joe continues to enjoy some time off this week. our newsmake esh of this hour is goldman sachs chairman jim o'neill will be joining us live in a few minute. apple's third quarter results falling short of estimates after the bell. it was the company's second miss in less than a year. the company blames a sagging european economy and a pause in iphone sales ahead of a new version for that device. apparently everybody is waiting for the i5. shares dropping sharply on this news. you saw a big haircut, down by 4.8%, a drop of more than $28. we'll continue to get this earnings foray today. a number of corporate results to watch before the bell, including boeing, caterpillar, aol, conocophillips, eli lilly, pepsi and well point. a lot more to come. a broken record here but continuing fears about spain this morning. the country's funning costs have reached near new era highs. madrid has to find 50 impl euros

in funding by the end of the year, 10 billion euros more than than they expected at the start of the year. regional debt soaring borrowing costs, higher deficit and souring market sentiment, which could account to too much for madrid without aid. moody's cutting outlook for debt rating of eurozone's debt fund, comes after moody's lower outlook on europe, luxembourg and spain. we'll have more from london in a few minutes but now over to you. let's talk about other news. "the washington post" reporting that the new york fed was silent on barclays admission of libor rigging. them tim geithner reportedly didn't tell top regulators the british bank admitted to fed staffers, yep, it was manipulating the key rate. in his current role as treasury secretary, geithner is going to be testifying today before the house financial services committee. the hearing is on an annual

report on the financial stability of our economy. but, of course, legislators will be eager to ask geithner about the libor scandal. he said the new york fed did everything in its power to sound the alarm four years ago. from what we saw of his presentation, by the way, he's not mentioning in his opening statement anything about libor. >> that will be the big question, that will be the focus. other news out of washington, the t.a.r.p. watch dog warning hundreds of bailed out banks are struggling to repay taxpayers. the quarterly report to congress says those banks will soon find it even harder to make required dividend payments to treasury. that is set to increase 9% from the current 5% as early as next year. by the way --. >> t.a.r.p.'s already profitable. >> it is. by the way, on the same subject, i don't know if you saw in the new york times today, neil barofsky, the other watch dog originally, wrote a book "bailout ", it is -- i've never

read a book review like this in ages. the most remarkable book review that you -- >> why, what did -- >> it's on the cover of the section. it's like if you could say that a book was hated more. it was unbelievable. if you get a chance to -- jackie combs wrote the piece. unbelievable piece of, i guess we call it journalism. time for the global markets report this morning. we'll go across the pond and say hello to kelly evans, who's standing by in london. >> andrew, good morning. there's tons of olympic anticipation around here, but markets this morning are looking a little more muted as they take a pause, try to digest the news flow we've had over the last couple days. advancers outpacing decliners on the europe stock 600 by about a three to two ratio. up about a quarter of a percent this morning and added to gains in those positions just in about the last hour, hour and a half or on. let's hone in on european and

starting with the ftse 100, managing to be up 0.25% despite ugly figures on britain's economy. investors saying perhaps weakness isn't as accuse as the 0.7% drop. dax up 0.6%. this despite the ifo institute coming out and saying that sentiment had worsened, keying off the pmi weakness yesterday, certainly pointing to more weakness in the german economy. stocks are shrugging it off. the ibex in spain up 1.8%. we have to keep this in perspective of the severe losses we've seen in earlier trading sessions. bonds are what to watch this morning. in particular, the spanish curve, this one is flat as a pancake. ten-year in spain, 7.55%. the seven-year and five-year sitting at just about that same amount. the two-year was up at 7% earlier this morning but it's

since fallen back to 6.8%. we're of course waiting to hear more on whether the ecb could take losses -- additional losses or losses in the first place, i'm sorry, on the greek debt that it holds. that will hold the key to the performance across the spanish curve here. it's not just about recession. it's also about what happens if that country needs a bailout. back to you guys. >> thank you very much. as kelly was talking about, investors have been running for the hills, as europe's fiscal crisis worsens. jim o'neill, chairman of goldman sachs asset management with $38.6 billion under management. kelly brought up a great question, one the market's been waiting for, is will the eurozone, will the ecb, end up taking any losses or any of the haircuts that come out when it comes to greek debt? what do you think? >> well, given they've been involved in trying to take some of the greek debt off individual countries and private sectors, it's going to be pretty difficult for them to avoid some of it.

>> right. >> haven't given -- given some other issues going on, i haven't given that a great deal of thought recently. i don't see how they can avoid taking some. >> when you look -- i would imagine that's the thing that a lot of people in the private industry think at this point. you scare away private investors if you don't agree to take some haircuts yourselves if it's a two-tier system? >> yeah, i think that's the broader issue, as part of the pondering going on in markets today. it would seem inevitable, given the escalation of spanish bond yields in particular since last friday. but the monetary authorities have got to try something else. but private investors are kind of like, well, unless the ecb does suffer some of the risks of it, what incentive does that actually give to us to follow it on? so, i'm sure that the minds inside the ecb and advisers are

trying to figure that out right now. what is sure is we cannot continue with spanish bond yields rising the way they are. not only would this represent serious, serious challenges to the future of the existence, it would have consequences way beyond it if they carry on like this. ultimately the monetary authority has to do something about it. >> what do you -- what would seem like a reasonable solution? we hear all about the problems. there aren't a lot of solutions that sound like they might work. is there anything you've heard about or that you've thought about that you think might actually be a step in the right direction? >> well, i think i've said to you guys before, you know, if they wanted to behave like genuine eurozone, let's call it, united states of europe-like policymakers, they could solve it. while we're having this interview. just come out and make -- get all leaders on the screen together and say, from now on, we commit to some planned euro

bond in the future, not necessarily even specifying the date, and, presto, that would be the beginnings of a major resolution. >> but that's a lot easier said than done. >> of course. it's up to them whether they want to do it or not. there are three scenarios. that's the nicest one, especially for people that believe in the grand european project. the other one is they just call it a day and say, okay, it was a mistake, let's stop it. or the third one, which is the one i think policy makers prefer, which is increasingly known as muddling through. muddling through can't survive, as we're going to show in a paper we're putting out in a couple hours. muddling through can't survive spanish and italian bond yield for this long. it's not a persistent option. >> jim -- >> you have to put -- we have shown a way, two years max, two

years max. but markets being markets, we've unveiled a degree of speed of move again here in spanish and italian yields, which make it tough to see this getting through the summer without some serious consequences. you know, i read in the papers this morning some amusing comments about european policymakers won't do anything because they've gone on holidays. guess what? this could be the sixth summer running where none of us will have a holiday because it's not going to be a holiday for anybody if this goes on, that's for sure. >> so, the paper that you're putting noutout in a couple hou will say two years max but more than likely something will happen over the summer, because of where we see spanish and italian bond yields right now? >> you know, i'm fond of -- again, as i've said to you on here, of saying things like china creates the equivalent of greece every two and a half weeks. spain is the largest economy in the euro area italy is the third

italy is the third largest debtor in the world. the european -- as a goldman colleague put it to me at a meeting we had a couple weeks ago. essentially, the whole devoted international european devoted government bond buyers disappeared. we're behaving as though it's an asset class of the distressed debt market. and if you put italy in that context, the size italy's bond obligations is bigger than the whole global distressed market. so, the whole of emu is ceasing to slowly function. everyone is doing these preparedness exercises all over the place about whether it's financial institutions or corporates, which in itself is causing the thing to unravel. this-f these policymakers want it to survive, as they all keep claiming they do, do something of significance to support it instead of this repeated

ditherring. even when they have summits and claim they agreed to something, as they return to their own capitals, they interpret it differently. >> do you think that there is actually a likelihood that they will go ahead and do something substantial, as's mystic as this all sound? at the end of the day, do you think they buy into this and agree and finally get the message and say, okay, we're going to do something substantial? >> well, i'm caught by the weekend from an interesting phrase mario draggy used in an interview where he said there were no taboos. that suggests to me, at least from a monetary perspective the ecb is probably going to do plenty more and it might have something up the sleeve in the not too distant future. >> jim, have you -- >> that is -- that isn't a lasting solution for the underlying -- the markets are

figured out, it doesn't work. they have to do the underlying path has to be something to do with that. in the meanwhile, the monetary authority can do plenty. >> jim -- >> you look, again -- sorry, go on. >> if i'm an investor and i'm listening to you, and i'm probably getting depressed a little bit this morning, the question then becomes, is there more risk on the downside at this point or, frankly, more risk that actually they come and do something and that you'll miss out on the upside? >> i don't like to depress -- we have the summer here for the first time in london and olympics starting. we can't have people depressed. let me switch gear a little bit. >> i'm not suggesting you shouldn't be depressing them. i'm trying to figure out where the opportunity lies, if you will. >> well, if you look at the -- you look at the valuations, and we touch on this in the piece we're putting out as well. if you look at the valuations of european equities, they are

priced for almost permanent disaster. you know, many people think, well, that's the way europe's going to stay. essentially, europe's now down a path of japan. but there are changes going on. this is why the monetary authority needs to play a bigger role, in my opinion. quite a few of these countries are doing things because of the crisis. there's some evidence that unit labor costs differentials with germany are starting to now owe n spain, portugal, even a little bit in greece, believe it or not. and so, you know, there is going to be some kind of life out there, whatever the hell happens with the euro. so, i think there is probably for investors that have -- that those limited few, seemingly these days, that have the luxury of not worrying about next week, you know, there's a lot of are value around here. and in a global perspective, as i'm always fond of reminding you guys and your listeners -- or viewers, it's not the only thing going on in the world.

i read a very interesting thing. monday, which is stuck in my mind, one has to reflect on, apparently as of last friday, the year to date performance in the s&p was the best since 2000. but it doesn't feel like that, does it? >> no, it does not. >> and if you reflect back and against that, sentiment from investors is one of the rock bottom lows for many, many a time. and usually when you compare those kind of two things together, it's the investor sentiment that swings. we've got plenty of policy options from the monetary authorities in europe if they're prepared to do it, and at some point they'll be forced to. the fed's got probably some version of qe again around the corner. and most importantly, and here i tend to strongly disagree with the pessimistic consensus, china is showing signs of starting to bottom out. even beyond that, the policy

optionalty chinese have with inflation so low is vast. so, i think people shouldn't get themselves too down in the dumps, as bad and as troubling as many aspects of this european crisis genuinely are. >> marty feldstein has an op-ed piece. if the euro drops, that could be the thing to save spain, he's suggesting the ecb could do something with loser monetary policy to bring that on more quickly, the drop in the euro. in your view, is that sufficient? >> yeah, i read marty's piece with great interest, as one of my underlying professionals, i have the greatest respect for, and somebody i've thought highly of for a long, long time. although on the topic of the euro, i often thought marty never fully understood the dynamics of why it came into existence. for all those euro skeptics watching your program, and all

over the world, reading that piece of marty's is well worth it. he's one of the original genuine and more astute euro skeptics out there, and yet he's arguing things should be done to keep it alive because the consequences of not having it would be worse than otherwise. that coming from marty is quite something. it would be very helpful in principle for the euro to continue to decline. and i think as he argues, if you can contain that without -- this he doesn't mention. if y can contain it and there weren't adverse consequences for some other currencies, such as the rmb, then it would be a price worth paying with other countries to support the europeans doing that. but linked to what i said earlier, the way that will happen is if the ecb gets more active. whilst a lot of conservative ecb

conserve ties hide behind all this legal mumbo jumbo, as i would call it, they have got a mandate for inflation close to 2%. and if you look at the pmi survey, flash pmi as we had for the euro yesterday, what was most interesting in the general weakness, and again in the ifo this morning, is now germany is slowing sharply. and the ecb has got no excuse, from what i can see, to be a lot more active, which would potentially weaken the euro. certainly be a very helpful thing to solve in this mess. the one caveat i would add, which i think marty's piece doesn't really seem to at least focus on or perhaps acknowledge, if the euro were to continue to decline, other parts of the world that manage their currencies on a trade-weighted basis, including the chinese, that would translate into fresh rmb weakness against the dollar, which obviously is something we

would have a bigger issue about, particularly justifiably about, people in washington. that is an additional complication to that. >> no solutions with that other problems create add long the way. you know, what you said about mario draghi's comment about no taboo when it comes to ecb policy, does that give you the impression that at some point the ecb might start printing without anybody else's permission? can they do that? >> they have a mandate. proud, they are generally speaking, very quick and proud to mention that their mandate is to keep inflation to this sort of weirdly defined just below 2%. that is under threat. as the eurozone recession gets worse, ignoring issues about the structure of the eurozone, the ecb needs to be doing more to stop this recession. it's quite clear that their

policies so far are having very limited effect on eurowide financial conditions, which are a sort of lead leading indicator of future activity as financial conditions are in the u.s. and elsewhere. every responsible central bank has a role to play in trying to change that. so, be i read mario's comments as a pretty strong hint that they're going to be doing quite a bit more. the question is, whether it's this afternoon or in the next few days or the next few weeks. >> jim, i want to thank you very much for your time. we always appreciate talking to you. and all feel a little smarter. thank you very much, sir. >> all right. take care, guys. good luck. coming up, we've got john harwood, who will join us with the full story on the new nbc/wall street journal poll. he will tell us how much the economy is playing into the presidential election. and squa and "squawk" is getting started. the man of the next hour, former

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i new nbc news/wall street journal poll is out and john harwood joins us with pretty interesting details. >> we have interesting details in this poll. the top line similar to what we've seen in past polls. president obama leads by six points. . i want to break down a few of the internals that give you a sense of the dynamics of the race. first of all, here are headaches we can see for president obama that have been clear all year long. first of all, 60%, the number who think the united states is off on the wrong track. 53% is disapproval of his handling of the economy. 55% is the proportion of people who think the news they've heard about the economy lately has made them more pessimistic. mitt romney has big headaches, too. 46% don't like mitt romney personally. 52% say they don't relate to his background and values. and 32% say that the recent news they've heard about mitt romney's tax returns has made them feel more negative about

him. you put those competing sets of negatives together, as well as the positives, obama's liked better and mitt romney has some credibility on the economy, here's how it nets out. by 16 percentage points, americans say president obama is better suited to look out for the middle class and by 7% they say mitt romney is better for improving the economy. the dynamic between those two forces, one guy with the reputation bonding a little better with the american people and the other who has some personal baggage because of his wealth and tax returns, but is seen with some more credibility in terms of handling the economy. >> here's what i'm confused about. so, we're looking at a 49% to 43% gap, if you will, with 3 percentage points of margin of error. so, we're still pretty close. >> very close. >> if everybody seems to keep arguing it's the economy, it's always the economy, it looks

like we have romney topping obama 43% to 46%, which is that 7% number you were referring to. >> yes. >> i'm unclear about the middle class number. how people are separating this issue of who's better for the economy versus who's better for the middle class. >> well, the middle class question doesn't -- you know, we have a series of attributes. we say, who's better on this, who's better on that. looking out for the middle class is kind of a proxy for how relatable that person is, how well they connect with average people. i think when you talk about improving the economy, that's more about, you know, who can jumpstart the yin of the engine of the american economic machine and goes to a different set of characteristi characteristics. i do think it's also a reflection in the juxtaposition of those two numbers of the personal connection that obama

has. two-thirds of the american people say they like obama. so, whether they agree or disagree with his policies, 67% like him. the number is 20 percentage points lower for romney. that's the reason why if -- forget about the other particulars of the poll. if you separate out, okay, the economy's bad, people want change, that's one thing. but how they feel personally about the candidates is something that matters an awful lot, too. the obama administration has been pretty successful at driving up negative feelings about mitt romney. >> it appears there's just 8% of independents who remain undecided. >> undecided are very small and negative towards both candidates. they don't rate obama very well, romney even worse. >> we have to race. appreciate it. when we come back, a big miss for apple. ening to the numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions.

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♪ ♪ well i won't back down good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin. y joe is off today. the ecb says demands for loans from businesses and consumers remains weak. it's another sign europe's economy remains slack. also the imf suggests china achieved a soft landing in the economic slowdown but it is calling on beijing to enact more sweeping reforms to ensure healthy growth in the longer term. research analyst is expected to report -- to plead guilty to charges of insider trading. those charges are part of a

wide-ranging probe that involves hedge funds. let's talk apple this morning because it's one of the big stories at the moment. apple shares were hit big time after the bell. the company's results falling short of expectations. will power covers the company for robert w. barrett. we talked about this company yesterday. how surprised were you? >> that's right. good morning. good to see you all again. we were surprised. i think our expectations of the current quarter would be solid, albeit with risks, and we knew there would be risk to the fourth quarter decide answer. that did play out. a bit of surprise, as you looked at the bread crumbs provided by at&t and verizon suggests the sales in the u.s. were strong. and i think probably the mistake we made, and perhaps others, is extrapolating what this might mean for the rest of the globe. >> is this an apple problem or a wall street problem in terms of this, quote/unquote, miss? >> i think it's both. i think in hindsight apple could have guided that much more

conserve tyly, but also trying to understand the trend in europe and china. as apple becomes more global, the checks become more global. >> the fundamental question is, is this slow down -- i don't know if it's a slow down. not growing as fast a product of the fact that everybody is waiting for the next iphone, is that the real issue, or do they wink there are larger structural issue or even larger structural ways people are buying these phones? maybe people aren't upgrading the way they used to. >> i think the pause in front of iphone 5 is a contributing factor but no question the macro environment is playing a role here, as you look at europe, perhaps in china but to a lesser degree in china. let's not forget competition. samsung has done a great job with the galaxy 3 device and others as well. when all is said and done, we believe the iphone is in the

pole position, except strong results at the end of the year. >> does this change your outlook on the company as far as a target price? >> no, it doesn't. we maintained our $749 target price. we still have high expectations for the iphone as we go into next year. as you look at the results, don't forget the ipad was actually stronger than expected, so that continues to push revenue and earnings higher as well. >> you listened to the call yesterday. impressed with what tim cook was saying and how he was saying it? >> you know, i think tim cook's done a nice job. i think it remains to be seen. look, he's still been in the seat he's in for a relatively short period of time. i think the road map largely had been set for him. i think they still, as they noted, have a variety of new products down the pipeline. i think the next generation of products is going to be critical for him in terms of establishing him after steve jobs. >> how quickly do you need to

see the new product come out in terms of the pipeline? next quarter? does this have to happen 2012? >> no, i think iphone 5 obviously is widely expected. obviously, that would be -- >> do you need a completely new product in 2012? >> i don't think you need a completely new product. i think clearly that would help, and i think that is a potential catalyst. itv, we're not expecting that this year, more 2013. but it becomes very critical as you move into 2013 to prove that innovation engine will continue under his stewardship. >> thank you for joining us this morning. >> thanks, andrew. if you have any comments or questions about anything you see on "qua , e-mail us. we'll talk about what traders are talking about in the pits this morning. at the top of the hour, a well-known name both on and off wall street. legendary banker sandy wei will. l will be our guest host

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welcome back to "squawk" on this wednesday morning. look at the futures. looks like it would open marginally. s&p would marginally higher and nasdaq off marginally. earnings just coming out in the past few minutes. let's start with eli lilly. earnings of 83 cent a share, ex-items, beating the street's view of 77 cents a share.

revenues in line. company ceo will be joining us live here at 7:20 eastern time. also, hotel wyndham, three-cent beat. revenues slightly short. let's get back to washington. we're joined with new numbers on super pacs and what do you have? >> our friend at centers for public integrity have new numbers out this morning. the study looks at how companies are donating to super pacs and concludes not necessarily surprisingly that republicans are doing more in terms of super pac fund-raising than democrats are. but take a look at some of the companies that are giving money to these super pacs. an interesting trend, the top democratic donors among companies. perennial strategy group, vitreo, wilkes, ceasers, elaine mckay, in the hundreds of

thousands of dollars and no consume consumer-oriented, maybe ceasers. on the republican side you see the same kind of dynamic. no big consumer brand companies are giving to super pacs here. among the biggest one, oxbo carbon, $2.75 million. contran, crc, these three are registered out of the same address. on the republican side, dote nati the donations are in the multibillions of dollars. republicans raising a lot more money from companies in this study and also bigger donations. but companies on beth sidoth si the political aisle, not in the big consumer brand oriented space. that would lead you to suggest that a lot of companies that have to do with consumers don't necessarily want to get involved in open political warfare. you don't want to ever alienate

half your customer base when you're trying to sell coca-cola or mcdonald's. interesting study. >> beck and i were looking at each other because i don't think we've heard of some of these companies. >> are they covers for -- >> fronts for something else? >> no, these are all actual companies. one is a family llc. they're small and tend to be controlled by a founder or a patriarchial figure. these are not your big, major companies. that's the interesting trend out of this study out this morning, because you look at what has happened in terms of the supreme court decision on fund-raising. everyone expected a sea change here. we're seeing new dynamics but we're not seeing the major consumer companies at least showing up on this list. i think that is very telling. >> i don't know if you saw the front page of the new york times this morning, a new story about sheldon addleson for romney,

starting a multibillion dollar advertising campaign called my buyer's remorse. how big a deal is this? >> sheldon is a big whale for the republican party in terms of campaign contributions. that is the trend we've seen this year, is that these billionaires can get involved in politics in a big way by writing huge, huge checks. i think that is an interesting dynamic, because one of president obama's potential weak points is support for israels. republicans have come out and said, here's a president who has not visited israel while in office. of course, the obama team saying ronald reagan never visited israel while in office as well. going after the jewish vote, when the race is as tight as it is, is going to be crucial for the obama campaign. if sheldon addelson can break into that through this effort, that's going to be damaging. any demographic, when it's as

tight as it is, is crucial for the ultimate victory in november. >> thanks. >> thanks, guys. coming up, just months after its now infamously botched ipo, facebook will be reporting quarterly earnings for the first time today as a public company. we'll be samping a team of experts to get us ready. that's next. at top of the hour, the newsmaker of the morning, you name him in the financial sector and he's been there and done that. today the man who built citigroup is going to be our guest host starting at 7 a.m. eastern time. tomorrow on "squawk box" -- our guest host will be tim geithner's right-hand man, deputy treasury secretary neil will join us for two hours, and quarterly results from dow components, 3m, exxonmobil. [ male announcer ] it's a golden opportunity... to experience the ultimate expression of power -- control. ♪ during the golden opportunity sales event,

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facebook's releasing first quarterly results as a publicly traded company after the closing bell tomorrow. i should say, it's tomorrow for those of you i got a little impatient and said it was today but after the bell tomorrow. the big question is, what should investors and wall street expect from the social media giant? joining us from l.a., cnbc's media and entertainment correspondent got up early, julia and kayla.

i'm going to go to you, julia, first. in terms of revenue, in terms of thinking about the top line, which i imagine in this business is what people are going to focus on even more than the bottom line, how do you think about it? >> well, the big issue for facebook is, of course, adverti advertising. the vast majority of their revenue, 80% of their revenue. when it comes to advertising the big question is mobile. facebook only started serving mobile ads in march. this is the first real quarter we could see any impact of mobile advertising. facebook has taken various steps to make it easier for advertisers to buy mobile ads. it's harder to skip ads. they're right there in your face. we should get a pretty good indication of how mobile will boost the overall ad revenue, but i think we are to be cautious and know we're not going to see the real impact of a lot of these mobile improvements they've made until after this quarter. but i think it's going to be a huge focus on mobile. >> john, we've been having a debate -- you were having a

debate during the commercial break about this issue. >> when i was on last i said i thought the concern for mobile for facebook was unreasonably negative, it should be positive because we were seeing mobile social advertising perform better than desktop. >> people clicking on the ads? >> yes, click through rates on facebook-sponsored stories. true advertising in mobile are performing better from all the reports i'm reading relative to even desktop. on desktop they're performing better than a traditional banner. at buzz feed we see the same thing. our mobile story units are clicking through at 3%, on desktop it's 2%. that's way better than a banner. >> my point as a user is just that if you click on something on a mobile device, you're already captured in a smaller space. if you get somewhere you don't want to be, you can't get out of it as quickly. >> i agree with that point. i also am slightly convinced by john's point. we were just talking about this during the commercial break f you get suckered into a story and you trick me into going

there, i've never clicked on a banner ad -- >> but now you might to want take a cruise. >> if you find my interest, bring me in, maybe. >> we're banner ad. >> we're talking about social advertising, about stories people want to engage in and it's in the stream and people are engaging at a much higher rate. >> julia, what's the buzz in terms of advertisers sticking with facebook or new advertisers coming on. right before the ipo, there was a big debate about what's going on with the chrysler ipo. >> while general motors went away from facebook, big advertisers like ford and coca-cola came out and said how much they do believe in facebook as a platform to connect with their customers. there was a new report from a company called tgb that found facebook ad rates are growering, which indicates they're working, and their click-through rates

are working. there have been dozens and dozens of reports out about whether or not facebook ads work. there was one a couple months ago from comscore that facebook participated in. but these report raise questions about do the quick-through rye tloou rates matter? if people see something, will they have positive associations about it weeks later without clicking through. >> so i think there's two things here. we're seeing people engage in the social content at a higher rate than they would a banner. we see the people's disposition to purchase, affinity for a brand top of the funnel stuff. so across all metrics. >> do we think users are using facebook more? there were so many reports that came out around the ipo that

there was a sense that some of this was tapering off. >> 50% of users are interacting in mobile and 12% are mobile only. usage numbers ten to grow. they're going to pass 1 billion users. 50% are active daily. >> but from a growth standpoint, there's only so many more users facebook can add in the u.s. i think facebook needs to monetize it's european users. it see massive numbers in brazil and that's where it needs to ramp up the revenue. >> i want to talk about cost. but there's some interesting costs that are going to come into place this quarter around some of the restricted shares that they may have to pay off from these early employees. >> you always see items x, plus and the fact of the matter is your first number is a public

company. you take that charge in the corner of the liquidity event. even though it's right there in the s-1, people overlook that. if you take a look at zennia's first quarter estimates and the stock was down about 20%. fabds's numbers in the s-1, the share base compensation expense will include approximately $965 million that they will incur in the first quarter, give or take $300 million more taxes. so that's roughly a billion dollars that's going to come off their top line. >> what's the lockup in terms of

shares and when they may sell or what kind of overhang that might for the sure. >> we have the 268 million share of e inlible. in november 1.333 billion shares coming to the market and 124 shares will be eligible to be shared. the idea was to get these investors out there that they wouldn't incur potentially steeper capital gains taxes. november 13th obviously is going to be a big day for the stock. >> what's the one surprise? >> everyone wants to listen to the call, right? everyone knows revenue is going to basically be flat. we'll look for be progress on social advertising, i think users are engaging with them, brands are going to be satisfied and we'll hear about the

facebook exchange which is basically going to turn those marketplace aulds into data inch really direct gold. to julia's point that is what we'll hear about in the receiptier criminal. >> it's important to watch research. that was a big sticking point for investors in the road show because r & k showing was growing as an 8-year-old company. you shouldn't be spending that much and groving that much. it will affect margins in the near term, they will be increasing research as the dollar amount and revenue. >> we've got to run. we thank you for a terrific conversation. guys, appreciate it very, very much. >> when we come back, the earnings parade is kicking off. up next, quarterly results from

pepsi and complete analysis. plus eli lilly's ceo. stick around, squawk will be right back. [ female announcer ] want to spend less and retire with more?

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he's a titan in business and finance. sandy weill joins us for the rest of the show. it's an exclusive interview you wouldn't want to miss. >> and the latest quarterly

earnings this hour. the soft drink pepsi. and eli lilly joins us as the second hour of squawk starts right now. good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with andrew ross sorkin. joe is on vacation this week. >> nasdaq is under pressure because of the miss from apple. the dow down about 2 points. ecb policy maker nowotnoy boosts on the euro fund.

the ecb has reportedly rejected the idea in the past but resurfacing with strengths from markets. >> apple failing to meet analyst expectations and getting punished in the markets. >> well, pepsi shares just hitting the wires. we've been taking a look at what's been happening with those numbers. >> we're in line, beating across the board on the top and bottom line. as it happens, i don't know if we have them ready, do we have the man of the hour? we have another man of of the hour sitting at this table. is hugh johnston ready for us? he is. the chief financial officer on pepsi here on cnbc, hugh, thanks for joining us.

>> good morning. >> it does look like you beat on the top line and in line on the revenue side. >> that's exactly right. revenue came in at a solid 5% organically, which compared to most of the world we feel very good about right now. all of our businesses grew revenue solidly in the quarter. from an eps perspective, we will a 3 cent beat. frankly the year is unfolding pretty well exactly the way we thought can would. >> let's talk about one of the big issues we've seen repeatedly out in this past earnings period. we have the currency issue and the commodity issue. take them on. >> from a currency perspective, we indicated in february we thought currencies would be a 3-point headwind. that's still our forecast for the year. we're looking at currencies as a 3-point headwind.

from a management position, we don't hedge translation, we do hedge transactions. >> from a commodity transport of corn? >> we don't try to anticipate markets. we're hedged about nine months out. anything that happens in commodities at this point won't have an impact on us this year. as for 2013, too early to talk about. our program given that it's nine months out -- >> i appreciate it nine months out but come spring of '13 you could get hit by higher commodity costs, no? >> we have a big basket of commodity. the drought is terrible but corn is less than 10% of our total commodities basket. no commodity individually even

accounts for 10% of our basket. the basket of commodities generally do yes weigh out pret well for us. >> volume on beverages seems to be down marginally, 1%, in the great battle for pepsi and coke for volume and market share, how should we think about this? >> it's exactly in line with expectations. wend kated earlier this year we don't intend to fight a battle based on price. we have the marketing that is priced rate. pepsinext, we just lost a couple new flavors and increase the media have great, great advertising. our media was up 24%. in the second quarter, our media spending was up 40%.

that's a longer tefrm type of build and we feel good about where we are. we have to run, hugh. is going to be here for you. we just launched, i had one this morning. this is a terrific partner and we feel good about this. >> he's even holding the yogurt. >> and he's going to be on the super bowl this year. >> that's right. we're going to be the half time sponsor. pepsi is all about being the center of sports culture and music. >> we'll are thrilled to have with us today a philanthropist, a financier, author and the former chairman and ceo of citigroup. joining us for the next two hours is sandy weill.

thank you for being here. >> thank you. good to be here. >> there are so many people who want to get your view on europe and libor. i want to get your view on what's happened over the last seven years. you've been known as a visionary and i can just wonder in retrospect, very few people saw the financial crisis coming. in looking back, do you think the mega banks played a role in terms of too big to fail in what happened with the financial crisis or not? >> let me first start by saying that i think the two decade bfs the problem, the big banks really led the growth of the world and creating capital markets and all these countries, converting communist economies they'

they've, as defined in different part of the world. so the banking system is really very, very important. i think the problem that was created was created by too much way too much leverage. very little transparency with lots of off balance sheet things that downreally count. but even of a the problem, there's no other country in the world that can really be a leader of the word. >> if we're going to be the leader, we have to have a financial system that can help us be the leader and that's not happening right now. >> the dodd-frank regulations, only about a third have been implemented so far. you bring up a few things, leverage being one of them.

>> i think if we had a leverage of something between 15 times and 18 times, rather than if you added back off balance sheet, lehman's might have been at 50 times. i think there should be transparency. if a bank or any other institution wants to do something, call it on the balance sheet. it should be shown. i think in derivatives we-the-should have a place where they can trade so that you have don't have a problem that building up over multiple years and all of a sudden you see a big collapse where if it was marked to market every sangle day, you'd be able to protect i think the balance sheets of the different companies. what i think mostly is there is such a feeling among people,

among regulators, among the political system all over the world against the banking system and i don't think that's going to change so soon. so i think what we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks maybe commerce loans and real estate loans, have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail. if they want to hedge what they're doing in their investments, let them do it in a way that it can be mark to market so they're not going to be hit and have a creative system where the financial industry can again attract the best and brightest young people like think-the-do in silicon valley and like they're doing in

engineering so that we can lead innovation that's necessary and entrepreneurship that's necessary. we can't have a world where it's impossible to make a mistake. if you make a mistake, you know, you are really a bad person because we do that, we're not going to have a world where anything happens. >> that's a pretty radical idea, breaking up investment banks and banks. are you suggesting going back and really breaking these companies up? >> that's exactly what i'm suggesting. i want to see the united states be the leader. and i really believe in our country. we're not going to be a leader if we keep on trashing our institutions. >> the question becomes glass-steagall. you're almost referring to bring back zas steglass-steagall in s respects. >> glass-steagall as it related continue to vestment banks was done away with in the glass i'm

the taxpayer will never be at risk, the leverage of the banks will be something reasonable and the investment banks can do trading, they're not subject to a vol kerr rule, they can make some mistakes, but they'll everything that clears with each other every single night so they can be marked to market and they would have the same kind of leverage -- >> you sound tougher than vo volck volcker. >> i want to see us be a leader. >> what does that say when you think about the model you developed and now you're prepared to break it up. >> i think the world changes and

the world we live in nour is different than the world ten years ago. there are a lot of things in silicon valley that don't work for the few that end up working. there's no other place in the world where you see the creativity you see in the financial states now. i'd like to see this in the financial industry. this isn't solution? >> bus of voters -- do you think the bad from hampering that right now? >> it's real. i think we should have a world where they're separated and they can both do their own things. i love the title of your book, i loved reading your book but i'm not a -- i think too big to fail can be spoken." >> you spoken to jamie dimon or

vick what this reaction would you? >> no. >> i am, too. this is the best way to deal about this situation? >> i hear with america and i hear about the world. you know whurks see what people are doing in the latin america, the immediatele east, asia, it's really exciting. there are problems in europe, there are problems here. lots of what's happening here is because people don't know how to plan. companies aren't spending nip money. they're spending only what they have to because they don't know what the rums of the game are. >> at the very beginning of this conversation, you laid out all the great things the big banks were able to do, the financing they were able to bring this third world companies and

couplers had never had that being being splitered. i think deposit banks would not be beposit takers. they would not have the ability to be abe now so intertwand that the institutions that wrel got in trouble, that created a lot of the problem were not thanked. >> you've seen a lot of the companies post back on a lot of the regulation. you've seen a ceos that banks are not too big to fail. that's the argument that's been made. you see that's wrong? >> no, i thif we say v size and scale but it doesn't have to be connected to a positive education. when i sap i'm speechless, i'm

speechless. >> i want news public across the bottom that i soy breaking news." this is very different from what we expected to hear from you. how long have you been to the long time this was an industry that attracted a latta. this industry is very important to growth and important in turning the world round. >> what you think about there that are yet to be pim plimted. i think what, much stricter. >> we'll would understand then. it would be much more free for the investment daunging of can

25 years ago for banking side of it. >> so firms like a morgan stanley or goldman sachs or if you were to hire j. p c morgan, are those invest banks techl sefs going to too much were that? >> a >>age you manage understanding markets and con is. and you manage it by bay -- having aable, that people nope what's there. they know how to mark assets as far as when you're figuring the leverage by what is marketable, real estate deals that weren't marketable will be charged in a different way to figure out the capital. >> what was your turning home for you?

>> i think the turning hount is from what's happening i see a four-feeting position of leadership in the world. >> but this come to you in 2008, come in 1970. >> this is a true evolution. >> trud. it's something that i've bying and i wanted to really get my thoughts to the and said somebody but i think it really -- good this evenings are simple. and i think what i'm saying is very simple. you don't need a thousand pages to figure out what one's leverage is or how would you evaluate assets to determine what is one side of that equation. >> let's review this. >> by the way, we need breaking news -- listen up if you haven't been listening so far. >> just review exactly what you

want to see happen to the big banks. >> i would like tocy z the banks become simply a deposit-taking institution that makes loans to individuals, that makes loans to the small business, that makes loan os to businesses. operate within a leverage racial yosh of 12 or 15 times the equity that it has. that it has to have everything on its balance sheet. there's no such word as offbalance sheet. and if it's going to edge its position, it hedges them in a way that that position can be mark to market and clear through an exchange. so it's not something that you can do 20 times what the transition, which is what ended up happening with a lot of his drugs died.

>> and the idea is to truly separate -- we're talking about truly separate institutions? >> and tab the investment banks out of that. they can insist how they like. >> are you spinning them off completely? >> completely. completely. es been the model that you developed and said this is what the kind wants. with we have bank fos goalun surveys is not going to let that happen. >> our world is not going to let that happen. our world says you can't make a mistakes. if you make ace takes the taxpayers aregoing to come down

on you. i don't like to see us forfeiting our position of leadership in an industry that we created that everybody has copied our model of capital markets, of being able to sell debt. everything. >> if you were a ceo today running one of these big institutions, do you think it would be move -- >> what about the banking institutions itself. that's not a hugely profitable business. >> this is what all the reasonable willing do. then i think look at that and say i'll be a mij huge 43? >> i think definitely.

with the confidence coming back -- we should be able to ak t -- you have to be able to make mistakes and be entrepreneurial. our country was built with immigrants that are entrepreneurial. i mean, people have a chance. look what you all have done. you know, the 1% i think 99% of the 1% were part of the 99%. and that's a good thing to look forward to. >> we're going to have much more with our conversation with sandy weill. he's going to be with us for the rest of the show. and see, you know hough to kick off a show. >> coming up in between all of this, we're going to tack a check on the profit line hooin

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rest of the sho we back. eli lilly reporting a short time ago. john lechleiter, eli's ceo is here. >> we're in line on most numbers on the income statement. we were able to talk advantage of the weaker euro. >> let's talk now about what you do with zyprexa going off patent the what's the strategy? >> we navigate carefully where not only zyprexa goes off patent but other other products as well. we run a tight ship, during this

period from 2011 and 2014 and invest wisely and appropriately in r & d to lunch the products that at the end of the this period i think we're executing well on this strategy. >> we've got 12-mile accruals in the latest far $ -- we have drugs for alzheimer's and schizophrenia. >> on that specific drug, pfizer and j & j this this big trial and it didn't work. what does that mean for your drug sp. >> i think we have to be careful to draw conclusions on the results this week from pfizer.

we both have anti-bodies that attach to this beta am lloyd proteins that form plags in the rain. she had had hud. >> okay. john lech looitd er. >> also ansandy weill is on the show and he's a shoulder. >> please hurry up with the alzheimer's thing. >> and later, an area oftenover looked when it comes to revamping the system but the side effects could be deadly.

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weill. we've already gotten some of his thoughts on too big to fail. he said at this point the big blanks need to be broken up. apple's third quarter results falling short of expectations after the bell. the company blames a sagging european economy and a drop in iphone sales. net flex warning it may have trouble reaching year-end target for new subscribers. that sent video rental company shares down 16% with hours. we also just heard from eli lilly, the earnings topping expectations and the company raising guidance for the year. and we also have boeings earning out right now. >> per share rising to $1.27.

both of those numbers are better than expected. >> most people are now raising and increasing their guy to abo about, including -- >> the street is already there. wall street was already at the high end of that level. people should pay attention to that, too. >> sounds like caterpillar earnings are out as well. going through right now very quickly, there have been a lot of questions about caterpillar because it's been do so long well, almost defying gravity in terms of the earnings power they've been able to bring in. >> it's .54 versus .58. >> analysts had handily down

graded the stock. werp like it looks like cat pat lar is answering the quit all the way up at 85-16. the stock closed at 81.46 yesterday and this is huge news because this dow component, you can see them higher by about 40 points. again, this was a stock that there had been a lot of question in the do you for first two months as analysts. >> if you comments on anything you see at squawk, shoot us an e-mail. you can also follow us on

witter. we have much more to come, sandy, while, he's got brig news. -- big news. and states pushing congress on uncollected sales tax, money they say they need desperately. dick durbin will be here to talk about leveling that playing field. we have more on that after the break. ♪ our fireworks. ♪ and our slip and slide. you have your idea of summer fun, and we have ours. now during the summer event get an exceptionally engineered mercedes-benz for an exceptional price. but hurry, this offer ends july 31st.

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welcome back, everybody. congress looks like it is close to finding a way to help states collect sales tax from online retailers. states say they desperately need the revenue. joining us now with more on this is senator richard durbin, the senator majority whip. senator, thanks for being here this morning. >> good to be with you. >> this is a problem people have been circling and for some i'm. it's something we weighed in on here on squawk and i wrote a column for "fortune" on this, too. these are taxes the state would be able to collect but are not necessarily new taxes. >> they're not new taxes.

it's simply a question of compliance. the people who have brick and mortar retail establishments are collecting sales tax in every state as required by law. that sustains local services and the financials of government. but the internet sales in those same states are not in many cases collecting that same sales tax. there's a competitive advantage for the internet retailer over the bricks and mortar person. as you meet with retailers and shop keepers around my state, they say this is totally unfair. we required to make it and the internet retailers are not. this law says the state has the options to require retailers to collect but to do it in a streamlined and simplified manner so there isn't an additional burden on them.

>> how can you do this in a streamlined way? >> about half the states are in the streamline system, it's a simple method of collection. for the other states if you want to collect the sales tax on internet sales, you have to do it with a single agency, a single form and a computer software that the state provides to retailers so no expense for the retailer for this to happen. we think this is the most fair, the most direct and comprehensive approach. many direct retailers like amazon have endorsed our bill. >> new jersey required to you sign off and pay in. you had to sign a line and say you shopped on line and there is how much it was. what are some the dollar figure has would be going back to

states? >> nationally somewhere in the range of $23 billion that is not collected in sales tax on internet sales. a lot of people were still required by law in my state, illinois and others, are required to pay. those who are legally obligated to patriot the tax and don't should. >> senator durbin, i want to thank you for your time today. >> good to be with you. >> good to be with you. let's get thoughts from sandy weill here who has broken huge news here saying he thinks the big banks should be broken up. >> sandy, i know you're not on twitter but there's this thing called trending on twitter in the top actually in new york, which means your comments -- you

may be changes the debate about this very subject as we speak. i do have a question, we asked viewers to send in questions about the the last break and got a number of questions from people in the business specific we got people in the business, some of whom you know is do you think now in retrospect that the earlier stage was a mistake? >> if you can go become in time, you wouldn't have done it. >> i think the earlier model was right for that time. i think the world changed with the collapse of the real estate lochte and the housing bubble and what that did kof because of leverage in certain institutions. >> and another equestion is if you separate the deposit trading banks from investment banks,

seems like the vin messed fent beans reducing profitability. both could negative impact the captain markets. do you believe that? >> i don't. i believe they've been more impacted by investment banks and trading operations not being able to make marks and how do you define what's may gon ma tallity. the i think they and with limits on how much leverage could be used, i think people would have a lot more confidence because they would know what's there. >> another banker who you know well but will remain nameless said, sandy, what about our clients? our clients are big like ge.

they have global ambitions, they need big checks. if we're broken up, we won't be able to do that. that's -- that's the opposite side. >> i don't know where the big checks are now. i think this system is really emmobilizing the system. i think i have a copy of his -- morgan stanley wasn't a goad man they were competitors. >> where you see that it's not working, that things are freezing up? >> where is it not working? the return on equity is puny. when our company merged with city to form citigroup. we were selling at 5 times book.

now you see these things at half a tangible book. >> to the extent other banks is got in, is there any argument to be made or do you suggest a false argument? >> creativity, ingenuity, brain power of the people is much more important than size. what i'm talking about is creating an environment where we can attract those kind of people to be leaders. and i think that this and they'd do a level of a lot the ones with beg balance streets. >> can we add a couple more hours? >> we wish. >> there are going to come up with thoughts.

cou >> when we come back, is the united states at risk of losing its spot if funding doesn't pick up? this is another area near and dear to sandy weill's heart. ♪ i'm making my money do more. ♪ i'm consolidating my assets. i'm not paying hidden fees or high commissions. i'm making the most of my money. and seven-dollar trades are just the start. i'm with scottrade. i'm with scottrade. i'm with scottrade.

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welcome back. it is one of the side effects of health care reform that nobody seems to be talking about and that is research funding. thanks for being here. >> thanks for having me. >> how dire are the consequences at this point? >> they're pretty dire. we rely on support from the government and there are really looming health care challenges now. we have an aging population with chronic diseases we don't know how to treat and we have fiscal constraints in funding hospitals and our research enterprise. to people who think we spend a

lot of money on research, if you think research is expense i, try disease. that's what mary lasker said. >> under the health care reform act, how did it get left on the table? >> i think the health care reform act is going to be good for patients because the more patients that are ensured, the more likely they are to seek treatment and we have a better chance of preventive medicine. and it's a lot cheaper to prevent a disease than to treat it. i was a little bit disappointed that biomedical research funding was not on the ticket there because the only way that we are going to control health care costs is through discovery. we need to discover how to treat these diseases. we don't figure out how to treat them, we're going to be in a position where our health care costs will grow. can i give you an example of that. think of alzheimer's disease. this year alone we spent $350

billion in health care costs just treating in your logic diseases. that's more than the nihs spent in over 50 years in funding research. think about it this way, when high grandson is 40 years old, we are going to have a very large population of elderly people. 32 million people in the united states are going to be over the age of 80 and one of two of those will have alzheimer's disease. that's 16 approximately people. that's bigger than the population of new york city, los angeles, houston and chicago put together. and that's going to cost us over $1 trillion in health care. >> where are we in trying to find some solution, some cure? >> i have good news while norman wellcon just announced the success of his small trial for

imu low globulin. it's a protein and the doctor asked maybe it will work in alzheimer's disease and so he treated a small group of patients like that for three years. the brain the brain did not sh reng, memory was retained and executive function was not normal. it was a small trial and has to be repeated in higher numbers of patients. >> can you talk about what we're going to be able to learn from gnomeix and what we might think about in terms of disease? >> it's doubling its research space with the new research building, which was -- allowed us to thanks to the generosity

of one of our member see are i think this is going to be hub is exactly that. the goal is precision medicine. so we ask how should i live? and that depend as bit on your environment but it depends on your unique gene profile. so imagine that you're 20 years old and you go to see your physician and you have your genome sequenced and your physician says you're going to have genes that make you more likely to have a stroke. know nou you say i better be very careful to keep my blood pressure low because that's going to allow your physician to

tailor your treatment to your unique genetic profile. >> by the way, when we come back, we'll have more from our guest host, sandy weill, philanthropist and ceo of city. those dow futures are up by 100 points. since then we heard from boeing, which beat expectations, and in the next hour, we're going to dig into quarterly results of construction equipment. caterpillar's ceo will talk to us about they managed to beat expectation business such a long shot. we'll be back.

there is going to be some kind of life out there, whatever the hell happens with the euro. i think there is probably for investors that have those limited few these days that have the luxury of not worrying about next week, there's a lot of volume around here. >> what we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks makes commercial loans and real estate loans and have banks do something that's not going to risk the taxpayer dollars.

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banking from investment banking. >> the chairman and ceo of caterpillar will join us on the squawk ceo call. and we'll talk about building a better educated workforce. >> anyone know what this is? anyone? >> the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, i'm going to call it a special edition of "squawk box." joe kernen is off this week. our guest host this morning has already been making waves. sandy weill. first becky has your morning headlines. >> we do have major companies reporting through the morning. pepsi returning earnings of $1.12 a share, 3 cents better

than the street were expecting. revenue in line with expectations. boeing reporting second quarter earnings of -- i don't know what happened to the bid. throughout the morning the bid ask had been higher. we'll come back to that in a little bit. and take a look at share of caterpillar. the bid is at $84.60, the ask is add 84.69, in with earnings 2.54 a share, the straight had only been looking for 2.28. this came after a lot of skepticism from the analyst community leading up to these earnings. we're going to hear from caterpillar's chairman and ceo doug oberhelman in just a few minutes. >> and concerns about spain this morning. the country's eveneding costs

have reached new euro era highs. madrid has to find $50 billion euros in funding by the end of the year. souring market isnsentiment cou make that amount too much for madrid to handle without external aid. european equities have been a little higher this morning but you have to remember they are coming off incredibly low levels. spain was at a nine-year low and italy at an all-time low. at this point the dow future is up about 80 points and that's coming out of strength out of the dow components reported today. >> what type of returns should investors being expecting in this market? joining us is the chairman and ceo of national financial partners and is the daughter of

sandy weill. we have a father/daughter team on the set. we were talking during the break, i'm just curious, having watched your father offer this view, which i think to everybody here was a surprise, was it a surprise to you? >> i was surprised he came out with it but independent not surprised he was thinking out of of the box and looking at the next step. i think i was always fortunate enough to grow up with somebody who -- >> have you guys been talking about this for some time? >> a little bit, a little bit. i don't disagree with him at all. he was on the mark. perception is critical. companies should run on behalf of their clients and shareholders and i think this would make a huge difference in pushing everything forward. >> let me ask you about your business and you're in an advisory business, also in a benefits business. how do you think in this environment, and i always bring it back to my mother, how my mother should think about the world we're living in right now. >> first of all, on your

mother's side and just talking to some of our advisers, i think, first of all, she should be a planner. i think getting planning and advice right now is critical. it's very easy to get emotional when you're watching the vol ti -- volatility of the market. >> wa kind of return can you expect anymore? >> the most interesting thing is return expectations are coming down and we're trying to help those expectations come down. they're going to live longer and the markets aren't works as hard for them. the balance is a bit out of whack. that is long-term not a great place for people to be. they should have more balance. equities are cheap here. we do understand the volatility. amounts depend on where your mom is in terms of how long and what

her objectives are but we think people should think more about balance. you see it in the funds that the flow is into fixed incomes and at some point you have step taugout of it. >> what do you think about interest rates? andrew hasn't been able to set a mortgage because the rates keep dropping faster. there's talk that the fed could push these rates out to 2015. what do you think this means? >> i think it's very, very scary rates are where they are. i don't think we've seen where you get a negative return if we're seeing inflation at 2% and you're making 1.4% on a ten-year bond and nothing on anything short term. you're losing money every single day. what effect is that going to have on the pension funds that are still figuring a 7.5% return? if you look at a very good

investor over the last ten years, pick ware buffett, your friend, berkshire hathaway has gone up 10%, not 7.5. where are the pension funding going to invest their money to get that return? we're either going to force them to do speculative things they shouldn't do and overreach, which is how you get in trouble or the benefits that we're promising people are not going to be there. you're seeing cities go broke in california and, you know, it's not just cities, it's states. it's everywhere. we have to focus on these issues. >> if you were ben bernanke, what do you do? raise the rates? >> i think lowering the rates from this level are not going to do any good. rates are incredibly low here, incredibly low in the u.k., they're low in germany. i don't see in benefit in that. and i think that rates have to

go to some kind of level where the investors, the people that retire, the people that are counting on pensions can have some kind of return without the pension managers becoming crazy risk takers. >> jessica, when you are talk to clients and they're recognizing they're probably going to have to work longer and deal with lower returns, how quickly are those expectations coming down and how realistic are they in terms of what you're seeing? >> it's interesting. when they're part of a plan, when they're being advised, when they're less emotional, particularly since this is the third summer people have been going through this, they seem to be a little more straight forward and they're seeking that advice. i do think you still have to look at one of the strong components of our economy has been companies. companies have been performing. they're doings best they can. there are opportunities. i think the u.s. actually still has opportunities. we do see unemployment and a lot of the negatives but we've been able to turn out organic growth

and really try and focus on clients and be important to them and that attracts them to you. >> do you think 401(k) plans still work? i think there's a large macro question in the american psyche about the way we've moved away from pension plans to 401(k) plans and people look at what they're getting and they say this is tough. >> 401(k)s are a very big part of our corporate business. i think they work when people get education in addition to just the plan. the failure is it's there and people don't take advantage and don't think about their asset allocation. >> but how can you have a defined benefit plan in this day and age when you're promising people something and you can't deliver? what's going to happen ten years from now when we see e-mail surface about people running these pension funds say they know they can't provide the benefits for the people, you know? what's going to happen to them?

>> the problem with putting it into the 401(k) doesn't fix the problem necessarily. it just pushes the responsibility back on the individual. >> that's sort of the general trend of things. that's true in health care, that's true everywhere and i think that's okay as long as you educate people and they're really thinking about what their objectives are. anything that helps the savings rate, investing rate is probably an okay thing. >> since you work with so many corporations, how do the benefits change? what are you seeing? what are you hearing? >> during the downturn all the matching was taken away. now you see the matching coming back in. our general philosophy on dealing with companies on the benefit size is that they downsize significantly. it's anecdotal but we're not seeing any big return to reemployment but at the same time keeping the people that are now critical to those businesses is very, very important. so they really are beginning --

>> when we come back, caterpillar beating et street? its second quarter report. doug oberhelman will be joining us after this. that stock is up at least $3 at this point. and building a workforce that is better prepared to step into american industries that need qualified workers. we'll talk industry, themed education and corporate partnerships. squawk will be right back. and see what criteria they use. such as a 5% yield on dividend-paying stocks. then you can customize the strategies and narrow down to exactly those stocks you want to follow.

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welcome back, everybody. dow component caterpillar announcing earnings well above expectations. joining us is doug oberhelman. you definitely caught the street by surprise. what are you seeing around the globe that has you coming in with such strong numbers and a positive outlook for where you see things headed?

>> good morning, becky. it is great to be here. we're celebrating this today, a record quarter in terms of top line sales. the thing that we are most proud of today is the record incremental operating margin pull-through, best in the history of the company, which means we're operating as efficiently as we can within the four walls of our country and an outlook of record in 2012 in the history of caterpillar. today we're seeing a mixed set of tea leaves. any given day you read the headline and you want to jump out the window and you go home and read other reports that you don't want to jump out the window. i can't recall a time when things have been so mixed in the way the economy is going. having said that, we're in a rough spot today because of what happened a year ago with a lot of governments, central banks, holding policies a little too tight a little too long.

they're all loose today. we mentioned that in our report. the u.s. of course, the monetary policy is easy, ecb is doing this evenings to ease the situation there. china is doing lot of things to restimulate their economy. those are the things we're looking for later this year and into next that give me some optimism. again, focusing on the long term we've got it pretty well set up here i think. >> is it key that the central banks stay easy or that they continue? do you expect to see more easing from the ecb? >> i would not expect much chang from the ecb. i don't know if any more easing is needed or not. let's run the course here and see what happens. thing about question mark of course is the politics. the politics in europe, the politics here. that's the cloud that's got all of us very, very concerned and worried. but having said that, we think we're going to get through all that and in the end we see pretty good things coming through the rest of this year and on into '13 and beyond.

i'm really strong long term with the shape of the world. 7 billion people out there, all are open for business as i'd like to say, and of course we're in infrastructure business exactly at the point where they need things to develop. i'm very bullish in the long terms. >> there had been a lot of nay sayers saying the slowdown in china and the bricks, things would slow down with caterpillar. how did they get it wrong? >> we're concentrating on our four wallwalls. we're talking about safety at a company, we're talking about efficiency. we have a great team of leaders, a great team of employees and it's just working very, very well. as long as we do that and concentrate on our four walls, influence those things outside our four walls that we can

influence and keep an eye on storm clouds that are out there, we can function. we saw super operational performance by our team here. >> doug, you have a shareholder on our set, sandy weill. he'd like to ask you something as well as. >> doug, as a shareholder, i want to say thank you very much, and i like your long-term approach. i think you're right long term. nobody knows what the rules are the game are going to be yet. >> you are right. >> i think the world wants the rules of the game to be right. listening to you i think i'm going to buy some more stock. thank you very, very much. >> it's good to see you. i watched your interview earlier and i'll compliment you because i think what we need now in the world and in this world especially is bold ideas and bold leadership. we've got to do something differently than we have been. i compliment you for taking a stand as you have. i'm going to defer all the banking stuff to you experts but

bold leadership is needed right now. >> you side stepped a very quick question that was coming your way, doug. i assume you are a customer of some of the big banks? >> we're a big banks of most of the big banks and they're very good partners of ours and as has been for a very long time. >> would you like to see them broken up? do you think that sandy's view is the right one? >> you know, the financial resource industry is one of the things that's made this country great and i agree with sandy on that. i'm not close enough to the banking business to take a position on that. all the banking guys knows what needs to be done. i'm going to defer to them. sandy, i could use help here at caterpillar but i think you'd probably be better off helping the banking business and industry really. >> doug, let's talk about your business then in terms of mining, in terms of what you're seeing around the globe. are those mining companies still in a position to be investing

more? >> well, you know, all the mining companies have said they're taking a long-term view. some have postponed a lot of projects. we're talking to them every day but in the end we still have a nice backlog of mining business. the world still needs just about everything that comes out of the earth that the minuers do. we're seeing copper hold in there. it's still a mixed bag around the world. lots of places are booming and others like coal in this country are soft after a mild winter and softness in the power plant. so it's a mixed bag but overall still very optimist beiic over long term. >> sandy is whispering next to me "infrastructure." >> yeah. we did see nice stuff from

washington a few weeks ago. that's been used to stimulate, create jobs and invest in the country. we travel all over the world. a lot more countries are putting a lot more infrastructure than we are and they're becoming a lot more competitive as a result of what. i was so happy to see bipartisanship, the fractions put aside and the transportation bill go forward. the transportation bill is good for two and a half years. that should help us and give that a good kick and invest in our competitiveness for this country. >> doug, very quickly, we have seen signs that housing is improving here in the united states. have you seen those signs as well? >> i have. i was on a trip on the west coast a number of weeks ago and i called on a lot of contractors

and i was surprised at how often homeownership came up. >> doug, thank you very much for joining us today. always a pleasure talking to you. >> my pleasure. >> when we come back, much more from sandy weill. plus, how do you get to carnegie hall? you can practice or you can talk to clive gillison. he's going to join us at 8:30 a.m. with the spark cash card from capital one, sven's home security gets the most rewards of any small business credit card! how does this thing work? oh, i like it! [ garth ] sven's small business earns 2% cash back on every purchase, every day! woo-hoo!!! so that's ten security gators, right? put them on my spark card! why settle for less? testing hot tar... great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with 2% cash back or double miles on every purchase, every day! what's in your wallet? here's your invoice.

. former citigroup chairman and ceo sandy weill, we've talked about a lot of issues about banking but the euro is on everyone's minds right now. we heard from jim o'neil from goldman sachs asset management and talk about marty feldstein's article saying the euro has to come down if they want to save spain. >> i think the euro is a terrific thing to put together. when you think about what it did for germany where the euro companies are their biggest exports and how it allowed that export market to grow dramatically, when you think about the fact that spain and italy and portugal and ireland and greece were able to borrow money at very low rates for 12

years and the benefit they could have had from that and the problem is they didn't take advantage of having those low rates and they're therefore now in trouble. but if you were to break up the euro and create a deutsch mark again, it might appreciate 30% against the dollar. if you think of spain and it live and other peripheral countries in the south, the deutsch mark would appreciate maybe 50% or 60% against those countries and you'd have something that would be even more unworkable than what we have. i think it's in everybody's advantage to keep the euro together. >> do the germans stand that, the german people? >> i don't think they do yet. i think you look back to gerhard schroeder, who was a socialist party, he made all those changes, which cost him an

election but put germany in a terrific place. the politicians have to understand they're elected by the people to do the people's business and they should explain to the people what has to be done. there are the assets in europe to make this thing work and they got to really face what the issues are with the banks and with these countries and get them back on track by combining both, you know, austerity but also thinking about how do you stimulate growth? you can't cut your way out of the problem. you have to grow your way out of problem. >> you're an investor. how do you handicap it? >> i wake up every morning as an optimist. this is still the morning. so i think that -- i think it's unimaginable what might happen if the thing breaks up. i think when you think about -- everybody was willing to sacrifice lehman because a wasn't big enough and it wouldn't create a problem and it nearly brought down the system. i think we don't know what would

happen with the collapse of the euro. nobody does. i don't think anybody wants to find out what happens. >> will the ecb ultimately step in? >> i think they have to. they have to. >> all right. we're going to continue this conversation in just a moment. >> coming up, a music venue thriving during the crisis. carnegie hall avoided losing money and continued to innovate during the year. sir clive gillinson will join us after the break. ing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs.

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boeing beating the street. the company says rising airplane deliveries offset higher pension costs. that stock also indicated higher this morning. that's been helping dow futures, which are up by about 90 points or so this morning. if you look at the nasdaq futures, they've been hurt badly by apple's third quarter results that came out after the bell

last night. those numbers falling shorts of estimates. those were the company's second miss in the year. and there's also been a big pause in iphone sales ahead of a new version of that device. >> we have another interesting story this morning. carnegie hall is considered morning the best. joining us clive gillinson, artistic director of carnegie hall and sandy weill is a trustee. what's the environment like right now? >> well, i've always felt there's a degree to which the environment is what you make. i mean, eigit's a very tough ti but on the other hand people are always interested in great ideas. as long as you come up with

ideas the world cannot live without, there's always going to be people willing to back you. >> much more difficult? i assume it's better now than it was two or three years ago? >> it's better now than it was two or three years ago but it's not like it was before. but i think on the other hand, you know, the interesting thing is carnegie hall is unique. as far as i'm concerned it is the greatest concert hall in the world and that creates opportunities as well as responsibilities. i mean, the responsibility is to fulfill that potential. >> sandy, this is a serious question. you not only make huge donations. you ask for huge donations. how easy or hard is it for to you ask? talk about the ask. so many work on the phone with the ask. >> the thing about asking is you have to learn to accept rejection. it's a major part of the business. you should never ask anybody to do something you're not willing to do yourself. people understand when you have

a passion for something, they're more willing to listen. but lots of people won't go out to lunch with me anymore, and it's one of the reasons -- >> you're asking too much or -- >> one of the reasons we moved to california because we have a whole bunch of new people out there that don't know me that well and are still going out to lunch with me and we're building a concert hall on the grounds of sonoma state university that i think will like tanglewood except with better weather, better wine, better food and nice young people. >> we're going to try to do the show from there when it's up and running. >> clive, talk about carnegie hall as a business. you were one of the few businesses that didn't lose a dollar during the financial crisis. >> we've got the most phenomenal team. when the financial crisis was againing to build, i talked to everybody how we have to completely transform our business model. everybody worked together on that. >> what was the big change in

the model? >> el with, we just looked at the way we did everything. >> cut out all hobbies. >> but it's also doing things different. you look at what all your objectives are and are there different ways of meeting those objectives that are cheaper, more effective? i think we're now a far better business. we cut our budget from $84 million to $70 million. >> what's it now? >> it's now 70 million. we're doing so much more now. we're now a much better business. >> and is he considered the boss to you? >> we're partners. i feel the whole thing about working in a business is everybody's a partner. you know, you have to feel that way. i mean, i love working with sandy. i mean, what's great is he's demanding in all the ways that matter but he doesn't want to run it. he wants to make sure it's being run properly. whether it's about artistic, education, all of dhees things

he'll be -- these things these demanding but he leads by example. >> what's the cool performance in the fall? >> our biggest performance is a tribute to latin america. it's an extraordinary -- >> sandy and his wife have signed on on the giving pledge, which means you're going to be giving away at least 50% of your money. >> we've done that already. >> done that already? >> these guys are users. >> appreciate it. >> with when we come back, we're going to head to the new york stock exchange for stocks on the move this morning before the opening bell. there are plenty of them. and then an education model that focusses on industry-specific themes to try to craft a better workforce. squawk will be right back.

you can see futures now, dow looks like it would up about 9 points higher, nasdaq off marginally. let's get back to our newsmaker of the morning, sandy weill. we talked a lot about -- glass-steagall. i know you want to change it now but the question is do you go

back and look -- bob reuben was interviewed last week and the question was do we believe that glass stegall or the repeal of glass-steagall unto itself created the financial crisis? >> what did reuben say? >> he said he did not believe it. he said he thought it was a myth. >> i think that everybody thinks that the repeal of glass-steagall allowed banking and investment banking to come together. that's absolutely not true. under the rules of the game when we went and talked to citicorp, we were able to -- we were an insurance company. as an insurance company, we were able to buy a bank, provided that we had two years to come plig -- comply with bank holding company rules and that could be extend extended to five. the only thing we were out of compliance was insurance

underwriting, not investing. glass-steagall didn't have any -- it started that way. glass-steagall was put in place to separate the banks and investment banks and separate n investment management from banking. that evaporated from '33 to 1985. >> i wanted to talk to you about the culture of wall street today. there's a great sense in the public psyche of distrust about wall street, whether it be the facebook ipo not working, the libor scandal, whether it be questions about this trading loss the jpmorgan. what do you think about the culture of wall street today? >> i think that 99% of people on wall street are very -- are honest, they're ethical, they care, they care about the country, they care about their shareholders, they care about what people make. their future is really connected. the financial industry is connected to the country, to the economy of the world.

and, you know, you always have bad apples in any kind of a business and in the financial business when you have it, the numbers are bigger and they get a heck of a lot of attention. but i think that we've gone things wrong and i think a lot of the overleverage and speculation that took place, which is why i worry about pension funds being led to do something like that through competition -- >> compensation? >> what do i think about compensation? i think compensation is important. >> too much? too little? where are we right now? >> i think right now everybody's shooting at compensation. i'm glad i'm not working. >> were you surprised about the libor scandal, the idea that banks could be rigging this incredibly important key? >> i was very surprised. i don't think we have all the facts on who did what and what

kind of collusion there was. >> we know barclay put in wrong bids, fake bids. just the idea of something that trillions of dollars are investments are based on. >> it's very unfortunate that whatever happened happened. and i think it's just another bad mark that's going to reenergize people to hate the banks and not trust banks. i think we have to do more to make it. that's why i think it's important to simplify the banking side and let the investment bank trading side do its own thing and not be part of something that has to be supported by governments. >> sandy weeshs have to slip in another break. hopefully we'll get to talk a little politics. i might want to talk about regulators themselves, tim geithner and others. >> let's get down to the new

york stock exchange. jim, where do you want to go? pick your poison. >> i'd like to talk a little bit of the upbeat. your interview with caterpillar was incredible. and if your stock's been hammered, your stock rallies here because it's not as bad as you think. if your stock was not prepped for any shortfall and let's talk about exhibit a apple, then your stock gets hammered. it was all about who fell and what shareholders had given up and it turns out it was wrong to give up. that's the story of today's earnings. >> it's been pretty stunning watching some of the big surprises coming if, things you've been saying, jim, for i can't tell you how long both on "squawk" and "mad money" and how

you have to watch the companies, the companies are performing, doesn't give up on the stock market a-- >> caterpillar and boeing show what american workers can do and what creativity can do. it's great. it makes you proud to be an american. >> jim, that's a message i feel i've heard rear peated often from you. >> yes. this is about american engineering and that air show last week was basically saying airbus airbus is saying we're going to make better airplanes. we heard that yesterday from ellen coleman and dupont. the gloom that surrounds us totally understandable but it's not surrounding the executive offices of great american companies, whether it be pepsi, ford, which called out for

potential change in latin america. don't take your cue from apple as much as i'd like to. >> doug oep heldman saying he's chang in the travel. what was the stand out call? it was lumber temperature pfs timber, it was housing. there's a remarkable thing going on, oum and gas. $90 is the sweet spot for caterpillar. bingio! getting oil from bachen to the refineries, neither poll signatures harolds it specific washington seems o hate business right now but business don't care. >> thanks. we'll esee more of you. >> coming up, work-based

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>> welcome back, everybody. with a sluggish economy, the

labor market is brutal. the president of the national educational foundation provide as partnership between the business and educational community. and sandy weill founded the academy back in 1982. thanks for joining me this morning. >> thanks for having me. >> we hear complaints from business owners who say they can't find a qualified candidates out there. >> we have a million kids a year failing to graduate. we know that having a diploma actually changes their earning capacity over time. >> look at the unemployment figures. >> oh, my god, it's horrible. but we have a track record that says you can change that if you're open to working with industry and providing real experience during high school years that lead to an internship experience in the workplace. too many of our young people go

to school not knowing why they're there. if it's out of contexcontext, h application, doesn't change their world view of why they should go to college and get a degree, those issues change the trajectory for a student. >> this is in 500 schools. it's everywhere. >> we just wonder why more aren't adopting it. i think the challenge is really getting the word out that businesses can partner successfully with schools and young people can do the work when given the opportunity. >> what are some of the more successful partnership you've had? >> the most recent class, the academy of engineering.

so bringing industry to the stable and relevance to that curriculum changes the game for students. they cease to drop out and they don't lose interest either. they are contributing to the bottom line like any other employee.

s. >> but that is what america is. when we started the engineering school, less than 3% of the engineers in the united states came from minority communities and 10% are women. so we were not reaching the people in the united states and our people. we have new coming out in health care which you read every month. so the areas that we're in are areas that there are job opportunity opportunities. >> congratulations. we're going to get parting shots from our guest host after this break.

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>> we're getting final thoughts from our guest host. giving your comments this morning about dividing commercial and investment banking, i'm curious how you think this will be politicized, that they understand how you're thinking about it and the way you want it to be. >> i hope it's not politicized. i hope people really care about what's right and what i'm say something something that people should be thinking about. all americans want our country to be a leader. banks, again, are very, very important. >> there is a chance that the obama administration which has been pushing for tougher regulations are going to take your words and use them to push

them further. >> i'm saying push in a different way. >> when you look at the regulators, you did sit on the new york fed for five years. geithner is under fire right now for his roll, although we don't know what his role was in libor. what do you think about tim geithner? >> i think when he was at the fed and i was there, he is incredibly bright. he is a good listener. >> any time i would get worried. tell me what i should be nervous about. down to the trading room.