear. they need to be on a tear. >> those highlights before they even lay out the rest of the deal. this is at the top of the press release. this is a massive deal because nexen is a $9 billion market cap company. >> wanted the deal to be done and didn't want any push back from the canadians or

shareholders. >> it's hard to imagine you could get push back. though we've seen other things happen in canada. canada is not always friendly to outside investments so quickly either. we'll see where this goes. but wow, $15.1 billion on a monday morning. >> let's get a check on the futures, big story is futures are weaker. at this point those dow futures down by 150 points. what happens with spain and greece? these are drops of better than 1%. dow futures down by over 1 pores. same with s&p. nasdaq down as well. major losses on friday and that wiped out the gains that we had seen built in for the month of august. people will be watching this incredibly closely to see how this plays out. oil prices right now have come back down but this is after major gains last week. at this point down 3% because probably concerns about the global economy and what this means. last week it had been tensions between iran and israel that had been pushing prices so high.

at this point wti trading at $89. ten year note is something to keep an eye on. earlier this morning we did see a record yield, a record low yield. it's pushed through that. 1.408% is the new record low for the u.s. treasury. this is the safe-haven. >> is spanish bond is over 7.5%. 600 basis point spread. you wonder where that stands historically. got to be pretty darn wide. >> let's look at the dollar. >> i'm in the middle of a modification on my mortgage a refi. maybe we locked in too early. >> don't look for financing in spain. >> exactly. >> the dollar we should point out is stronger against the euro. on friday it was a major selloff for the euro. it reached incredibly low levels across the board for just about every where that you were looking. in fact let me pull up just a couple of notes on this. at this point the euro is

trading at 121.08 but the euro on friday settled at a ten year low against the yen. 3.5 year low against the british pound and all time low against the australia dollar, 17 year low against the canada dollar. on and on, ten year low or two year low already against the euro/dollar and pushing lower today, 1.2107. dollar versus yen is at 78.05. gold prices, you can see they are down almost $12 to 1570.90 an ounce. >> let's go across the pond. get an update on what's going on over there and what the spanish yield means to the rest of the market. kelly evans standing by. kelly, i see a sea of red behind you. >> what's remarkable, 600 stocks in the europe stocks, 15 of them are in the green. led up here in this far corner by philips which reported second

quarter earnings. one of europe's biggest manufacturers. the rest of the market is, i don't want to say falling out of bed but that can be applied to the bank shares which is in the hall of shame. weakest performers in the index this morning. italy, spain, greece, all places where we're seeing tremendous pressure. europe stoxx 600 is down 2% which itself isn't one of the buggest losses we've seen. when we take a closer look what's happening we can see where the pressure is. ibex 35 down more than 5%. huge move. again in this space in europe's debt crisis to see levels like this are pretty troubling. ftse was down more than 5% a couple of minutes ago. energy dax down and ftse 100 not spared. if you want to know what's causing a lot of this action consider for example the hard line germany seems to be taking

with greece saying i want doesn't apartment third bailout for the country it doesn't like the way things are going. you consider the case of greece and how poorly that effort has gone and think about what happens if spain is next in line you get a sense of why people are concerned. remember even if we have comments from spain's finance minister saying the country needs and trying to break the link between sovereign risk' banking riching, if the sovereign is the problem, if there's weak growth, if there's no funds to help rescue the country it doesn't matter what's happening separately with the banking system. clearly it does matter for shares of these companies down across the board, huge loss. take a look at uni credit down 7%. trade was suspended in some italian banks. paolo down and deutsche bank more than 5%. the french bank down more than 7%. quick look what's happening across the spanish yield curve. yields blowing wider especially

in the shorter term. five jarp almost one percentage point on the day. almost at 7.5%. ten year over here well over 7.5%. that's a new record. we'll put that in context by joining you the rest of the bond yields that we're seeing. spain, italy all the peripheries are blowing wider. flight to safety are being exacerbated we're we're seeing record loss. ireland higher, italy 6.4. spain 7.5. again the german bund at a fresh record low, 1.13%. the number of times we've said record on the show this morning itself tells you what kind of a trading session we're starting off this week. >> let's get the latest out of aurora, colorado. this morning is the first time in the world we're going to have the chance to see the man accused of the worst mass murder in recent american history, 24-year-old james holmes will be make being his first court appearance after being arrested

for shooting 70 people and killing 12 at the sellout showing of the new batman movie. >> good morning, andrew. that want appearance should be brief. be held at the arapahoe district court. he'll be advised of his reits. the charges will form jamly be announced today likely. but when they do, no doubt there will be very many. at issue is whether prosecutors will decide to seek the death penalty. the defense will most likely try and argue whether he's mentally competent. his legal team today is expected to go inside the theater and take a closer look at things like the bullet holes and the blood stains and what's left of the carnage as they are putting together their defense. now all of this while the community continues to mourn. there was a huge vigil last night where people consoled each other and earlier in the day yesterday president obama was here. he spoke with family members of

the victims individually and also offered hope and inspiration to the larger crowds and the people here in aurora. so now the legal process under way but the morning still far from over. andrew, becky. >> okay. thank you. appreciate it very much. it's a horrible story. got me thinking about a lot of things this morning. >> a lot of people spending the weekend really just making sure they appreciate what they have. it's a very difficult story. let's get back to markets and talk a little bit more about what we're watching this morning as well. our guest host this morning is "fortune" magazine's managing editor. andrew we've been watching the moves this morning. it's a little unsettled. we've been hearing europe is in big trouble and the markets seem like it has these moves where it's convinced europe is a huge problem then we get over it. this morning it's europe is a huge problem again. what does you want take for us to actually figure out what's happening and what the solution

will or won't be. >> i've been wrong about this over the past couple of weeks. i've been saying europe can't make it any worse. but it continues to do so. and it's just confounding, it's frustrating, it's scary. but quite frankly there is no end in sight to it. i think that's sort of the most unnerving thing about it. if you think about it we're all being held prisoner by three things. europe, gridlock in washington and chinese slow down and we bounce from one thing to another. >> don't have a solution toni of it. >> no. it's hard to see a solution. the positive thing of course is high short interest climbing the wall of worry kind of stuff baked in to price. but, that's kind of a tough sell at this point. >> of the three what do you think is the big squeft problem? the fiscal cliff? >> you can't see anything on the horizon to suggest this will be over. you saw people at the "new york

times" calling for a lame duck session after the election no matter who wins to solve the fiscal cliff problem. >> no problem. >> can i take the other side of that? don't you think ultimately europe has to be the problem. maybe even china the problem. but the fiscal cliff a manmade problem that ultimately when -- we'll get to it and screw it up for a while until we don't but it will have to get fixed >> you're a can kicker. >> i am a can kicker. and they will kick the can. the problem is the can kicking in europe is a much worse situation than the fiscal cliff here. >> bigger can to kick. i can see your point. it's not europe, china is the biggest problem and biggest unknown and the problem we have the least influence over. there's nothing we can do about that. >> correct. >> the chinese to sort of try to begin to understand, you know, what they are doing is something

that's pretty much hard to under. they are going through a government transfer at the leadership level and, you know, you ask someone in china who will be the next leader in china? if you're chinese you can't say. this is a very different political and economic system. >> the gao is expected to release a report in the next few days talking about how the last time we went through this the debt limit fight it actually cost the treasury money because of all the uncertainty surrounding it because the treasury market. >> i don't want to dismiss it. i say by size of problems fiscal cliff -- >> not just fiscal live. it's obama care and romney saying if he's elected he'll repeal it. this is the biggest piece of legislation since world war ii on the biggest sector of the economy.

everybody is sitting on their hands. more uncertainty. there's some really some truth to it. >> there's a story on the front of the "wall street journal" today talking about how the tax policy at this point has been pushed so far and a lot of small and mid-size companies say forget it they are not is going pay any attention to these tax incentives they say it's too expensive to be in compliance with the regulations. if we've reached a point where the tax code can't push the companies around it shows the mess. if i had to pick my problems i would pick this one. this one may have a bigger exact on what we face. >> fiscal cliff, europe, china. right? who has the biggest problem. pick your problem. >> you just came back from aspen. >> yes. >> the tech guys that you spent time with, right, and we can name all of them. >> right. >> they don't talk about any of these issues. that to me is what's so

remarkable about what's going on in the valley. >> the growth sector unlike anything in the world. silicon valley. they are disconcerted by what's going on in washington but they are looking to create new social media companies, looking to get funding from venture and selling out or going public but creating new companies. you know, it's sort of -- it's a bubble. but it's more like, not just a bubble that's overinflated but a bubble that it's a parallel universe. at some point people have to be consumers for their products too. they got to be a little bit worried about the big picture. >> we'll be back with more. >> coming up we got two big themes for the markets. earnings and economy a preview of what you need to watch. that's coming up next. first sports news this morning. south africa's ernie els winning his second british open. ten years after his first.

it came to a monumental collapse by adam scott. he bogeyed the first four holes. look at that.

welcome back. if you're just waking up. u.s. equity futures are trading sharply below fair value. european markets are in the red. this morning i would have to suggest part of this is what's going on with the ten year in spain. michelle girl regard is senior

economist at rbs. explain it to us. >> the situation in the eurozone is far from resolved. >> it's always far from resolved. every monday it's far from resolved. >> you're absolutely right. in the end quite honestly only when the markets are behaving in this way do we see policymakers moving with the urgency they need to the actually, i think make the decisions that no one wants to to eventually move us beyond this. so you never know if this is good news or bad news. >> back up. what's the good news part. >> i'm saying that when things are quiet and everybody is kind of complacent then nothing seems to be happening to move the ball forward in europe. it's only when you seem to get the markets getting back into a crisis mode that policymakers advance the ball forward. it's a shame we seem to be like that but ultimately probably things have to get worse and noisier to get the policy make towers make the decisions -- >> to kick the can.

>> to get this over. >> handicap the next kicking of the can. what does that kick look like? >> what we're seeing is movement on the part of germany to be able to acquiesce to be more willing to assume the risk of these other countries, the mutualization. other countries have to concede to germany more control and the ecb is ultimately going to have to do more in terms of expanding its balance sheet. it's wanting more from the cunning in terms of being able to, you know, give something for that kind of support. it's a stand off with both parties. very hesitant to, you know, actually concede and do and take the steps that need to be done. when you get in situations like this the pressure is on and that's when things move forward. we have the brees situation coming to a head. the spanish situation. it's going to continue to be noisy. you can understand why the markets are as nervous and how

that feedback to the u.s. >> austerity is so difficult. got to be key part of the solution in those countries but obviously the unions are strong and every time some austerity measures are proposed the streets fill up with workers saying are you kidding? work a four-hour day i don't want to work a six-hour day. that's not quite fair but a little fair. >> we know, of course, people have talked b-we're looking at these youth spanish, spain and greece these youth unemployment rates that are up 50% or more. you can understand why. talk about austerity. more austerity. >> do you think it actually works down the road? you say all of them coming together but everything that you read over the weekend and beyond that, the germans are saying no way. angela merkel's own coalition is saying forget it. they are saying we're not going along with it. >> which is exactly why. at some point the germans will sit down and look at what it means not to do it.

for germany having a breakup of the euro is far worse than, i believe, that they would recognize than what it would take to keep it together. >> so if we are in an emergency, if you will, over 7.5%, put that opportune code yellow. what number gets you to red? >> one of the ways we look at it is any time you have a situation where let's say five year yields in these countries are above nominal gdp you're looking at nominal gdp growth as a proxy for their revenue. then you have a situation where the debt loads are not sustainable. we look at 7% like it's some magic number because historically that's a level that preceded a need for a bailout. that's why these countries are under pressure. they have a situation where the funding costs make their debt load unsustainable. we're already in the red in italy and spain these countries their interest rates are above basically their nominal growth rate you have to question their

ability to sustain that. >> i want to bring it back here for one second. there was an op-ed one today's "wall street journal" by alan binder who had an interesting idea to try to spur things a little bit. idea is to lower the interest rate paid on excess reserves as a way to for the banks, if you will to loan money. >> there's even discussions about taking the rate negative. not so much here. the ecb has done that. right now banks can put funds to the fed and earn 25 basis points on those reserves. >> they are already getting next to nothing. >> exactly. they can make a mortgage loan. >> if the bank could make a loan it would do that rather than taking 25 basis points. >> that's not the reason the banks are not making loans that could earn them a good deal amount of spread versus

financing. when you talk about perhaps taking that rate negative and now you'll charge banks maybe that's a different story but we're seeing to be going away from that. >> thank you for coming in this morning. >> when we come back we'll talk more about the short fallout from this european worry. european shares being hit pretty hard and u.s. equity futures are following suit. can the bulls battle back? we'll ask if earnings will help or hurt the picture right after this. i'm freaking out man.

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♪ good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin. joe is off today. our guest host this hour is andy serwer. under pressure is the appropriate song to be playing this morning because if you take a look at european stocks that will tell the story. the european stocks falling pretty sharply in greece they are down by more than 6.8%, spain off by 4.3%. other major averages including the cac in france down by better than 2%. all of this coming as investors grow more concerned that spain may need a full sovereign bailout. this coming after a second region in the country indicated it will likely need government

help. follows valencia asking for help on friday. local media saying half a dozen regions willing to do the same. spain's finance minister has denied the country will need a bailout but the markets are not buying that line particularly when you take a look at the spanish ten year. trading above 7.5%. any level about 7 is when you start to get very worried that the country can continue because the borrowing costs are just so extraordinary. so 7.5% is certainly something that has some alarm bells going off not only around spain but back here in the u.s.. take a look at the u.s. equity future and it paints a bad picture. the dow is down by 10 points. the nasdaq is down by 30 points. these are drops of 1% across the board. also been keeping an eye on oil prices and despite the big

climbs we've seen recently because of those tensions between israel and iran right now you can see oil prices are pulling back, down $2.80 almost for wti. sitting back at $89 a barrel. this is again after some major climbs. this morning the oil market are much more focused on what's happening in the economy. watching the ten year note. the yield is at a record low, 1.406%. this is a flight to safety. people are worried about what's happening in spain and you.ed out earlier, how many basis points? >> 600 basis point spread. >> that tells you a little bit of the story here. we're very likely to be giving money to the united states. investors are thinking they will give their money there rather than take those big yields because they don't think they will get their money back. the dollar is telling you a similar story. on friday the euro set all kind of record loss. the there are is up once against the euro, 1.2118.

after friday closing at a two year low versus the dollar for the euro. more of the same in this trend. the dollar/yen is at 78.10. gold prices are down, close to $12 sitting at 1571.30 an ounce. earnings season is off to a predictable start. who are the winners and losers and what's ahead for the earnings season? stephanie link is here and we look at earnings season. we're off to maybe not as bad as a start as some exhibited but when you look at the revenue lines that's where we've seen a lot of misses. >> 67% of the companies have beaten so far, 11% have missed. we've only had 23 puerto rico of the companies report.

but the fact that they can actually beat on the earnings side that's impressive. that tells me they are doing a very good job on margin, on cost and restructuring and philips said self-help. that's why you want to focus on the companies that have strong management teams, that have good balance sheets, that are gaining market share and there's a lot of them. you want to get the winners. on days like today you get to ge some of these top quality companies on sale that you wouldn't maybe get at the, in the past in terms of valuation. >> the earnings growth is unsustainable. we've seen over the past couple of years back in march we released the fortune 500. okay. we've noted that fortune 500 earnings were up 16% versus year-over-year, record over 800 million profits, record year and that was all due to the fact that companies weren't hiring and cutting costs and the top

line is the problem going forward there's only so much you can do to keep rising profits. >> if you look at some of these companies, you're seeing some pretty good underlying quotes. >> that's why they are able to make their numbers on the bottom line even though they are missing on the top line. their costs are going down too. >> the numbers are out a year out. tough. >> certainly. that's why you have these discounted valuations. that's why the market is trading 12 times. >> what's your tipping point. what's your hope. what's the thing that will get us across the finish line. what's the light at the end of the tunnel. >> it's hard to say to be really optimistic. companies are doing a very good job to the discussion that we've been talking about. they've been doing a good job in terms of cutting cost and keeping it lean. i don't see them hiring any time soon. they can't. if they have to make the bottom line then they have to be very tight on controls and expenses.

you look at companies and management teams that have very strong management teams and balance sheets and they have the flexibility to do what they need to do to get it done. >> you said jamie dimon buying back his stock. what do you make of that? >> i'm not surprised. he said the stock is cheap and they has a company would be buy field goal they could have. he goes out and does you want and you know the company will get approval and buy back stock. that's one of the cheapest bank stocks. you want to be very selective on banks in this environment but he's one of the best leaders. you get it behind you and get a very high quality company on sale. >> even the tech stocks and we talked about how that sector s-you know, there's so much growth there. but the multiples are really low. you look at companies like hp or cisco even, electronic arts, these are single digit multiples. at some point somebody will go

in and hit some home runs. you're looking at the big picture and where will the growth come? >> what are some other stocks you like >> i like ge. industrials are out of favor but very cheap. they did a good job. i like that story. coke, once again, runs away. and those expectations are high. >> pretty impressive. >> north america and also in the brics. supposedly the brics are following apart. they saw double digit group. e-bay, emc, so many actually last week to be encouraged about. and to your point, revenues weren't that exciting but still pretty good. earn mc doing 11% revenue growth. >> storage, if you're not making money or growing your business in storage in cloud executing you're not running your business. >> up get that at 14 times earnings. i think there are some competes

out there. >> we have mcdonald's reporting later this morning. people look at mcdonald's to say okay if the economy turns down maybe they benefit from it because people are trading down. >> expectations are low. 30% revenues in europe. a tough number. expectations are low. i don't expect great number. but even if it's in line maybe that's enough. i think this is a name where it goes back to the mid-80s that's where you buy it. very strong cash flow management team and balance sheet. but i'm not expecting this robust number. especially one lying of what young said last week as well as panera and chipotle. they can muddle through and get through it. and again i think you want to have price left. >> stephanie, thank you very much for joining us. >> a merger monday. another deal that crossed the

wires. genesee and wyoming to buy railamerica. >> 11% premium. >> nice little premium. also should note this morning that carlisle group is going to be investing $800 million in genesee and wyoming as a way to finance what they are doing. that's going give them a nice little stake in this company as well. >> a lot of old school companies doing deals. you got energy, oil and gas, rails, right? >> who said the fiscal cliff was stopping business at least on this monday morning. did you say that? i just did. comments. if you got comments, questions about anything you see here on "squawk," shoot us an e-mail. coming up a u.s. company that's hiring. there's only one problem. it says there aren't enough qualified applicants. we'll talk about that after the break.

but before we do, check out u.s. equity futures. they are down about 1%. stay tuned for complete market coverage all morning long and my favorite segment when it comes back after the break. you'll see what we're talking about. maybe do a little sightseeing. or, get some fresh air. but this summer, we used our thank youpoints to just hang out with a few friends in london. [ male announcer ] the citi thankyou visa card. redeem the points you've earned to travel with no restrictions. rewarding you, every step of the way. redeem the points you've earned to travel with no restrictions. last season was the gulf's best tourism season in years. in florida we had more suntans... in alabama we had more beautiful blooms... in mississippi we had more good times... in louisiana we had more fun on the water. last season we broke all kinds of records on the gulf. this year we are out to do even better... and now is a great time to start. our beatches are even more relaxing...

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welcome back, everybody. the u.s. equity futures are under quite a bit of pressure despite the deal news we've heard. those dow futures are down by 123 points. s&p 500 futures off by 13 points. weakness in europe as well. drops of nearly a percent here in europe the pressure is greater. we've been watching european stocks down better 2% for some of the major averages. in greece and spain you're looking at greater pressure down

by 4.5% in spain and down 6% or greater in greece. >> okay. our american made series continues this morning. it's one of my favorite american made series this morning with a focus on a company that's expanding its brand both inside and outside the u.s., cinnabon. i can smell it. i was going through an airport yesterday, you had a cinnabon at an airport and knowing i would see you this morning i held off. before we go anywhere, what's the calorie count just so we know. >> don't ruin it. >> i think it's important. because i'm going to eat probably half that table is going to be ingested soon. >> it's less than a lot of people think. oh, that think is 2,000 calories. classic cinnabon cinnamon roll is just over 800 calories. >> the big one?

>> the big one. the mini bon is just over 300 calories that's the one i eat several times a week. >> i don't know how you do that. before we go any further i want to talk about the business. but andy and i were talking before. he thinks there's something going on at the airports. >> yeah. i smell a cinnabon here. is it true that you guys put fans in all the stores to blow it right down through the airport? come on. >> no. everyone asks us that. >> i've seen those fans. come on. >> no fans. >> that's just from us baking, our ovens are right up front. what's hidden in restaurants the ovens and baking equipment. cinnabon it's right up front on the line. you know everything is hot and fresh out of the oven. suns we open those ovens constantly that aroma wafts and temps travellers and shoppers every where. >> first let's talk about how

many new stores are you opening a year? >> we should open anywhere from 50 to 70 new locations worldwide this year. and that growth is happening not only in the united states, but in russia, the middle east. >> all company owned. this is not a franchise, right? >> almost all franchised. >> almost all franchised. even abroad. >> absolutely. >> and the other thing that seems to be happening from what i gather i see your brand pop up in the consumer market meaning at the supermarket. you can buy oatmeal. >> cream of wheat, international delight creamer, lots of kellogg's products. cinnabon is becoming one of the world's breathest and most delicious food brands because we own the special cinnamon and these famous ingredients they translate beyond our frequent bakeries into consumer packaged products and most are in that

breakfast category. >> one of the things that i understand is a challenge for your company is finding the right people for this. >> absolutely. cinnabon is a special brand and our franchise partners are always looking for top talent. often young employees where this is their first job. they go to work in one of our mall or airport locations and so we really are always on the lookout for those people looking to break into the job market as their first job. >> what do i need be able to do. i'm not good in the kitchen. >> make sure people don't eat it. are your concerned about inventory shrinkage? >> a little bit of inventory shrinkage. the products are delicious and hard to resist. the employees need to have that incredible smile, love people and really enjoy having fun with food. at least that's what we fwheed our hourly employees. but we're growing positions all over the world. we're looking for franchise business consultant, people to support our operational growth. experts in marketing and

branding. so we are looking not just for those entry level positions to support our franchise partners but for corporate positions that will help us grow our company worldwide. >> we got to run but i'm curious if you have a message for michelle obama or michael bloomberg this morning. >> everyone should get discretionary calories and when they do i hope they think of cimnabon. >> discretionary calories. that's the phrase of the morning. thank you for breakfast this morning. we appreciate it. if you know of an american made company you think we should have on the show, tweet us @"squawk"cnbc wi with #americanmade. >> like the series. >> take your discretionary income and spend it on discretionary calories. i thought it was consumer electronics. i was going to the wrong place here. >> time for breakfast now. >> i'm going.

>> still to come we're going to try to make sense of the sea of red. european shares being punished once again. u.s. equity futures down by 1%. we'll check in with barclays head of u.s. equities barry knapp. stick around. the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. 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. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. to experience the ultimate expression of power -- control. ♪ during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection.

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we're in the chairs and playing "james bond" because we're approaching the olympic games in london this week and as we do, it turns out that nations everywhere have been putting on their best impression of james bond to get a leg up when it comes to the olympics. this is a story from the front page of "the new york times" things happened like someone from the united states bmx cyclist team rode the competition course in london for the summer's olympic games they were able to create using technology a mock course where they can ride the exact same course to get ready and prepare and train for it. the usa sail iing team snatchedp some property near the olympic competition site in weymouth, england, to try and practice and prepare so they would know the conditions and really get to know what the area, the currents, the winds would all be like when doing this and france has taken it a step further. france has actually created a special bureau in its sports ministry to basically just focus on reconnaissance.

>> come on. >> apparently it worked for the beijing games. france amazingly got 41 medals. ? they were spying on china, the french were spying on china in china? good luck with that. >> they could find better ways to get their athletes up and better. >> in the old olympics all the doping that went on with the iron curtain countries, right, so people look for advantages, fair or not. >> and as it's gotten more prestigious, there's more money involved it's a bigger deal for these nations. >> i got a quick op. ed you have to read in the "wall street journal." seth goldman, ceo of honest tea, sold to coca-cola has a big problem with mayor bloomberg, calorie counts and the 16 ounces. this is interesting. >> honest tea doesn't have a lot of sugars in it. >> all of their bottles are 16.9 ounces, they have to go down to a smaller bottle, had to change their upc bar codes and the cost he's talking about now he says remarkable and it changes the

whole dynamic of the business. i hadn't thought about a company like honest tea. >> honest tea does not have a lot of calories. >> why does he have a bottle that's 16.9 ounces? >> he said that was the standard size his bottle supplier supplied. >> i've never heard 16.9 ounces. >> there was a smackdown, can we call it that at the aspen conference, peter teal, earic schmidt, take it away. >> they had very different takes on the benefits of technology companies, the technology industry in the united states and in fact for the world and peter teal's big point was that we talk about technology companies how great they are and they haven't gone great for the economy. they are a big failure and look at your company, google, you have all this cash, you don't know what to do with it, sitting there doing nothing, you and all

the rest of you people. >> schmidt didn't take that too well. >> eric got peeved, what are you talking about, think about the jobs we created and to be fair google invested money in all kinds of things. they have a lot of cash but also are trying things all the time but it was a great theater, i will tell you that, and peter thiel -- >> peter invested in the whole world. >> yeah, peter thiel you made a ton of money on paypal and facebook but peter thiel has very different ideas and wants to create his own floating island nation off the coast of california and everything else. >> thank you for being here this hour, andy. >> thank you for having me. come up, barclays barry knapp on the morning's market sell-off plus nrg's ceo on his multibillion-dollar deal. is ou. ♪ this is our pool.

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it's a big time power play. the latest details on this major energy deal, first on cnbc. and finding america's fiscal footing. >> our problems are massive overregulation, unsustainable spending and the threat of a huge tax increase. >> pennsylvania senator pat toomey is talking taxes, regulation and the economy. is he our guest host this hour. taking stock of your investments. what's on tap for traders before the first transaction? the second hour of "squawk" begins right now. ♪ monday, i'm all right, get me out of bed though late ♪ good morning, everybody. welcome back to "squawk box" on cnbc. i'm biggy quick along with

andrew ross sorkin. joe is on vacation this week. we've been watching the stock futures this morning, they are sharply lower. worried about spain's troubles even though spain's economy minister died that a full scale bailout would be needed. valencia said it would need a full bailout on friday and people in the local media say there could be another half dozen regions that come seeking a bailout. end result, dow futures down by more than 125 points this morning. you see basically 1% drops across the board for the s&p 500, the dow futures and the nasdaq futures. among some of our other headlines we've been cnooc buying nexsen for $15 billion in cash, worth $27.50 a share, that's a 61% share to nexsen's closing on friday. this deal in the press release

at the very top lays out why this is a great deal for canada. another deal that sees jenesee in wyoming buying railamerica for $1.4 billion in cash, that represents an 11% premium for friday's close for railamerica shareholders. barclay's vice chairman michael rake has taken himself out of the running for the chairman's job. we been considered the favorite and the news sent markets lower overseas. andrew, i'll send it over to you. europe is in focus, investors growing more concerned that spain may need a full sovereign bailout. joining us to talk markets is barry knapp, barclay's head of u.s. equity strategy. where do you want to go with this? we could talk about the u.s. but let's talk about spain and maybe the impact on the u.s., barry. >> sure. first of all, i think that the biggest problem with spain is, as i see it anyway is that the

solution that they came up with from a sovereign perspective for spain's budget deficit is that they hiked the vat tax by 3%. clearly looks like an imf type solution but if you think about increasing consumption taxes on the mainstream public in an environment where you have 25% unemployment and 125% debt-to-personal income ratio there's just no way that's going to work and they're going to collect any revenues. the link has not been broken between the sovereign and the banks and spain is in an economic bit of a spiral. now this sort of brings you to the broader question about growth and the impact on the u.s., because really the vortex of this global growth slowdown is obviously spain and italy and until that stabilizes, the net export channel through china is weak. >> barry, handicap not what should happen but what will happen, let's not even go that long. over the next three or four weeks, anything?

>> on the european front, no, not likely. i suppose if the ecb were pushed hard enough that they might restart the sovereign debt purchases because it doesn't look like the mechanisms to do it through the esm or efsf are in place. i think the next four weeks will be ugly for europe and for the u.s., quite frankly. >> barry, i'm sorry, the spanish ten-year yield above 7.5%, what kind of urgency does that lend to the situation? actually 7.49, just moved below. >> considerable, and especially given the fact that the front end's moved up so much, they just can't play the game that they've been playing all year where they just finance the front end. presumably the ecb will get pushed into action here. i haven't heard any murmurings to that effect. if you look at the requirements for these other mechanisms to buy bonds, it seems inevitable. >> barry, bringing it back to here for a second, we're in the

middle of earnings season, going to get mcdonald's earnings at 8:00 a.m. this morning, i'm curious what you think of the top line issue, bottom line corporations seem to be doing okay. we talked last hour where are we going to get the top line growth? >> that's a great point, andrew, where i was going with the whole global growth dynamic. at this time a year ago global growth was running 3% above u.s. growth and now it's not. we've had 1% revenue growth this quarter year on year. that's anemic. typically that's where nommal gdp which is soft through this quarter and through the cycle and it's fall even below that. i think you've hit absolutely on the correct question and with no real -- you can bring some costs up to are a short period of time but if you don't get the top line growth you're not going to get earnings growth for more than another quarter or two. that's a huge issue and there's not much prospect in the second

half of the year. >> if you're an investor you either say sit it all out or short the market. it's hard to see something optimistic in all of this. >> i would agree. something closer to 1,200 in the fall with some election-related optimism i could see a rally getting started but at 1350 there's nothing to do other than sit in the high dividend paying defensive sectors and quite frankly i think buying puts here in front of the next few weeks is probably not a bad idea. >> so 1200 is your new target here? >> 1200 to 1225 would be about the level. >> wow. >> with what we think with what happens with inflations break even that triggers fed policy, i don't think that's a panacea but at that level you could see a tepper type case for a fall rally. >> you don't think that's a panacea, maybe not the same scenario last time, heads we

win, tails you lose type of situation? >> i think what happens is people sort of misremember what drove the rallies each of the last two years. i don't believe it was fed policy. i believe it was the data getting better. at this point a year ago the retail sales the weekly and monthly comps were improving because of lower energy prices. we haven't seen that yet and in fact energy prices have ticked back up so i don't see anything in the data to warrant a rebound, but as you get into the fall, perhaps the data will start to improve a little bit and that will be justification, along with fed policy, but again, for the next month, and especially in front of friday's gdp report which remember each of the last two years was a bit of a seminal event. we had gone from the escape velocity dynamic in the first are the quaer to a new normal slow growth environment in the second. when the second quarter gdp report hit at the end of july, we had a full fledged recession scary to the last couple of

years so that's plausible. >> i kind of want to thank you for that but they always say, you keep hearing investors saying jumping out of the basement window is safe but he just suggested maybe we're not at the basement window anymore. barry, thank you for that. >> thanks. we've been talking about another big deal, nrg energy is buying genon energy for $1.7 billion in stock, it will form the largest nation's independent power producer. david crane, thank you for being with us this morning. >> thanks for having me. >> this is where the acquired stock is indicated higher. your stock closed at $18.05, indicated anywhere from $18.06 to $26.04. what brought you around to think this was a good deal to make? >> the industrial logic of putting the two companies together has been compelling for a long time. our industry is maybe the least

consolidated industry in the entire american economy but, so scale benefits, traditional scale benefits really work in this case, and we're talking about $300 million per year of annual cash benefits from this transaction, and if you look at the relative size of the company, that's just an enormous number in terms of shareholder value creation relative to the size of the two companies. >> those savings began in 2014, is that correct? >> well, they only began 2014 because the timing of this deal, we expect the deal to be approved in the first quarter of '13. we can get all the synergistic on the ground in '13 but we'll get full year benefits in '14 but we'll start to get benefits in '13. >> this needs to be approved by state and federal regulators. any reason to think they might say hold on a minute? >> they have to do their job but these two companies are highly complimentary and we talk about being the biggest competitive

power generator in the country. we'll have 5% of the total generation of the united states. this is not exxon and mobile getting together. >> this seems to be a bottom line story or less a top line story. is there a top line story to be made out of this? >> time line being, andrew? >> meaning growing revenue as opposed to creating savings on the bottom line? >> i suppose so but you know, electricity, i mean, electricity prices are directly tied to natural gas prices and that's not someone anyone in the electricity industry controls. as long as the natural gas industry basically gives their product away for free, i'm not sure it's top line but the company will be the most cost competitive out there in terms of the cost basis of the company. >> can you speak to the uncertainty issue which is to suggest a lot of ceos come around the table and a there's

so much companies in the world, put m&a aside dealmaking is down, ceos, corporate boards say they feel paralyzed by the tax issues, the fiscal cliff, health care, all of these things. was that any information if what you guys decided to do at all? >> when you're in the electricity business the world may seem like a crazy place for other industries but one thing is certain, people will wake up and turn their lights on so maybe we have a little more certainty than other places. i don't feel our company is paralyzed by this uncertain world. there's always a certain amount of regulatory uncertainty, what is the epa going to do and things like that but ultimately our industry is relatively predictable. >> you mentioned it's the natural gas prices that have been driving things, the direct energy crisis, and i'm sure the natural gas guys would love to be charging more for their product if they could. it's this idea this abundant amount of it that we have this new panacea of natural gas.

do you see anything changing that picture in the next few years? >> well, becky, i don't quite understand that. every industry has spare industrial capacity. every industry can overproduce but for some reason people in the e&p industry chronically overproduce. do i see a change? i see it changing. >> it becomes not efficient or not the right price point to take it out of the ground? >> two things are happening in the natural gas industry, certainly the drill count is way, way down, way down, and there's a knock on effect of that, takes two years to work its way through the system. >> you see prices coming up? >> yes, but not in the next three months. i mean, in the natural gas world and the electricity world, short term movements in natural gas are directly tied to weather, but longer term it's basically supply and demand. >> that's right, we have a lousy winter. >> we have no winter. and when you're in the

electricity business extreme weather leads to more electricity usage. >> the summer's been a little hot. >> summer's been okay so far. our company is heavily in texas, you probably don't notice it's been raining in texas the last couple of weeks, hot weather in texas wouldn't be a bad thing. >> we have to run but this deal gets done over dinner at boule, and i also understand i don't know if we have a picture of this, you just climbed kilimanjaro? >> yes, july 4th. >> any last-minute deal refinements at the top? >> i had to take a satellite phone, when you're in the shadows of kilimanjaro the cell phone doesn't work because the satellite is on the other side of the mountain. >> you were negotiating as you were climbing? >> you know, you get the deals done when you get the deals done. >> i take that as a yes. >> david, i want to thank you very much for coming in and congratulations again on the deal. >> thank you. thank you for having me. >> thanks for being here. coming up next on "squawk box," guest host and senator pat

toomey of pennsylvania will talk about how to fix the economy and howard dean will join the conversation. between listening to the numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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welcome back, everybody. we've been watching the futures this morning and they have under pressure, dow futures down by about 128 points, all around concerns about spain and the idea that it might eventually need a bailout as well. there is a second province in spain that has come forward and has sought some sort of a bailout from their federal government, and that has a lot of people concerned about what happens next for spain. also the european crisis, that is just one of many factors impacting the u.s. economy. joining us for the next hour is senator pat toomey, member of the banking, commerce and joint economic committees. thank you for being with us today. >> thanks for having me, becky. >> we were just talking about your questioning last week of bernanke and we had guests that came on said you were by far the senator who most understood and appreciated what was going on. we've been talking also about

libor and what happened there. geithner is going to be going to the hill on wednesday. >> right. >> what do you think happened with libor? what needs to be done? >> well i think we don't know yet, right, what really happened except we do know what happened with respect to barclays. they were routinely in the reporting, misrepresenting the numbers. in some instances it appears they wanted to lower the setting that applied to them, the number that they reported out of a concern that otherwise it would appear as though maybe the market didn't have confidence in barclays. in other cases they were doing it as a way to try to help out their own trading book, right, where there are other guys in the firms suggesting a lower or higher rate would help them, so a stunning corruption here in how this was done. >> for a key number. i mean libor during the financial crisis, this was the number we had people like alan greenspan telling us they were watching first. >> not only that, of course this drives all kinds, thousands and thousands of american financial transactions every day. >> trillions of dollars.

>> yeah, mortgages get reset based on this, commercial loans, consumer loans. so much gets driven by this. what's stunning to me is that the questioned afed and the tre this process lacked integrity since at least april of 2008. that's more than four years ago. where have they been? >> senator, the question becomes what should have they done? bernanke will say it wasn't his responsibility that they forwarded their comments, suggestions to the uk, and that the uk did not take any steps to fix it. should they come out publicly? what would that have done to the markets? there's issue behind the scenes depending on where you sit what your responsibilities were and what options you had at the time. >> the folks at barclays, some have gone so far as to suggest maybe some of the british regulators were actually complicixli complicit in this case. >> i'm not defending them.

i'm putting the question to you. >> those circumstances have long since changed. late 2008, very extraordinary, worrisome circumstances. it's four and a half years later. to the question of what should they have done they absolutely should have raised a red flag. the city of beth he will him, pennsylvania, received periodic libor payments. did they get the payments they should have gotten? shouldn't they have known that there was a problem? shouldn't the big financial institutions that use this index all the time, shouldn't they have forced the bba to change their methodology or develop an alternative? >> different way to look at it, we now understand that some traders may get arrested perhaps as early as this week. >> right. >> is it better or worse they knew about it? do you consider it criminal if the regulators were complicit? >> that's an argument in their defense if the regulators were encouraging them to do this but that's a huge problem for our

financial system, if our regulators were involved in encouraging the misreporting of a fundamental index like this, now, i don't think we have any evidence of that yet, but we do know that they were aware of it, and they didn't even talk about it, much less correct the problem, they didn't alert and warn the american businesses and consumers who were using these rates that hey, there might be something wrong with this rate. >> senator, to me, it raises a larger question about whether or not americans can have confidence in wall street, and in our financial system. i mean when you see something as basic as libor, where trillions of dollars of products are set off of it, people look around and they don't have confidence because of what happened in 2008, they don't have confidence because of the flash crash. you hear scandal after scandal that comes up and at that some point the average investor has to say wait a minute how do i get a shake in this. >> it is a devastating blow to confidence but that's all the more reason as soon as you discover something like this,

what went wrong, what are the implications and correct it. when you allow this to linger for years i think it further undermines confidence. >> what would you like to have asked of timothy geithner when he goes before congress this week? >> i'm going to ask him what was he aware of, what was the follow-up after this memo that was shot over to the bba suggesting a range of alternatives, a couple of which aparentally were adopted, most of which were not. what was the next step? what were they doing? did they not have conversations with the financial institutions that use this index all the time to say hey, guys, there's a problem with the integrity of this rate setting. you shouldn't maybe, you know -- >> base everything off of it. >> base everything off of it on an ongoing basis. did that conversation happen, with whom and what was done about that? what was done to inform american consumer answer borrowers and businesses and others that they may not be getting or making the payments that they're supposed to. i just, i find it stunning that the secretary of the treasury

was aware of this in early 2008, and it takes 2012 before anything is really happening. >> senator toomey is going to be with us for the rest of the hour. we have a lot more to get to. come up, without congressional help the post office may be about to default on a $5 billion payment to its retiree health plan. senator tom karper will join senator pat toomey to discuss this in a bit. up next the president meeting with friends and family of shooting victims in aurora, colorado, yesterday. we're going to head there next, for more on that tragedy that has gripped the nation. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!! [ thlurp! ] aflac! [ male announcer ] help your family stay afloat

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we're back on this monday morning. the accused shooter in friday's horrific events in aurora, colorado s due in court today. leanne gregg joins us with the latest. >> reporter: good morning, andrew. that court appearance will be held at the arapahoe county district court, should be brief, a few minutes long. the suspect will be advised of his rights, no charges will be discussed today but when those charges are filed there will be many, we can assume 70 because of all of the shootings, perhaps 12 capital murder charges in addition to some attempted murder charges.

those as i mentioned will come later. also the defense team is expected to go inside the theater, take a look at the results of the carnage firsthand, they'll look at things like blood stains and bullet holes as they're putting together their strategy, and of course part of that strategy we can assume will be to try to determine whether the suspect is even capable of being mentally competent. meanwhile, prosecutors still must decide whether to seek the death penalty. some of the evidence of course will be what was found inside of the suspect's apartment building, explosive devices meant to kill were removed yesterday, so today officials will decide whether the other residents who have been evacuated for days now will be allowed to return to their homes. becky, back to you. >> leanne, thank you very much, leanne gregg of nbc. >> reporter: sure. when we come back, the post office's money problems continue. without congressional action this week there is a chance the

agency could default on a $5 billion payment. senator thomas carper joins to us talk about what it means for the future of the post office and as we head to a break take a look at futures this morning, under pressure, the dow futures down more than 141 points, s&p futures off by about 15 points. lot of concerns about spain with the spanish ten-year rising to a level of about 7.5% this morning. we'll be back with more right after this. [ male announcer ] how do you trade?

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welcome back to "squawk box." futures this morning are tumbling on worries that spain may need a full scale bailout, even though the country's economy minister has denied that this is the case. take a look at the futures board right now, dow looks like it would open 140 points down. let's catch up on some of the earnings reports though that have also come out this morning. toymaker hasbro earning 33 cents per share for the second quarter, ten cents above estimates. sales were below expectations, hurt by weak results in the u.s.

and canada and by a stronger dollar. oil field services provider haliburton reporting second quarter profit of 80 cents per share, five cents above estimates, revenues beating wall street forecasts. haliburton's results follow upbeat results by bakers hughes and eaton corps earned $1.15 for the second quarter, six cents above estimates. revenue fell slightly short of forecasts hit by lag in growth rates and unfavorable currently exchange rates and you can see that stock in the premarket is going to be down. the postal service here in the united states is in a pool of trouble if congress doesn't take action by august 1st. it is required by law to prepay billions in health care benefits to retirees and may not be able to make a more than $5 billion payment that's due. joining us is democratic senator tom carper who coauthored postal reform legislation, the 21st century postal act and thank you

for joining us this morning. >> good morning, how are you? >> good. we've been hearing an awful lot about the postal service and trying to get to the bottom of what's really at stake. it's your contention that it's this prepayment of health care retiree costs that is causing the post office so much trouble? >> no, no, that's not an unimportant issue but it's not the main issue. the main issue is the postal services really sort of an analog business operating in a digital age. they need to right size their enterprise, they need to better align the number of employees they have that the mail processing centers have and the number of post offices they have and the nature of the work done in each of those to meet the demand for their services. they also need to look for new ways to make money, to be more innovative, to be more creative. the senate has passed a good bipartisan bill back in april, we're waiting for the house to do something. we need the house to act. if i can make three points, the house needs to pass the bill so we can go to conference, that would be the first one.

the second point was the house needs to pass a bill so we can go to conference and work out a compromise and the third point the house needs to pass the bill so we can go to conference and work out a compromise. that would be it. >> senator, my sense of what happens in this is that when it gets to the house, the representatives in the house don't want to see any of their post offices in their home districts get shut down. is that what's tied up any bill getting past thesed there in th past? >> i think so. the house seems to want to work on, pass bills along party lines and the senate, we've actually moved a little bit beyond that and pat's there with you, he can tell you, actually quite a bit of legislation passed a bit by working together. you get a better bill especially on something this big if you do it together. i talked with darrell issa, elijah cummings on this issue and other key others. i don't care what you pass, go to work out in conference.

the thing that's hurting the post office the most is the lack of certainty, the lack of predictability. we need to make it clear we're not going to let the post office go away, right size their enterprise and they'll move on. there are about 7 million or 8 million jobs that depend on this industry and we need to make sure the industry will survive and turn around profitability. >> i think tom karper is one of the most thoughtful and reasonable guys to work with. >> i like pat toomey. i think pat toomey has great judgment. >> we are owe on different sides of this issue in terms of the actual substance of the senate bill although i completely agree with tom if a house passes a bill and gets to conference that's a good thing that could allow to us make progress. the post office is in big trouble and lost about $10 billion over the last three years, volume is down, margins are in trouble, they do have a very expensive health care retirement plan and my concern is that the senate bill really ties the hands of some of the reform that we need.

it precludes as tom knows for some time anyway moving to a two-day delivery standard, moving to five-day delivery, the things that would certainly save a significant amount of money and i just think they need to be willing to do those sorts of things. i think the leadership of the post office is more open to that than some in congress and congress ought to let them do what they need to do because what they're doing now is not working. >> 80% of the post office costs are people. they have arguably more people than they need, they have more post offices than they need. they need to be able to change the nature, and let me just say for post offices there's like 32,000, 33,000 post offices across the country, even small ones have postmasters, paying them $50,000, $60,000, $70,000 worth of year and they sell $15,000 worth of stamps. there are communities in which they're located you have many options, keep your post office open, open two, four, six hours a day, not going to pay a

postmaster $50,000, $60,000, $70,000 a year, incentivize that person to retire, and then the other thing we've got about a 480 mail processing centers across the country, the post office wants to take that down to about 325, our legislation lets them do that. >> senator, the big question on labor is, are you willing to let the post office break their union contracts? you are prepared to do that? >> are you asking me? >> yep. >> i don't think you need to -- look, we do look at the auto industry. auto industry and the postal service are similar, it's amazing, five or six years ago the auto industry had more employees than it needed, had more plants than it needed, mo are assembly plants and parts plants and they right sized the enterprise. the postal service needs to do that and the auto industry did it not by throwing people under the bus, they incentivized

people to retire. the postal service paid something like $11 billion, $12 billion into the federal employee retirement system more than it owes and ought to get refunded. everybody agrees they're owed that money. the postal service will use a quarter, $2 billion or $3 billion to inventivize some of the 125,000 people to retire that, saves a lot of money and the other thing they'll do with the money is to pay down some debt to the treasury. >> senator carper, thank you very much for joining us today. i realize that you and senator toomey are on opposite sides on this particular issue, but hearing the two of you say that yes, you can work together and you agree and you can reach across the aisle that gives me a lot of hope so thank you for joining us with that message today. >> if i failed to mention this, becky, the thing we need to do is for the house to pass a bill and we'll go to conference and we will work this out. and we'll celebrate and so will the people of the country. we can get this done. >> we hope the house is listening and senator thank you for your time today. >> thank you. when we come back, health care, taxes, the election and

more. you thought we had enough problems to solve? just wait, we have more coming. governor howard dean will talk about the issues facing the nation and your money, join us with guest host senator toomey. "squawk box" will be right back. i don't spend money on gasoline.

i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station

must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪

checking futures this morning, red arrows across the board out of fears out of spain. the dow looks like it would open 128 points lower, nasdaq and the s&p 500 would also be off, but at the same time we've got to check out on some stocks involved in what we're describing as merger monday, deals are back this morning, canada's nexen is being bought by china's cnooc in a $15.1 billion cash deal this morning, the first share price $27.50, a 61% premium over friday's close. we also have an energy deal, genon energy being bought by nrg in a $1.7 billion stock deal, genon shareholders will be getting an eight for every share they now own and finally railamerica being bought by

genessee? wyoming. it includes two short line rail operators and carlile is investing in that transaction as well and finally a satellite image provider, digital globe is buying rival geoeye, how do i say that? >> sure. >> i apologize, geoeye, $453 million in cash and stock. geoeye shareholder also have a choice of receiving cash, and stock or combination of the two. howard dean is the former governor of vermont, also a cnbc contributor. our guest host this hour is senator pat toomey and governor dean, good morning. >> good morning. >> we were just talking with senator carper, and senator toomey, senator carper were kind of throwing each other bones back and forth, saying we can all work together, great idea. what do you think? >> i think it would be nice, it hasn't happened much but it would be nice if it could happen. >> you think the fiscal cliff

coming up, you're convinced very need to fall over it? >> i do, actually. it's a drastic bipartisan solution. the tax rates go back to what they were when bill clinton was president and we cut the living daylights out of things that haven't been cut before. they're unpopular in washington which probably means they make sense. i don't think they'll strike any kind of reasonable deal because they haven't been able to do that for quite some time but this would really and the congressional budget office says we would go into recession for two quarters and then be out of recession and the growth rate for the year would be 2.3%. that's a tough price to pay. maybe 700,000 people lose their jobs, a tough price to pay. what you get out of it is a deficit problem that's significantly altered, something like $7.5 trillion out of the deficit is a big deal. the definite deficit is a huge

problem. it's not like greece but i think it is one of the biggest economic draggers that we face. i think we ought to do it. everybody's going to bite the bullet, the republicans will hate the taxes and the democrats are going to hate some of the cuts, but it's going to have to happen. >> senator, any chance we could get a deal without a gun at our head? >> unlikely at this point but i have to strongly disagree with governor dean. i don't think the answer for our economy right now is massive tax democrats are suggesting we go over the cliff. the cbo can make estimates about how bad that recession is going to be, could end up being a lot worse than that, and frankly, we don't have a tax problem. the current tax regime that's been in place for 12 years now as recently as 2007 we had a deficit that was only 1.2% of gdp. >> we're bringing in 16% of gdp. >> when you have an economic slowdown that always happens and if we could ever have a

recovery -- >> we haven't bounced back. >> right because of what we're doing in washington. >> 2007 you could argue a lot of that was based on false profits. >> you can argue a little bit but come on, 1.2% gdp is a trivial sized deficit. >> 60% of the deficits are caused by tax cuts. >> the president of the united states acknowledged the problem we have is entitlement spending. no big program can grow faster than the economy indefinitely. >> that's not the biggest problem. >> that's not right. >> social security, medicare, medicaid all of them, it's unsustainable. >> pat you're making the case you can't increase taxes because we're in a recession, that's why spending is down. that's why entitlement spending is up. this is a silly conversation. >> social security is up because of the tax rate? come on. >> excuse me, let me finish what i have to say if you don't mind. the cbo projects 60% of the deficit in 2019 is going to be solely the bush tax cuts, not the unfunded wars, not the

entitlement spending, solely the bush tax cuts. >> simpson and bowles, erskine bowles will tell you the biggest problem we have is health care and that is 22% of our spending of our gdp, 22% of our gdp this year, the second biggest is defense. >> absolutely. here's a fact that i think is very, very compelling. if you take three categories of federal spending, the social security program, mandatory health care and interest on our debt, within this ten-year budget window, that is projected to consume over 90% of all the revenue that we've historically ever been able to collect. that's completely unsustainable. we've got to fix the broken entitlement programs to put us on a sustainable tax problem. >> that's to say there is no compromise. >> no, those are two different things. >> bill clinton's presidency, had us in the black. the last time we were in the black was when bill clinton was in office because there was a reasonable tax structure. if you think we're going to get in agreement, if the democrats

are going to agree to cuts in medicare and social security while millionaires are getting big huge tax breaks that's insane. everybody has to put some skin in this game. this deficit was caused by all of us and we all have to put something in the pot to fix this and this includes tax increases and spending and i as a democrat am willing to make the spending cuts we need but senator toomey as a republican is going to have to be willing to agree to some tax increases otherwise we will go over the cliff. >> the proposal in the supercommittee was a major series of concessions including new revenue but the democrats wouldn't go along. >> would you go with the plan? >> i'm the one who offered the plan, tax reform, generated revenue, the revenue would have come from the top income brackets and asked for some modest spending reductions, and the democrats walked away. the fact is, the democrats control the senate, we're going three consecutive years without the budget resolution. >> we do not control the senate.

you've filibustered everything we tried to do. >> name any democrat other than ron widen, who deserves a lot of credit who has proposed any reforms for the entitlement programs. it's deathly silent coming from that side while republicans offered budget resolutions passed in the house, multiple budget resolutions in the senate. >> anyway, i think we're making my point here. >> it's an effort to try to get the other side to come and do something. >> two sides look at it very differently what the problem is. >> we're making the point we are going to go over the fiscal cliff and it's a good thing, it's the only way -- >> i think it's a bad thing. >> i know you do but this will solve the deficit problem. nobody is seriously talking about solving the debt problem in any way in washington. >> there are increasing numbers of democratic senators who don't want to do what the leadership wants to do, go over the cliff and cause a recession. i think we could very well before the election get to the point where we've got a majority in the senate. >> treasury secretary tim

geithner said at the delivering alpha conference he said it's ridiculous the idea of going over the fiscal cliff to deal with things. is there a way to get the adults back in charge? >> i don't hear a way, this morning on this program. you need to have -- this is the right way to do it. this is not the right way but the only way it's going to get done. as i said before you're not going to cut the entitlement programs middle class people depend on while you give people who make a gazillion dollars a year tax breaks. >> you don't raise taxes at a time like that because the economy was too weak. the economy is weaker now. >> it's stronger now. the economy is stronger now. no. >> we have miserable job creation. that's not correct? unemployment up 0.2%? >> it's 4.1 million private sector jobs since the president

has been in office. >> your side acknowledges what looks like improvement in the employment numbers simply comes from a reduction in the workforce participation rate. we're giving up, howard. >> it's just not so. our economy is getting stronger. >> it is so. >> it may not be fast enough but by every measure our economy is getting stronger. >> stronger on a relative basis to what? >> on the basis of job creation, simply job creation and falling unemployment numbers. >> we've averaged 75,000 new jobs a month for the last three months. that's not enough to absorb the new entrance in the workforce, howard. those are facts, those are the numbers, it's terrible. >> 60,000 job cuts is what we're seeing in the public sector which the republicans seem to be applauding at least the republican presidential candidate does and 135,000 to 140,000 jobs have increased. we'll agree that's not enough but we're going in the right direction and that's important. >> we're decelerating at a dangerous time. >> let's agree to disagree about

the means of dealing with the deficit. i can't believe you and i wouldn't both agree it would be great to take $7.5 trillion out of the deficit. what we're disagreeing is how we're going to do it. bargain was made a year ago to put this off and i think it's time to stop putting it off and getting it done. >> one way another there will be something that force this is issue. >> it's going to be an election. >> governor dean, thank you very much for joining us today. senator toomey will stay with us for the rest of the hour. >> thank you. >> thank you, appreciate it. when we come back, final thoughts from our guest host senator pat toomey and text hour, disrupter and founders fund partner bruce gibney. "squawk" will be back after this. o

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let's get final thoughts from our guest host, senator pat too maniy. we want to talk europe but i don't know if you saw the front page story in "the new york times" it was about money and politics, specifically sup superpacks. how do you think about all of the money slushing around, all the money you have to raise from wall street, from others. i know i think jpmorgan and goldman and all those are not only on your rolls, when they call you up and try to lobby you, how much easier or harder does it make the job? >> you know what i think is wrong the way we finance campaigns the limits and we wonder why money finds its way

to superpacks and 501-c3s and 4s. it's because we've imposed the limits. i've lon in favor of eliminating the limits and allow people to trbt whatever they want, require complete disclosure and candidates wouldn't have to run around the country raising money ins 22,500 increments. >> when the average american looks and sees a big bank for example has donated lots of money to you, how should that make people feel? how do you think about the issue? by the way this is democrats and republicans. it's not one side. >> everybody needs to raise money to run a campaign. it could be $25 million to run a race in pennsylvania. you don't have any choice given restrictions you raise money from people willing to contribute. it does not influence how i vote, doesn't influence what i do. people can examine my record, look at where the contributions come from. i just as i say i think the anomaly is the strange limitation we've imposed.

>> we have to leave it there, pat toomey thank you for being here this morning. >>s thanksing for havi thanks f. >> it's been a lot of fun. >> i agree. we'll talk retail, financials and much more and later, sean parker's right-hand man when it comes to investing in startups, bruce gibney will join us. "squawk" will be back right after this. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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is a partner at the heavyweight founder's fund, bruce gibney will tell us about the next thing in big technology. >> and economic projections from the chief economist at the u.s. chamber of commerce roger altman. plus chairman joe moglia, head football coach at coastal carolina university, the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with

andrew ross sorkin. joe is off today and this week. our guest host for the next hour is joe moglia, chairman of td ameritrade and head football coach as coastal carolina university. great to see but >> great to be here. >> joining us is our very own larry kudlow. it is great to have you with us today. >> thank you, becky. >> got a lot to talk about with both of these gentleman. we'll hear more from them in a moment. mcdonald's just out with numbers, this number on the bottom line looks relatively light. 1.32, the street had been looking for $1.37. if you look at current ly currency accounted for 7% off the top. revenue came in line at $6.9 billion but the street is looking at this as a disappointment. the dow component closed at 91.58 and remember last week when we heard from coca-cola, they also had all these issues

with currency, with the very strong dollar coming out to be a big, big deal but coke was still able to match the expectations on the bottom line, and that was seen as a huge success. mcdonald's coming in at 1.32 versus the 1.37 the street was looking for, currency accounted for 7%. if you look through the different areas overall, they did see overall growth for the second quarter, europe has been a particular area of concern, for the quarter europe delivered comparable sales growth of 3.8% and asia-pacific, middle east and africa comps were up 0.9%. >> you look at europe and you see that the sales growth increased, operating income decreased and as a result the currency issue because if you stripped out currency, they're saying it would increase 8% in cost and currency. >> it does look like they probably have some strong volume

that's going on there, a lot of people ending up in the stores, there's always this idea of the trade down when you face a troubled economy, people going down to the dollar menu, they call it the euro menu. this is a dow component and going to add to pressure. we've been watching red arrows across the board for the futures, drops about 1% for the dow and that is not going to get help from mcdonald's. dow down by 142 points, s&p down by 14 points. >> let's walk you through the headlines this morning, you can see before we go any further, european stocks have been falling sharply in early trading. it is red arrows across the board in large part because investors are growing more concerned that spain may need a full sovereign bailout, after a second region of the country reported it may need help. half a dozen regions are ready to do likewise.

take a look, it's come down slightly. >> 7.51% earlier today, had a lot of people taking off but still. >> either way it's not good news. meantime greece's prime minister saying his country is in a great depression. he compares it to the american one in the 1930s, greece's international lenders are due to arrive in athens tomorrow, going to be pushing for further cuts needed for the debt-laden country to qualify for further rescue payments, athens wants to soften the terms of a $130 billion euro bailout. in other news this morning, nasdaq plans to pay out now $62 million in cash to firms that lost money in the famous or infamous facebook bungled ipo, exchange is modifying an earlier plan that drew criticism from market makers and other exchanges. the new plan is $22 million

larger than the original one. the biggest difference in all the compensation is now it's going to be paid in cash rather than trading credits or rebates. let's get a read on the u.s. economy, given what's gone on on friday with second quarter advancing in gdp numbers. joining us for more on what we can expect, cnbc's steve liesman. >> thank you. the big news of the week is this friday jobs report at least on the surface it's going to be the second quarter gdp report. dig a little deep and the bigger news maybe that economists are projecting second quarter weakness is going to spill over into the third quarter, friday the economists expect the government to report 2q growth at 1.4%, down from 1.9% in the first quarter and well below 2% which people think is the normal rate of the economy these days. we'll be watching the annual revisions, they go back to '09 and last year they turned sentiment around about the strength of the recovery when there was a big downgrade.

maury harrison at ubs saying "european and domestic public policy uncertainties suggest that near term risks to our forecast are to the downside." jpmorgan "the real news is a convincing downshift in core retail sales through june, coming at a time when sharply lower gasoline prices had been expected to boost spending." it took more off of the third quarter dropping it by a half a point to just 1.5%. macro advisers taking 0. 3 and put third quarter growth at 1%. stephen stanley who is bearish, "the with the election looming on a broad away of fundamental questions regarding the fiscal and regulatory environment for the next four years up in the air, i expect businesses and to a lesser extend households to behave extremely cautiously over the next three months." stanley has a 0.7% number on second quarter growth.

a rebound in housing could push growth above 2%, according to naroff. hfe could pick up steam in the third quarter to 2.5% but right now the number two in front of a growth forecast is a rare commodity indeed suggesting a downshift in the economy that could prompt additional fed action. thank you. >> larry, are you with the optimists or pessimists here? >> i'm on the pessimist side. something troubles me here. when you're looking around 2% growth, you're awfully close to recession. to me anything that jars, let's say you have -- >> a shock to the economy. >> a shock to the economy, could come from europe. i'm worried about inventories, industrial commodity prices. you also had this duality where oil prices have behaved

themselves and gasoline prices have come down but food prices have been shocking. food prices led by corn, that's a tax hike on the economy. >> gas prices actually rose last week after a long time of dropping. >> yeah, but we're down quite a bit from the $4 peaks. the other thing i would say, it's the nexus, poor jobs leading to flat incomes, lower retail sales, and another kicker as we've seen very poor, investment from business. business is worried about the tax cliff. business is worried about tax rates. business is worried about health care regulations. >> and the economy, too. >> none of that stuff has been resolved and business is worried about europe and their exports and the strong dollar, so you just, it's hard to see where the positives are going to come from right now. >> he will's bring in one more voice on this conversation, marty regalia, chief economist of the u.s. chamber of commerce. marty you heard how larry laid it out. what are businesses laying out, what are they expecting?

is there any silver lining to any of this? >> i don't see much of a silver lining. wear looking at an economy if you could excerpt from europe and the fiscal cliff and just look at the base economy, it's pretty weak, 1.5% to 1.75%. the core spending in retail is very, very weak, and weakening. investment is very weak, because there's no sense to expand or add to capital, so we're not seeing much of that. the trade numbers are very weak because of what's happening in europe and because of the strength of the dollar. so the fundamental economy is weak. you superimpose on that what's going on in europe and the uncertainties created there, and what's going on in our own country because of our inability to face the fiscal cliff and you have an economy that's paralyzing at this point. the business community is reflecting it, consumers are reflecting it and the numbers are going to reflect it when they come out at the end of the week. >> larry, i want to ask you about the fiscal cliff. you had an incredible last week with the treasury secretary. >> thank you. >> you asked him point blank, is this the way to operate?

he said no way, we shouldn't be doing this. we heard from howard dean in the last hour who hopes we go over the fiscal cliff. what's that going to mean? >> i think going over the fiscal cliff is a terrible idea. i think the problem is congress is not going to solve it. they've got one week before they go away for the august recess, not going to get solved. the house may say full bush tax cuts but the senate's not going to act, so far as i know. i'd like to see the senate act. i don't know what pat toomey thought about that. i spoke to him on radio this weekend, he wasn't too optimistic. >> no, he wasn't. >> the second point is, chaos after the election, the election, whatever the outcome of the election is, that by itself does not solve the fiscal cliff. you've got to put together a coalition of votes to figure out how to extend the tax cuts, which is my main issue here. i'm not so worried about the spending cuts but that may be an issue, too. so you talk to somebody in business, they're not anxious to

make any future commitments, whether it's high hirie i hirin expanding long-lived factories and buildings until they know what the tax rules of the game are going to be particularly the depreciation rules, other taxes, small businesses particularly pay the personal rate, and if you knock out the top two brackets on the fiscal cliff, what happens? that's a million small business filers with over 50% of small business income. these are exactly what you don't want. it's what i talked to mr. geithner about. he's willing to take the risk, tim geithner, willing to take the risk on the high end rates. i am not. i think this is no time to take any tax hike risk in an economy that is in a growth recession, if not an outright recession. >> joe, you're our representative of american business sitting at the table. >> as far as, one of the things that strikes me immediately is that over the last month or so i know that larry has been bearish

but this is the first time he's been bearish in 25 years so that raises a red flag, number one. number two, when you think in terms of the issues going on in europe and our clients ask us about this all the time. when we had our blow-up in 2008 we had 50 states come together under the direction of one government. you've got 17 independent countries with 17 independent perspectives in terms of what's going on. i'm not quite sure how they figured that out. question for larry or marty, in terms of is there anything, anything that either obama or romney might be able to say or do that they clearly haven't said or done over the span of the next few weeks that helps settle down the anxiety that exists? or we just have to wait until after the elections and keep our fingers crossed? >> each of these gentlemen has their own message. we can go through the message, romney tends to be a lower tax message, obama tends to be a higher tax message. romney seems to be the pro-business guy, the market friendly guy, president obama

took a whack at business, as you well know. >> yep. >> listen, i've been worried about the economy for the last three or four months because of the jobs storstory. the jobs lead into retail sales and consumption, but the fiscal cliff affects business. you've got all of these higher end smaller businesses that pay the llc s corps tax rate which may go up substantially not only because the bush tax cuts expire but the obama tax hikes begin next year. beginning 2013 you could have a $450 billion tax bill and the marginal rates that affect economic growth and incentives go up. how the presidential candidates come out it's mostly -- >> i think there's a lot of uncertainty no matter who gets elected. say romney were to win and bring for example, even both houses with him. you would have the uncertainty

of the repeal of a lot of what the obama administration did or probably what larry said six months after that. we're probably moving in the direction that some businesses want, which would be positive, but you have a lot of things that are going to be up in the air for a while here. >> but steve i may not get an answer, but i just want to say, i want to front run my own interview, but i'm interviewing governor romney. >> tonight. >> we're going to show it on the show tonight and i'm going to ask him about his thinking regarding these next few months. i'd like to hear what his preferred strategy is, and then let's say if he does win, what's going to happen in his first six months or first 12 months. first 100 days, remember that idea from fdr? this is one of the moments when the first 100 days -- >> marty they're rolling the music but i want another quick answer from you. >> there are sectors that are doing well. the energy sector we ought to be putting more into that and we ought to be exploiting some of our energy advantages right now, it would create jobs, it would create income and might help jump-start the economy.

we're not even doing that. >> guys, my question is, is there a mandate from this election, because both sides say it is but i don't know you walk out of the election with a mandate unless we turn the conversation to this issue for more and more. >> i think you have very contrasting views in this election, very contrasting views. >> if one side ekes out with a win or 1% or less i don't know you walk out and say you have a mandate. you still have to deal with the other side of the aisle. >> the views may contrast largely but the math is the same. >> the math doesn't change. >> the solutions change. >> the solutions change and the pivotal issue is actually going to be the u.s. senate. that's the pivotal issue. >> marty, thank you very much, steve thank you. >> thank you. >> larry, thank you for joining us. >> my pleasure. >> and by the way don't miss larry's interview with the gop presidential candidate in aremi romney, tonight, 7:00 p.m. on "the kudlow report." coming up, onyx pharmaceuticals winning approval for a blood to combat blood

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the approval for this new therapy is big news. >> let's talk about what it means for patients first before we get to the business. >> sure, for patients, multiple myeloma is the second most common blood cancer of all, just behind lymphoma. these patients have good options but once they reach the end of the available therapies they don't have very much until now. that's why the drug is so important. the average patient in our trial had seen 13 therapies and one patient had seen 20 therapies so these were the sickest of the sick patients. >> this new drug extends life by how long? >> this new drug actually

improves overall survival from this trial, 15 1/2 months. compare that to the currently available therapies where it's only six to eight months so this is a significant improvement. >> you're charging $40,000 on average for the treatment of the drug. in an age we talk about health care costs how do you think about that issue? >> we spent a lot of time being thoughtful about this. we did research with health care providers and with payers and our conclusion after those discussions was that for the value to patients for the unmet need here and really importantly and i want to underscore this for the amount of continued research for patients, not just for this but the other therapies that's where the rest of the proceeds will go. >> you spent $1 billion in ten years? >> collectively six to seven years, that's right, this was quick. >> you bought the drug? >> we bought the san francisco company just down the street from where we are and there was

something we saw in the early data for this particular ther y therapy, we thought we had a winner and turned out to be true. >> the model is not to do r&d but to find companies that have successfully or looked like they were on their way toward success. >> we do development, which is the clinical study portion that gets the therapy through the fda. we don't do the internal discovery, the basic science side our self. >> tony, you had mentioned that the drug itself extends life another six to eight months. >> yes. >> how about the quality of the life of the patient over the span of that six to eight months? how is that impacted? >> it's remarkable, joe. this came out at the fda hearing about a month or so ago, several of the patients who came to the hearing from the fda stood and testified in front of the fda and said what a terrific difference this drug had made in their lives. it gives them good quality of life, the side effects are few. there's a very funny side effect that happens sometimes, nerve

damage in the extremeities, only 1% of our patients had that particular side effect, so you had testimonials from patients, and it was really a thing to behold. >> was there an improvement in their feelings and behavior, and again, quality, from the time they started to take that or was it more status quo? >> most of the benefit is in actually the shrinkage of the tumors and so that's what we noticed first but the fact that these side effects weren't the typical that you'd expect from therapies, patients really do appreciate that. >> is there a next step that potentially means the elimination of the tumor? >> that's what we're going for. >> yes. >> this is a disease that unfortunately is uniformly fatal, which is why we're testing cyprolis in other lines of therapy for multiple myeloma. the patients in this trial were the sickest of the sick. we now want to understand what happens if you're newly diagnosed patient, can we deliver the same magnitude as we

can in the sickest of the sick and that's what we're studying now. >> good luck with that. >> thank you. >> we have to run but i wouldn't be the first to tell you you're expected as a takeover target, how do you think this changes in terms of remaining independent or taking on a partner. >> it changes the price first of all. >> i'm not going to speculate on rumors but i will tell you our first job is to take care of patients. as of today we have people educating health care providers about this new particular therapy and we're going to stay focused there. that's our job. >> tony, thank you for coming. he has an amazing story, his son is a cancer survivor and it's remarkable story and how you've gotten into the business. >> i would love to be back. thanks, becky, andrew, john. at 8:40 the industry changing tech startups you haven't heard of yet, bruce gibney of the founders fund will talk to us about the technology

companies disrupting business as usual. "squawk" will be right back.

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coming up in a moment, a bleak view of the economy, roger altman breaks down the economic headwinds and the implications for the november election. and the biggest technology startups you haven't heard of yet, that's the operative word. we'll talk tech with bruce gibney of the founders fund, after the break.

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welcome back to "squawk box," everyone. take a look at shares of dow component mcdonald's, the company came out with their second quarter numbers.

it was $1.32 a share, and that was five cents below what the street had been expecting. the number of 1.32 included a seven-cent hit because of currency rates being unfavorable but the street is not looking for this in the knee-jerk reaction, shares down 2%. mcdonald's issued comp. store sales numbers for the month of june and on every measure on the global level, the european and north american level all above expectations, still, though, the currency is going to be a factor, last week we heard from coca-cola, who also had the same currency issues and was able to meet expectations despite the big hit they took from the currency changes. also check out the big mover of the morning, canada's nexen energy is being bought by china's cnooc for more than $15 billion in cash, a 61% premium above friday's close and there are lots of points they bring out in the press release at the top about why they say this is

good for canada. it's been an interesting story to watch this morning. the u.s. recovery has been slowing to a crawl in recent months likely making the data we received before the november election critical to its outcome. joining us is former deputy treasury and evercorps' chairman roger altman and our guest on the set joe moglia. let me ask you this first, roger, before we get to the u.s. because it's a cloud that's hanging over all of us, which is europe this morning, thinking about the ten-year in spain, thinking about the issues in greece, thinking about some of the comments over the weekend some of the officials in germany have made about not wanting to provide any more money. how do you handicap, we've been talking about kicking the can, the next kick, how do you handicap the next kick? when is it going to come? what is it going to look like? >> andrew i assume you're referring to europe? >> yep, i am referring to europe. >> i think it's a matter of continuous kicking, so the next

step is obvious, there will be more delay and more ambiguity. it should be no surprise to anybody that the crisis has erupted again, because most of europe is in recession, because none of the structural changes that have been so widely and incessantly talked about, fiscal union, banking union, have been actually detailed or let alone taken, and the rescue of the spanish banking system is not finally done. the greek bailout, of course, may be as we can all see unraveling. so the idea that the spanish ten-year is at 7.50 a few minutes ago and the u.s. ten-year is at 1.40 and that's just as profound, unfortunately, it's no surprise. >> roger -- go ahead. >> there's some wires just

crossing right now, roger, that say that spain's market regulator is banning short selling on bank stocks for three months. people keep looking for big actions. does this qualify? >> no. that doesn't qualify, becky. what people, if they step back, should be concerned about, is that spain is on the verge of losing access to markets, to financing itself. at 7.50 you're right on the edge. if spain should lose that of course that would require that the esm take over the responsibility for financing spain. the problem with that is doing so would consume a great deal of what's already been committed to the esm, only 500 billion euro and by the way the spanish banking rescue also comes out of that, and that would leave the esm much too small, for example, to deal with italy if italy

should go the same way. >> right. >> so i wish it were otherwise but it's no surprise that we're seeing this eruption again, because none of the necessary steps have yet been put in place. >> roger, back to the u.s. for a second. you spent a lot of time in board rooms with ceos, boards of directors. when they talk about the issues that are overhanging us, is it europe? is it the fiscal cliff? is it chooina? how do you rank those with what seems to be paralyzing our economy in. >> andrew, first and foremost, most ceos focus on the outlook for their own business and in general the outlook is fair. it's not terrible. corporate balance sheets of course are extremely strong, so there's not concern over safety issues. >> right. >> and there's a sense of progress even if it's painfully

slow. now beyond that which of those three factors impin nlgs the most on a particular ceo's thinking depends on the scale and breadth of his business. those who are operating or affected by china are seriously concerned about the idea the slowdown may be more severe than the statistics coming from chai dma suggest. and of course those who operate in europe are sensitive to the market because of the nature of their business are worried about europe. i don't hear a lot of talk about the fiscal cliff, that's mostly so far in the press and among the pundit class. >> joe, where does the fiscal cliff come out for you? ? when you look at what our more educated investors have anxiety over, europe, what's going on

politically and our economy. with regard to europe, the segue on a point we made earlier, when you think about what happened in 2007 here, the government was able to move incredibly quickly to put a rate of $350 billion money market reserve, et cetera. that was done immediately, had that not happened we could have gone back to the great depression. what you've got in europe, you've got germany on one side of the equation, greece on the other side, spain next to them. italy right next to them. what they care about is different from country to country. the question i have for roger, is how are you going to be able, they started talking about their problems a year and a half ago. how can you possibly over the span of that year and a half where no progress has been made, 17 different governments can't come together, how do you fix the problem in europe? what advice do you have to are them, roger? >> joe, i think they actually

have made progress because they're much closer to for example serious steps on banking union. the problem is you need 17 separate nations in and most cases 17 separate parliaments to approve any of the steps we're talking about here and inevitably, and given the very different characters of these countries compared to each other, inevitably that's going to take a long time. if the eurozone survives and we're having this conversation 10 or 15 years from now this very conversation we'll look back and say well it was necessary to take three years or four years or five or six years to do that given the history of the political differences, the parliamentary approvals and so forth. the problem is of course the crisis may not give them that much time and that's why, you know, it's a crapshoot as to whether the eurozone in terms of

its 17-member character actually does survive. >> roger, before you go and we have to let you go, real quick, we're calling it merger monday. i don't know what's in the water today but we've had close to $20 billion worth of deals, of course one of them being $15 billion with cnook coming into canada. is there anything to be said about some form of confidence reemerging or is this a one-off that's industry specific? >> it's difficult to judge, andrew on three announcements on a monday morning. i don't think merger activity is weak. yes it's down 25% to 30% in dollar terms year over year year-to-date but backlogs are generally good, activity levels in terms of working on deals quite high and i think conditions are slightly better. of course this year was expected to be an up year overall and it may turn out not to be in terms of total dollar volume globally

but i don't think merger conditions are poor. i really think they're pretty active. >> roger, we'll leave it there. thank you for joining us. joe moglia will stick with us through the rest of the prap. >> when we come back we're continuing our disruptor series with a venture capital partner that invests in tech startups that are changing the world. bruce gibney of the founders fund will join us right after this. with the spark cash card from capital one,

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we're back, it's disruptors time. founders fund taking ideas from inception to ipos. what are the latest projects disrupting the world? we'll find out right now. joining us on the set, bruce dib know, former managing director at peter thiel former hedge fund. you got to be happy being out of the hedge fund business, this has to be a better business now. >> the returns are pretty decent. in the past two months microsoft required yammer for $1.2 billion in cash and so good break so far. >> during the break you want to tell us task rabbit which i think is one of the coolest new apps on iphones. >> it's a great company with a great ceo solving a major problem. labor market inefficiency is probably one of the most significant problems that the

united states faces right now. it's unemployment is, unemployment and underemployment are high for a variety of reasons, one of which is not because there's a total absence of supply and demand but it's difficult to meet casual supply with casual demand. >> explain what this thing does though. >> anything i don't want to do i can outsource using my iphone. if you want to supply that labor or anyone in the world wants to supply the labor task rabbit will hook you up. >> need a box moved from my apartment to my office, i go online and say i need this and i'm willing to pay 20 bucks and someone decides randomly they're going to do this? >> there are a lot of people who want to set their own schedules, are unemployed or underemployed. >> what kind of jobs can i either get on this thing or post for? >> this is the great thing. there is nothing that savory --

>> i thought of something in the break. >> we know where her mind goes so early in the morning. >> delivery in san francisco, to web services to just a catch-all of any service you can think of any person wants to provide that's sort of above-board. >> right. >> you can have taskrabbit assign it out. >> is it in san francisco mainly? where else has it rolled out? >> operating in nine markets including new york so if you have chores you want to do this weekend i recommend that you outsource them through taskrabbit. >> i'm thinking of doing it. breaking news on the is he, you have some news you're going to be breaking shortly. >> i do. we also happy to announce we're leading a round in asano, dustin mocovitz new project, one of the co-founders of facebook, there's a long relationship there. peter will be joining the board.

basically what asana does and it's an amazing crew, just like dustin, it makes project management in the workplace much more efficient and this is actually sort of, if you look at this thematically and we tend to look at things that way, one of the oddities about the past 30 years is that computers have gotten way, way better and you don't see it in the labor product of the stats. it's surprisingly absent and i think the reason why is that software is just incredibly bad, for example, just managing your day-to-day project work flow you have scraps of paper, your calendar on outlook, e-mail. >> and this solves that? >> it's all in one place. >> joe has a question. >> a have a group of players, many interested in doing something on wall street and one of the things that's come up by some of the td ameritrade clients as well you talk about the venture capital industry and people that make specific investments there.

how is that different from the active portfolio management? what would be the skillsets required of somody of what you do, a venture capitalist person versus somebody that actively manages money in mutual fund? >> patience is probably one of the key virtues and willingness to take technological risk. you have to have an opinion on the direction the company is going to take over ten years. for more active portfolio managers that obviously is more challenging but the nice thing i have to say about being a venture capitalist, coming from the hedge fund, you can't trade around your convictions and that tends to preserve quite a bit of returns. >> how do you feel about facebook right now? >> i think it's one of the world's greatest companies. i can't comment on the news that's coming out because one of my partners is on the board of directors, but you know, it was actually the very first deal i worked on, on the private side with peter and to think in 2004 it was literally nothing and now it has almost 1 billion users is

astonishing. it shows you what american technologists can do. >> different direction, the ipo market, is it broken, is it dead? when you look at the facebook deal, when you look at what's happened to groupon, how does it change your calculus in terms of vc investments? >> really, it doesn't that much. because we get in so early that the last doubling, while it can be quite important, is not, you know, won't necessarily make -- >> does this exit system work? >> i don't think it does work at some level for retail investors right now, and one of the reasons why, and this trend is going to continue is that the jobs act, which has now allowed companies to stay private functionally forever, previously it was sort of you had the 500 show and you'd grant equity to employees if you had 500 employees and 500 shareholders and you had to go public, right? now it's 2,000 people and

employees are excluded from the calculation which means companies can stay private indefinitely. lot of high growth companies are reinvesting all of their profits in their business and don't show that bottom line and don't produce dividends will choose to stay private until growth moderates. i'm speaking generally, not about any one company in particular. that has profound implications for the retail investing business. >> joe, what do you think? >> i think ipos from an historical perspective, good deal, good price, great demand. if they're crappy deals, retail seems to get a lot more stock and one of the ways potentially to approach that to be fair is the dutch auction process, the auction process is fairer for institutional and individual investors alike, and i think that makes far more sense down the road than maybe what we've had up until now. >> we'll leave the conversation there. bruce thank you for coming in and breaking a little bit of news this morning. >> thank you, guys. don't miss cnbc's "20 under 20" designed to find the world's

most talented technology entreprene entrepreneurs, 20 young innovators a chance to win $100,000 and two years of mentoring by silicon valley's best and brightest. there's a catch they have to leave college or high school to focus full time on the big idea, a two-part special will begin airing august 13th and 14th at 10:00 p.m. eastern. don't miss it. okay, when we come back, it is merger monday. the latest buzz from wall street and the new york stock exchange, right after this. to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture o

welcome back, everybody. let's get down to the new york stock exchange. cramer joins us now. jim, we've got all these deals but i've been dying to ask you about mcdonald's. what do you think? the currency headwinds were there but coke was able to overcome them. why not mcdonald's? >> people want very much to say mcdonald's was terrible, and can i understand the stock being down a couple. do i want to tell people that i think what matters is june was hardly that bad. same-store sales up 4.4%. >> well better than expected. >> pretty good number. >> europe plus 5%. everybody wants to dump on it. everybody wants to say why isn't

it coke? coke delivered an amazing quarter. coke was very well hedged. everyone wants to throw in mcdonald's. goldman sachs downgraded 85, 86. probably gets there and then turns around. >> so you like what you're seeing, especially the most recent numbers that we got for the last month. >> june was good. june was good. >> yeah. >> it's so easy to look at a headline miss and decide you've got to throw that away. when i look at the currency, can you say the currency horrible. the fxc is going to 100. just going to get worse and worse. i to want to tell people that at a certain point you have to understand that companies -- american companies are just doing a fabulous job overseas. 5% comp in europe is pretty darn good. >> what about the story this morning andrew was talking about it. look what happened to unocal. they say we're done with the united states and they look at canada and the top of the press release has all these reasons why it's a great deal for canada. >> i think it will happen.

the 2005 unocal, an american company with a lot of different holdings, by the way off of china, $18 billion deal. the canadians blocked the potash deal. i don't think this is the kind of deal that will be blocked. the chinese need this oil and gas. by the way, this company looks like a lot of american companies with a similar balance of oil and gas, and i just think that this could be the beginning of a canadian wave. hard to imagine an american wave because we're so protectionist when it comes to china buying our companies. >> jim, real quick. >> spain banning short-selling on banks the next three months. meaningful? >> look. spain is a disaster. we actually an export number that's a little bit better and as the euro goes down, you might see more than that. look, we won't be able to today withstand the decline. the s&p futures take down everything, and then what's been happening is we take a look at everything that yields 3.5%, 4%. don't forget the 30-year. 2.49%, so when you look at the

30-year and you look for yield, which everyone is going to be doing, you watch the futures knock down the american domestic security companies. you wait till they yield 3.4, 4 and then you pull the trigger. >> jim, thank you. we'll see new just a couple of minutes. >> thank you. >> okay. >> coming up, we'll get some final thoughts from our guest host, chairman of it. d. ameritrade after the break. >> tomorrow, "squawkbox" is true to its school with professor jeremy segal and the chairman of software client s.a.p. domino's delivers to the set and sarbanes/oxley ten years later from michael oxley himself. the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. take a look at futures. the dow is down close to 200 points based on fair value. s&p futures off 18.5 points. that's a drop of 1.5%. futures down by just over 1.3% for the s&p futures. it's all because of concerns out of spain. it's gotten worse throughout the morning. >> all right. let's get quick final thoughts from our guest host. you're now in the football business. in two minutes time we'll hear from the ncaa on their penalties for penn state.

you would do what? >> at the end of the day it's not about just penn state. as a coach you are really untrusted. you've got a fiduciary asset of a family, their kids, and if you do anything at all that will violate that trust or hurt them or take advantage in any way you're supposed to be held accountable for that so you have to live with the consequences of their actions. i want to turn it around. 100 guys coming into camp and we'll talk about career planning. a half a dozen guys that are coastal that would lyric to be journalists. what kind of skill sets who you advise? >> i would say writing is first, no matter what you want to do. >> and how you want to go after it? >> i think writing is the most important. because if you can write, can you do just about anything else. that care its you in every form, including television. you've got to be able to write to do anything and that's just practice, practice, practice. >> curiosity. naturally curious. i wonder if curiosity is a learned skill but have you to naturally want to know. >> how about summer jobs? what do they do there? >> inattorneys.