dick kovacevich. and the former wells fargo ceo and chairman is no exception. he'll counter wiles arguments. he's never a man to mince words. today we got second quarter advanced gdp. going to be hitting the tape at 8:00 eastern time. forecasters say the economy grew at its slowest rate in a year. gopd has slowed to an annual rate of 1.3%. other surveys put that number at 1.5%. got everything from the economy to earnings. got some big names that are reporting before the bell. chevron and merck and early candidate for stock of the day, facebook andrew talked about it, shares falling sharply in after hours. it's not like this time around. this comes after the company's quarterly report. it's roughly in line with estimates but the company offered no forecast to ease worries about prospects for an

advertising boom any time soon. julie boorstin spoke to facebook ceo. >> starbucks earnings missing the mark by two cents and the company is citing global weakness and recent slow down in u.s. traffic to its stores. the news adding to worries that consumers are cutting discretionary spending. amazon earnings matching wall street's estimates. the company said the growth of new businesses is boosting profits, or boosting profit margins but current guidance falls short of consense sues. gilead announced details of a pivotal trial for the oral regiment of hepatitis c. amgen getting a boost, earnings beating the street on strong demand for many of its drug. raised its full year earnings

and revenue forecast. >> steve, thank you very much. let's take a look at the markets this morning and after that big rally yesterday we saw it continue throughout the day. let's look at the future. you'll see right now at least the futures are a little mixed. the dow futures are up by 12 points. nasdaq is down by over one point. everybody is waiting to see what happens with this huge gdp number. this is going to set the table for what we can expect to hear from the fed next week. steve, i don't want to go too far off tangent but this idea that the fed could step in if the number is really weak would they do that before the jobs numbers? >> i think if this number is very weak and it's not due to be sort of one off reasons they could move next week. what was not clear to me from the rhetoric and the articles that have been out and when i listen tocy think the fed is ready to do something. it's not clear they agreed on what they should do and can do.

>> take more discussion and argument. >> and it's not like they can't come to an agreement at the two day meeting, but usually there's an idea out there. most of what i'm hearing is thinking the fed would be out there buying mortgage backed securities as part of a broader qe program. how they execute that qe is a big question. they could do it monthly, open ended. they could do it as a single lump sum. there's different ways it could be executed. the bigger story might be that you have the fed on the edge of moving. certainly draghi yesterday suggesting. you have these two big central banks on the verge of, southern like they are doing something if the economy doesn't go the way they want i want to go. certainly in europe it seems like it's already decided. >> can i ask a europe question. i don't want to get off on a tangent. there was a report out that said mr. draghi was stating a fact not changing policy.

do you believe that? everybody is trying to assess these three or four words that are strung together and what they mean. >> i think it's classic and emblematic of how a central banker speaks one can interpret anything he said that way. he said before. why did he say it and how did he say it this time. i'm siding with the view he said it before but he sawed it before on the verge of additional policy actions and i think draghi is talking in a specific way that led the market. >> i said the same thing you did. >> you look at the powerful reaction of markets yesterday especially the bond market. these are supposed to be smarter guys. and i don't know -- i should get used to this, but i was joking with dennis the other day. wouldn't we all be rich right

now if we could trade volatility in the european bond markets. i don't know which way they would go. but 100 basis points swinging the two year? >> talking about europe let's go across the pond to the land of the olympics this morning to get the global markets report. kelly evans is standing by. you only got a couple of hours away before we'll have the opening ceremonies, right? >> andrew, that's right. in fact just a little earlier this morning they had this great thing ringing the bells or all the bells where basically from 8:12 to 8:15 in the morning, 12 hours before the opening ceremony, big ben and a lot of bells around britain were ringing simultaneously to kick things off together. that was a unique moment. but i wanted to show you this. it's the front page of the "times" and it says let the games begin. now all the newspapers as you

might imagine have something like this on the cover. i thought this one was particularly appropriate given what's happened in markets this morning because it's for a friday, a day you think people would talk about the olympics but in an extraordinary day. first take a look at the europe stoxx 600. decliners outpacing advancers by 3-2 margin. up 0.05%. look at this spike right here. i'll explain what happened. we had mario draghi's comments yesterday you saw market reaction in the u.s. analysts, economists are waking up and saying he's not changed his tune, we don't know how much -- you heard steve talk about this. then the bundesbank are still opposed to direct bond buying, markets off. then there's a report now that reuters has picked up from lemon suggesting the ecb and bailout

funds will move to buy spanish and italian bonds directly and this could start in september and that's what cause this spike. we come off that a little bit but managed to turn stocks back to the green. i want focus in on barclays. that company reported earnings. first let's look at the boards here. ibex 35 is down .6%. ftse is up half of a percent. xetra dax is down half of a percent. barclays did surprise to the upside with regards to its earnings. i want also said we're sorry for the events of the last couple of weeks. so just keep that in mind. we'll dig through those earnings and await the investor presentation. ftse 100 was in the red and still down 0.16% those bank earnings are helping out. let's take a look at the action across the bond curve because that will give you a sense of what's happening.

ten year in italy, good one to focus in on. we saw it rising above the 6% level earlier in the morning when it was more of that risk off, what did draghi say. then this report from lemon hits the wire. spain still high but below 7%. france and germany kind of back and forth this morning as they digest all of that news. hand it back over to you guys. i'll pass the torch if you will and we'll see how investors in the u.s. digest the lemon report but my suspicion is that will have more to do with market reaction than gdp figures. >> liked your joke but i think they played the abuse for you. it was a good joke. we'll take that torch and take off running. >> kelly before you go, one question. i've been reading some online. you have the physical papers there. i was reading your london papers. governor romney stomping out there raising some money. looks like he got in a little

bit of trouble in london. >> andrew, i can't tell you. people are ripping into romney left and right. there's just this sense of kind of american politician saying disparaging things about britain's readiness for the olympics. the mayor here, boris johnson in hyde park last night comes out rallying the crowd saying we'll show mitt romney, we're ready for the olympics, let's show the world how great britain is. mitt romney has not gotten off to a great start. >> he's going to be on the "nightly news." >> he's been asked how are they doing and he said, you know, we'll see if they are ready and then the mayor apparently said you know it's a lot easier to get ready if you're starting the olympics in the middle of nowhere referring to salt lake city. there's a whole debate going. >> thought the word was that london did everything. the london organizers said they did everything that they were going to do at that point which

has not been the case with a lot of olympics. >> we'll talk to carl a little bit later what's going on in london. let's get back to this side of the pond and talk about facebook. facebook stock tumbled after its first earnings report as a public company now. cnbc julie boorstin joins us with a lot more on where things are. the problem is facebook's growth slowed. facebook's ads are lagging. facebook's biggest issues include the fact that mobile growth far outpaced revenue as facebook is just starting to display mobile ads. payments revenue flat lined as users are bypassing the social network and downloading games on their smart phones. facebook's focus on the earnings call was largely on mobile. they are focused on durng that mobile to dollars. the other big focus rolling out new social ads.

sponsored stories format is make acmillion dollars a day, half of that from mobile. one little product we won't see any time soon a facebook phone. zuckerberg saying on the call it wouldn't make sense. the company did not give any revenue or earnings guidance but said operating expenses in the second half the year will continue to increase significantly as the company prioritizes investing in growth over managing for margins. andrew and becky. >> thank you very much. why don't you "today" here with us because we have another guest who has a few concerns about what he's heard from facebook. he covers the company and ken, obviously, there's a lot of things to choose from if you're looking for some bad news. what jumps out as the most concerning fact for you. >> from an earnings perspective they beat. when you look at the valuation where it trades about 14 times revenue there's not a lot of valueiation support. when you compare that against the growth they posted while ahead of expectation, it's still

not impressive given where the stock trades. i think for now the concern will be as you shift from earnings to the approaching lockups, you have about a billion shares coming to market probably over the next three to four months starting in august and, you know, what's to keep you from the short fallout from that technical pressure. investors are moving on from earnings into sort of that mindset. >> the 14 times earnings does that include what would happen with the billion shares in the market or that's going to raise that number, right? >> well no. it's really separate from the shares. their valuation right now basically versus revenues kind of places them in that range if you're putting it on -- it's clearly higher than that. >> is this a mistake? is this a wall street mistake in terms -- everybody says they hit the expectation and yet then everybody is very depressed. >> what earnings represented was

a catalyst between, you know, everybody knew the lockups were coming. in toshd negative on the stock you had to be worried about the fact they would beat. there was the possibility they might beat bigger than anyone expected and people might feel differently about the overall story. >> and they could have provide guidance and guidance could have been strong and showed traction in sponsored stories to make people think there was an accelerated story here. those things just didn't come. so, the quarter came in better than expected but nothing that would change investors minds that, where this stock trades versus where it's growing there's a disconnect when you talk about another billion shares coming to market in the next few months it's not a place you want to be. >> julia? >> one reason is simply the fact the company did not provide revenue or earnings guidance. i think investors are looking for some clear guideline of where we're going to see the growth moving forward. the only guidance we did hear is

that costs will continue to go up without actually having any tangible numbers for where they see growth especially for mobile. there's a lot of colored commentary how mobile is doing great but no actual numbers for what they expect that segment to do in the next couple of quarters. >> that's spending will continue. maybe that's not a bad story if you are looking at a growth company but then again if you break out the cap x to sales. amazon is seen as a big spender has a cap ratio of 4%. is this good or bad? >> i think it's okay. for me it's probably more about when you look at where they monetize their users relative still very low. a lot of opportunity for home to drive higher monetization. you want to make sure if they do this investment there's something on the other side and

there's a product people want to see. >> cheryl sandberg said this is a new medium. early days of television. people still don't under it. television wasn't hugely profitable business for a long time. my question is how much patience do investors have. >> investors don't have a tremendous amount of patience when you look at the potential risk of shares coming to market. i do agree with the company. i think they are dealing with something, they are potentially embarking on a new form of advertising that stands to be very powerful. i think when you set that aside and look at even their payments business and look at the impact move bill on that, that's a little bit more worrisome because i think the payment platform that they have currently where virtual goods are exchanged, et cetera, that works on the web but get nothing when it's done through mobile. that's a hard thing to address how that will change for them in their favor. >> where do you think the stock can go? not just your target. where you think it could go.

>> i think we try to look at the fundamental basis but from a psychological technical factor the stock goes lower before it goes higher. >> what is the lowest it could go >> i could put some, you know, parameters around it. if the storng in the mid-teens, hypothetically still be looking at a stock that is about 45 billion or so in market cap, right. that's still a lot to place on optionality. if you're not sure that the sponsored stories business will work, they can't transition successfully in payments to mobile. >> your saying you still wouldn't like it if it was in the mid-teens. >> i'm saying -- i would like the story because i think actually what they tanned to present longer term is a good one. near term -- >> julia this is a faith versus finance call. you have to have faith that this

company which owns this space and is really the monopoly in social media, at least in the web based part of it and also the applications is going to take the audience we know it has and find a way to make money at it versus what ken is doing which is looking at the numbers and saying it doesn't work. no. >> i actually thing the key thing that you're pointing to is find a way to make money but the audience that facebook already has is a web audience a shifting to mobile. 67% year-over-year mobile user growth. that's a massive number. especially concerning the fact that's where all of facebook's user growth is coming from. the majority of it. they have to figure out what they learned about make money on web, adapt it to mobile and reinvent the rules. it's a fast changing business and continue to evolve and facebook needs to figure out how to just reinvent itself for the mobile era.

>> julia, thank you very much. ken great to see you. thank you for coming in. coming up it's the most important economic stat since the jobs report. what do the markets want to see one today's second quarter gdp report? we'll find out next. but first the olympic torch has begun the last day of its 70 day, 8,000 mile journey. this morning's relay started on the royal row barge. the final leg of the olympic torch is being kept secret. the caldron is a closely guarded secret and will be revealed tonight on nbc. then don't get nd by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments,

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. a lot of big weather in a lot part of the country that's changing all kind of things. if you're waking up and planning on traveling for business you better check twice. danielle banks joins us from the weather channel. danielle i had my flight for today cancelled. how about a lot of other people? >> oh, my gosh. were you going on vacation or just doing this for business? >> quick visit to see a friend but i know it's going cause people who are traveling for business a lot of headaches. >> yeah. so bummed feeling. you're not alone. >> no. >> what we're going to find is as we back things up you can clearly see why a lot of flights yesterday were cancelled. a lot of these blue arrows

you're seeing on the map those are wind reports and we did have a tornado report that came out of almira, consuming in on that. that's where this particular follow up was and we'll have that investigated as we go through the day. lots of damage, however noted across so much of the northeast. it's kind of quiet right now but still very damp out there. we still got to prep for the second punch of this and the punch is not only going to be across much of new england but across the mid-atlantic and down to the south. there was a severe thunderstorm warning up along i-75 but right now that has since subsided. we have heavy rain for that area south of macon. heavy rainfall for the time being as we journey into this southwestern arkansas. taking a look around the west will do anything we can to help the firefighters. many active blazes ongoing through here. southwest, we will see more storms firing up today for new mexico and shifting gears into

arizona for more storm activity for tomorrow. for today the areas shaded in red are the focus for severe weather developments, the prirm risk being spotty damaging winds and hail. we'll keep our eyes to the sky and ohio valley and some stormy developments across the northern plains. now back to you. >> thanks very much. now to the markets. which can be a stormy as all that. b ben, are your a believer or a skeptic. >> we have yet to break out or hit that is basically a savior for the market. we saw a strong rally yesterday in reaction to the comments about european savior here. that 1.20 level it's significant we didn't break those levels.

this week has been a wash. s&p is open around 1355. >> tell me why it's huge. we're sort of locked in. >> because -- >> what is it that gdp could tell you this morning that would make you change your mine and about what? >> well, i think what it is going to continue to tell us which it was last report with i think it was the 1.5, or 1.6, i don't remember exactly but it will don't see we're seeing that slower growth and than the a mix when we should be seeing some sort of result or some sort of, you know, growth period as a result of the stimulus that we've been putting in to this, billions of dollars we've been putting into this in the last couple of years and it's basically similar to the markets. it makes me think of michael jackson. it isn't "thriller" i'm

thinking. too high to get over too low to get under. >> if you're telling me there will be news in the gdp report that the economy slowed down, i guess i would say to you you have not been paying attention. sfligt w >> you said huge relatively in terms of what we're looking at today. no other information that's scheduled for release that's as big as the gdp data. i think on a whole, though, again i think we're in summer markets right now that's what i was saying we haven't done anything this week. we're trading sideways. we're at 1355. for the month we're trading sideways. again the euro currency was unable to break down. the bonds have been unable to break above that level. we saw record low yields. have yet to see follow through conviction and energy. we're seeing conviction at times, energy at times but it's

been divergent. that's what you need to see is follow through. we've been trading 1.22 for the euro currency for months. woe is, woe is me when we break lower or the dollar comes off and that euro currency stretches the 1.24 level. all i'm saying joe -- sorry, steve. >> second time this week somebody called me joe. it's that espresso he's been drinking in paris. we got to run right here but i have some thoughts on what would be news from the gdp report. thanks a lot, ben. >> the olympic games will officially begin tonight. we'll talk to a member of the international olympic committee and olympic medalist herself. that's coming up next. there's big news. presenting androgel 1.62%.

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♪ good morning, everybody. happy friday, happy first day of the olympics at opening ceremony is coming. welcome back to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin and steve liesman. joe will be back next week. we're now just two hours away from the most important release of the day, second quarter gdp. forecasters are saying that the u.s. economy probably grew at its slowest pace in a year. the dow jones survey is calling gdp to have slowed to an annual rate of 1.3%. compares to the first read we got of 1.9% from the prior quarter, first quarter. other surveys are putting this

number at 1.5%. again all eyes are on this this morning. i can say that because joe is not here to yale at me. we did see some massive gains yesterday. the s&p was up yesterday by a huge amount. dow was up by over 200 points. this was the best day that both the dow and the s&p 500 had in a month. at this point you are looking at green arrows across the board. dow futures up by 35 points. s&p futures up by 3.3 points. nine of the s&p sectors were up over 1% yesterday. the dow's fifth 200-point gain earlier this year moves the index back into the positive territory for the week and month. these all things we're watching. green arrows as we head into friday. gdp could really set the tone for the day. let's take a look at oil prices which at this point are up about 16 cents. 89.54 is the last trade. saw a lot of volatility yesterday. revolving around swings and

currency that we saw after draghi's comments moved every market out there. the ten year note today in the united states is yielding 1.458%. yesterday before draghi's comments that yield was below 1.458%. it moved instantaneously. the euro had its best day versus the dollar in a month. i want erased the entire losses for the month. the dollar is still higher against the euro. 1.2273. gold prices with the moments that we've seen here you'll see right now up about $7.90. gold is slowly starting to creep back up. right now it's at 1623 an ounce. >> going back to the gdp. the news will be outside of the ban. i think the ban in the 1.2 to 1.5 area is in line with the consensus. >> can you get below 1%. >> that would be news.

i don't think so. it's possible. i think there's a wild card for the upside to this thing. our guest today, we'll see if he's right, i wanted him on before, couldn't get the timing right, he had this idea that defense spending fell in the first quarter. that was an outlier. he thinks that could come back and the government doesn't count how well the government is spending money on a timely basis so we don't know. that could be something that's an outlier. shouldn't be mistaken for strength. anything above 1.5. maybe the economy isn't falling off a cliff. anything below 1.2 wait a second. in that ban the market is priced in. >> we're still talking about the olympics all day because that opening ceremony is just hours away. there are more than 10,000 athletes from 205 countries that will be competing in 26 sports at 34 venues. joining us right now from the olympic village in london is anita defrance. she's an olympic medalist herself. audiotape knitta, thank you for

joining us. great to see you. >> a pleasure to be with you. >> we're trying to get a sense. mood right now and we were just talking in the last half hour about some of the comments that mitt romney made to brian williams, wondering if london of ready for the olympics saying there were some disconcerting signs. what do you think? >> well, i just had the pleasure of walking across the village to get here and it's beautiful there. the athletes -- it belongs to the athletes again. no visitors today so you have to be either an athlete or a part of dells. such a beautiful peaceful place. the athletes are eating which is very important. they are having fun in the play room, the play areas where they are playing all sorts of video games and pool and other things and they are talking to one another and of course they are hot on the internet talking with families and friends and getting ready for their walk to the opening ceremonies. this is the first time since 1976 that the teams have actually walked from the village

to the opening ceremonies and it's going lot of fun. >> 1976 is when you won your bronze medal, is that correct? >> that's nice segue. we walked from the village and it was amazing because there were a few people along the side and as we got closer to the stadium there were more and more and we got more and more excited and turn the corner into the stadium and twlaufls of noise and welcome. it was beautiful. i can hardly wait for these athletes to experience that. >> you've gone to a lot of olympic games. how does this match up to what you've seen? >> it's not over yet. i can't assess it. >> just the pre-game, let's say. >> sure. they've been -- they are very organized. the athletes were able to be captured at the airport and then deposited at the village. some of them went from there to training sites. u.s. team has various training sites throughout the uk and they are back preparing now in the last moments before the stage, the curtain goes up.

there's excitement and a delight that finally the games are here and all the work and all the struggles are about to be over and then the thing about it is it goes by in the wink of an eye. so fast and then closing ceremonies. >> what have been some of the questions leading up to this. obviously you're getting everything set and settled for this. what are some of the issues that are specific to london because every olympic games has its own challenges. >> everyone has been concerned about transportation because, of course, already london is a city that's impacted by number of vehicles. you have to pay a lot to drive your car into london these days. and using the public transportation system as well, everybody is using it now. what will happen, lots of the businesses have cooperated. they asked that their staff take vacations or volunteer for the games. already today the traffic is much lighter than it's been the first two weeks that i was here. so that part is working well. people are going to cooperate. this is a city that has hosted

the games twice before. this will be the third time. this is the first time they've done it on their own initiative. the last time ioc asked for help. they said we want to do it, we're prepared and created a whole new area of town. this part, where the studio is situated used to abhor bill place. you wouldn't want to go near. now it's a beautiful park land. there's house. there's a huge shopping mall if you're interested in that. and it's a place that's very inviting. they reclaimed this area and it will be a part of the history of this town forever. >> well, anita, thank you for joining us. we're excited about this too. thank you for joining us so early. congratulations on your 1976 bronze medal in rowing too. we really appreciate you being here. we're watching these games tonight too. so thank you. >> all right, thank you. >> okay. if you got any comments, questions about anything you see

here on "squawk," shoot us an e-mail at "squawk box" @cnbc drm. we'll talk to david kirkpatrick knows zuckerberg and facebook. and the man who is blasting t.a.r.p. as an unmitigated disaster. we'll talk to dick kovacevich about why he's so upset about change of heart on big banks a conversation not to be missed coming up at 8:00 a.m. eastern time. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business.

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>> joeng us now is david kirkpatrick, the author of the book "the facebook effect." not a great day for facebook. not a great 24 hours. >> not a great day for facebook. i don't think you could say it's a good day. >> so -- >> they have a lot of days ahead of them. that's the key point. i love what steve said before it's a faith versus point to. you're absolutely right. i tend to fall more in the faith camp. they are like total believers. it's a matter of, you know, how virtuous is your faith. >> that's my question for you is how virtuous is your faith at this point. knowing what you know, having written the book, having been inside the company, dmog individuals themselves do you see a light at the end of the tunnel where you say you can support a 45, 50 billion dollar valuation or 100 billion valuation as the ipo would have suggested. is there a way to get there? >> yeah. my gut is long term that's more

likely than the other possibility, which is some kind of weird fizzle and despairance. in the internet that's possible. this is an unbelievable fast changing business landscape. this company didn't exist eight years ago and your got a billion in profits every year. >> put it for us in perspective. when google went public they were making a lot more money. they figured out how to monetize their business. am i wrong? >> they were making a little bit more. don't forget that was a very recent develop before their ipo only a year or two, three years at the most. they didn't make any money for the first, i don't know five years. >> can you help me out here. i can't buy the stock but if i was a potential investor, do they care about making money or do they care about growing facebook and its social achievement in the world. >> here's the weirdest things

about facebook. who is "they"? this is a company completely controlled by one individual. >> "they" is mark zuckerberg. designee cares more about growth, product and user satisfaction and impact. this is a faith product. >> we're going to grow this thing. we'll become the biggest social network in the world. >> they are. >> grow bigger and bigger. >> zuckerberg is a faith guy and cares more about product but believes money will follow and he thinks -- he always says if we do the right thing for our users i'm convinced there's a lot of money in it. sandholder was a great monetizer. she has long term plans for the ad platform and she's brilliant at that and got a ton of good things going on pap lot are super promising. it's a very fast changing landscape. >> david, we've talked to people

who actually say that's a good thing if you have the founder who is still in charge. people like warren buffett have said ate good thing if you a have a guy that's committed. >> die say it's a bad thing? it's a good thing too. >> i think the idea of building the network out, build the business and let the finance -- but the question i have is there a solution for mobile? >> yeah. come on. is there a solution? nobody has figured out mobile. this is so fast changing. especially if you look at facebook as a truly global business which you have to do. they even said on the call yesterday one of their biggest challenges right now is that they got this massive mobile growth in places like indonesia and india and brazil. >> one of the reasons zmoosh that's where mobile is growing super fast but the ad market is -- >> here's my question. one of the reasons they succeeded is because they

focused virtually solely on the user experience which is a good thing but because of it in fact i would argue it's been tough for them to sell ads. they don't want to jam up your news feed with ads. they don't want to jam up the pages with ads. >> weigh talked about that on the call. they think the best format is sponsored stories format which comes in your news feed and they are being very gingerly about how -- >> the question is how lie made it marketplace ultimately from an advertising perspective is there if the whole thing is about creating this great user experience, nobody here likes that. >> your ads for your book, is there any other way -- >> i sold my book over facebook. >> you sold quite a few copies. >> is there any other way to target a specific audience? >> there are other ways but no better way. this in the contemporary marketing world is the most successful way of tar gift certificating messages to individuals and it can to be done with brilliant accuracy, in

my opinion. >> but you're going have to be a long term investor and if you're one of these guys who bought in at the beginning and psyched to get in as an individual investor the bad news is you may have a long time. >> facebook took advantage of extraordinary enthusiasm that they didn't create and did price the stock too high. long term i'm sure it will go way above. >> jammed with ads it won't go there. >> that's my point. >> there's got to be a limit. it's a nice experience. >> the point is it becomes very hard to monetize it in the same way google has because of the single number of impressions that they can create. >> for the time being it's a global monopoly, most targeted ad market potential in history. i think that could be really big. >> we got run. how unhappy is zuckerberg when he sees the stock price? >> he's a little bit unhappy but that's not the thing he thinks

about. >> our facebook coverage will continue in the next hour when we'll talk to an early angel investor in the company at 7:40 eastern time. up next we know the drought pounding the midwest is disastrous for farmer and food prices but could that lack of water spell trouble for energy? we'll find out right after this. first, those let's pop into the "squawk" green room and see who we might find. well, well, it's blackrock's global head, peter fisher. we'll ask him everything from treasury yields to european bond buying. he's a busy man. he's trying to figure out what -- >> making bond trades. he's making actual trades before we come back. that powers sound decisions. duff & phelps financial advisory and investment banking services. 

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welcome back. the u.s. is enduring one of the worst droughts in history. some are questioning whether dwindling water supplies will cause the next big blackout. joining us from washington with more on how the power grid is holding up, christine tezak, senior energy and environmental policy analyst. tell us what's happening with the grid right now. >> well, first off it's hot and i think that's actually a bigger pressure on the grid and the reliability of transmission lines than the drought. >> and the changes that have been done since the big blackout, has anything improved at all in. >> i think it definitely has.

we are managing vegetation better than before, our reliability standards are mandatory and when you look at the integration of the grid across the regions we're seeing increased flexibility in part because we've been coninstructing transmission lines to harden the system and increase transfer capability to move different power resources such as wind. >> would you say there's a decreased probability then we could have a blackout we had several years ago? >> i definitely think so. certainly we're not going to see the complete avoidance of an event where you're going to see a localized problem or you're going to see challenges like we faced a couple weeks ago here in the washington, d.c., and mid-atlantic region where we had a very aggressive storm come through. you're seeing a greater capability to manage and balance and adapt to challenges like we're having now the heat here throughout the united states.

>> and the chances that -- let me ask you about conservation, because that's one thing i've been noticing a lot of. you go to the home depot, the l.e.d. lights, the average household use going down or up? >> i think we're seeing slower growth. we want to see electricity demand grow because it's usually highly correlated to gdp so we want to see it grow some because it suggests the economy is growing but the pace of that growth is slower and we're seeing a more efficient usage of power over time. if you look at california on a per capita basis they're using as little energy as they did in the 1970s, even with all of the ipods, iphones and computers. >> what needs to be done here? we're still battling on a local basis and nationally about the building of power plants. how far behind the curve are we in terms of future energy needs? >> well, i don't think it's so much behind the curve as much as we're adjusting to a new outlook and we're adjusting to a new set

of standards. the epa this year, well in 2011 finalized two important rules related to emissions, some conventional emissions like sulfur dioxide and nitrogen dioxide and hazardous pollutants such as mercury and those are phasing in, really starting to bite in 2013. what you're seeing is the electric power industry moving forward to rotate away from coal assets and smaller, less efficient plants into larger, more flexible facilities and integrate the renewables a lot of people feel are a priority. >> christine thanks for joining us this morning. >> you're welcome. >> christine tezak. still to come on "squawk," sandy weill's change of heart on the financial supermarket -- >> i think what we should probably do is go and split up investment banking from banking. >> but another banking legend disagrees, former wells fargo chairman and ceo dick kovacevich

will tell us why, coming up at 8:00 eastern time. first let's welcome today's guest host, peter fisher, and with u.s. treasury yields testing record lows, there is no better time to have blackrock's global head of fixed income with us. "squawk" will be right back. asy as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. uh, i'm in a timeout because apparently

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stocks soar. >> two, one, zero, and liftoff. >> but will yesterday's rally fade into the dark after some key economic numbers? we have the latest news out of europe. and u.s. gdp figures just ahead. facebook in focus. >> what are you doing? >> checking in to see how it's going in boss nia. >> boss nia, they don't have roads but they have facebook.

>> company having a tough time making friends on facebook, what's next for the world's biggest social media company? we'll speak to an angel investor and disruptor about the future of the business. plus guest host and squawk market master peter fisher joins us on the second hour of "squawk box." ♪ right here, right now, right here, right now ♪ ♪ right here, right now >> good friday morning and welcome to "squawk box" here on cnbc, i'm andrew ross sorkin along with becky quick and steve liesman, in for joe kernen right now. futures looking green, 42 points up if we opened up now. let's walk you through the morning headlines. reports that eurozone governments and the ecb are preparing to intervene on financial markets to bring down spanish and italian borrowing costs. the ecb was willing to take

action on condition the governments agree to tap the bailout funds. we'll get more from guest host peter fisher in just a moment. amazon, well their earnings matching wall street estimates, the company saying their growth of new business is boosting profit margins but current quarter guidance falling a bit short of current consensus. shares have dropped on that news. facebook reporting stronger than expected revenue in the social media company's first earnings report since its ipo but as we've been talking about, investors were not impressed and the stock tumbled more than 10% in afterhours trading. key executives holding a conference call to stress a shift to smartphones in the mobile world. julia boorstin spoke to the company's cfo david ebersman last night. >> he refused to give any financial guidance instead focusing on mobile as a "really big opportunity" saying that

smartphone also give facebook a market of as many as 5 billion people. he acknowledged the challenge is noble. users are growing far faster than ad revenue, also the reason payments revenue is flat as users bypass facebook and directly download games onto their smartphones. one of ebsman other challenges is scaling revenue internationally. in the u.s. and canada average revenue is $3.20, in europe $1.43, in asia 55 cents and the rest of the world just 44 cents and on the earnings call, ebersman faced questions about the ridesing costs that hammered this quarter's results, a stock-based compensation came in higher than respected at $1.3 aboutle. capital expenditures nearly doubled in the first half of the year as the company grew head count by almost 50%. while investors were selling

afterhours analysts were mixed. goldman sachs reiterated its buy on the stock and morgan stanley's analyst says he sees 50% share upside over the next 12 marks. citi's mark mahaney says he sees risk when it comes to mobile and user engagement. >> talk about facebook earnings from last night that's a focus on the markets today and the earnings reports keep coming in. right now we're hearing from dow component merck coming in with earnings at this point of 105x items, four cents better than the street estimated. singulair sales, fosamex sales $186 million, they'll be running through many more of these coming out and point out that

r&d costs came in about $2 billion and they are looking for 2012 revenue at or near 2011 levels, when you look at constant currency measures. of course, currencies have been the huge issue for everyone and guys, my computer's frozen right now on facebook, i can't call up the earnings per share expectations for merck, sorry, the revenue expectations for the 2012, if someone can take a look at the 2012 revenue numbers and let me know what that is, they are looking for -- 47.2 versus 2011 revenue numbers. >> 2011 revenue numbers are going to have been -- >> i don't know, but it's going to take us a little while to get the computer up and running. they're looking for at or near 2011 levels on constant currency. the constant question is what happens with currency. all of the news has thrown a wrench into things. >> what did we see yesterday, becky, a company missed by 4% on

currency? some company there, a bunch of companies. >> there were big misses in yesterday's earnings. exxon mobil was not one of them but there were several companies that came out with this. let's talk more about the markets. merck is up about 1.52%, because that is a significant beat in terms of earnings per share they were looking at. lot of issues for the markets to digest in the coming days, even hours with the release of the gdp report coming up at 8:30 a.m. eastern time. all leads to next week's fed meeting and the july jobs report. joining us is squawkmaster peter fisher, senior managing director and head of blackrock's fixed income group. peter, i don't even know where to begin. why don't we start with europe because that was such a huge mover yesterday and seems to have so much riding on it for every single one of the markets we watch. the bond market finally bought in yesterday on some of the comments from draghi that maybe he really means business. do you agree with that? >> you can see how passionate

draghi is. this is a life or death issue for the ecb, if people think the euro is going to break up the ecb is out of a job. more importantly if they lose control of the long end in the lit and spain they really can't implement monetary policy. that's something people gloss over, it's part of the transition mechanism, part of their mandate to make sure the bond markets are out of control. so you see governor noyier at the bank of france agreeing and being supportive of what draghi is trying to do. we know they have a debate but they have to seize control of the long end or they've lost control of the implementation of monetary policy. >> one of your prior jobs, you've had a lot of good ones. >> yes. >> was to run the desk of the fed. >> yes. >> after the fed set a rate, how much work did you actually have to do to implement that rate? >> most days we didn't have to

do much at all. >> much at all, okay. >> the central bank is a grumpy monopolist, in surviving liquidity at the short end but the central banks don't set rates that way now because the overnight rates are zero or thereabouts. >> in the global world where you set words what if draghi said i will not tolerate the rate of any sovereign more than a spread above "x" what would the markets do and how much would the ecb have to spend to make that happen? >> you're referring to what the fed did in the late '40s and early '50s managing the yield curve. if the ecb will be willing to back that up -- >> they'd spend $3? >> they'd have to proof that, spend some money and then the markets would respect it. >> why don't they do that? >> that's the debate they can't get right in the ecb, inside the

council, they don't have an agreement on what the mission is, whether that's part of the mission. >> a good central bank is for the interest rate market the word of god. we say it. do you it and i don't have to do anything. >> not at the long end. we never thought of it that way. at the short end we think central banks are omnipotent. it's the expected path. >> but it's nothing to write home about in italy and spain. >> that's the problem is how far. >> there are a lot of people who said yeah the ecb can just come out a change the whole picture and stop this whole thing. you point out they know they have to. draghi said yesterday they will act within the mandate. can they act within the mandate and stomp this out and do you think the moves will be forceful enough to convince the market let's say in the next three to six months? let's look at the rest of this year? >> he's certainly put himself out there. it's one of the things i've been

looking for, for the last few months, when was draghi going to tie himself to the mast of the euro. he really did, he said "i'm in this and we're going to do whatever it takes." that's one of the tricks central banks have is the unlimited balance sheet and they've never put themselves behind it. >> we had deputy treasury neal wolan on the set yesterday saying that's great but now we need to see action. >> that's what the market feels. >> the last time -- >> depends on what he does. everything he's done so far andrew he's done and then stopped. >> all i'm suggesting is whatever it is ultimately is going to be temporary in some respect, and so the question is, all he's trying to do is buy time -- he ultimately has to buy time for the politicians, that's what this whole game is about. you may disagree. >> i think it's both. i think that he's tied himself to the mast.

i'd now like to see that chancellor merkel and president hollande tie themselves to the mast of the euro. if they're willing to commit politically to the euro, the market will respect that. >> what i'm talking about was unlimited. that's what bernanke did and that's why i think, a major reason why we stemmed the crisis here. when you say unlimited you make traders scared and your market does your bidding for you. they have never done that. he did the ltro and publicly announced no more ltro, the dumbest thing to do. >> he's tying his own hands down. >> now what? now that he has tied himself to the mast of the euro and we expect that we will see some bigger moves come out of it, how

do you tell people they should be investing? >> the long end of the periphery is a risky place to be. that's why the yields are high. some investors may have the intestinal fortitude to put money there. >> zmou. >> yes, some small amounts. be clear the big pension funds, the big pools of capital have pulled back so the big benchmark indexing pools of capital have pulled back from the periphery, that's something they need to draw back in, the hedge fund pools of capital, yes, they'll dabble in the periphery in the long end and it's a nice place to make money as long as you're quick on your feet. >> peter will be with us for the next two hours. we have a lot to talk about what w what's happening with the united states and gdp that's coming up, what that will mean for the fed. stick around, much more from peter this morning. there's more coming here, 237 years after its inception, the post office is struggling to survive. >> huge debt. >> and can it be saved?

should it be dismantled? former assistant to the president for manufacturing policy ron bloom will join us next to discuss. comments? questions? send them to @squawkcnbc on twitter, look for updates from andrew, becky, joe and the "squawk" staff. between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. i bought the car because of its efficiency. i bought the car because i could eliminate gas from my budget. i don't spend money on gasoline. it's been 4,000 miles since my last trip to the gas station. it's pretty great. i get a bunch of kids waving at me... giving me the thumbs up. it's always a gratifying experience. it makes me feel good about my car.

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♪ whoa, yes, wait a minute mr. postman ♪ ♪ wait ♪ wait, mr. postman ♪ please, mr. postman, look and see ♪ ♪ oh, yeah i didn't know that. post office is in need of an overhaul. it says the agency but somebody wrote in and told us it's a private corporation. is that right? >> public, government corporation. >> anyway, reiterates that without congressional action it will face default. joining us ron bloom, vice chairman of u.s. investment banking at lazard. there's two problems with the post office, one is a law passed by congress that has to do with the retirement insurance and the other obviously is the market. why don't you walk us through both of those problems and talk about this $5.5 billion cliff they're about to go over. >> so i think it is important to distinguish. the postal service obviously faces a long-term secular problem, which is first class

mail is declining, declining 4% a year, 5% in year, that was inexorab inexorable, it will go for a long time so the profit in the post office is in long-term secular so we need a restructuring that recognizes that. on the other hand, the short term problem is entirely the creation of this prefunding mandate. in 2006 the congress said that the postal service has to put aside $5.5 billion a year for retiring insurance, for its employees. no other company in america, public or private, has that obligation. so if you actually look at the results of the post office, let's take the results of the first -- >> operating results. >> operating results, first eight months of this year, 94% of the loss is because of either the prefunding mandate or accounting changes regarding workers' compensation with low interest rates. the postal service is losing about $75 million a month from delivering the mail. that's a problem but a different problem than the billions we hear about. >> wait a second, ron, they

would have lost money even without setting aside this. >> but the numbers reported include the 5.5 so as an accounting matter they accrue that obligation. >> when you say they're losing $75 million a month delivering the mail -- >> that's a half a penny on a stamp. >> what i'm missing here is you're suggesting they're losing it but making an operating profit? >> no, no, i said the losses we talk about, people talk billions and billions, that's not what it is. >> but there are still meaningful losses. >> they are losing enough money so that if we raise the price of a stamp by half a penny, they would be breaking even. i'm not trying to minimize the problem but let's not -- >> thank you, we've been looking for clarity and get different answers every time we ask. >> people talk about half a billion, a billion a month, 2 billion. no, they're losing 75 million a month but for this obligation. >> what would be the loss if they were normally funding the

pensions and the retirement? >> the pension is overfunded, on retiring insurance the way it works under gaap it's a pay as you go system. if they were doing that it would be the 75 million a month. that would be the number. >> can we talk big concepts here? i don't understand the whole postal debate and what bugs me is people say this is the great example of government gone bad. this is a clear example of how government cannot deliver a service. on the other hand, the postal service is a government service. the reason we have the government doing it is because the private sector would not deliver mail to the rural address. >> right. >> so should the postal service be making a profit and break even or should it be something that cost is something acknowledging the benefit we get from a government service? somebody help me? >> perfect schizophrenia of how the congress behaves. on the one side it says we want to you deliver a letter from the corner of alaska to the far corner of hawaii and we want to

you do it for 45 cents, which has nothing -- >> public service. >> it has nothing to do with the price of what it takes to get there. on the other hand we want to you break even. you're right, and we can't, as normal, with government, we can't decide what we want. >> if the postal service eliminated unprofitable routes at the current stamp level -- >> why not just not offer 45 cents to get from here to there, make it $1.25. >> for a long time we said it was important that we all could charge 45 cents. >> if that's what we want from a service, we should pay for it. >> 80% of the mail that goes through the system on every single day is commercial. it's junk mail. >> it's about 50/50. >> now about 50/50? there's an argument to be made we're subsidizing business. >> business, public service. >> it's the economics of the post office, meaning media, magazines, newspapers. >> absolutely. >> and the catalogues, we are

subsidizing them. >> you're right and we won't let the postal service charge what it costs to deliver its product. >> we'll complain about it. >> and then we complain about it. >> it's inefficient, is itineff? >> at the art and science of delivering the mail post office isn't bad. congress puts a lot of obligation on it. look, you want to close a rural post office, that's a congressional event. you want to close a post office, a rural post office and it doesn't save a huge amount of money but they have post offices out there that have 90% negative margins, because nobody comes in. so what we need to do is we need to step back. we need to ask ourselves what do we want this thing to be. >> and how much will we pay for it. >> and what are we willing to pay for it. this is an amazing network, it hits 150 million homes six days a week. that can be a thing of value for commerce, and so maintaining the network can be a very valuable

thing. amazon wants to sell you everything, and having that network available for the last mile is valuable for lots of different kind of commerce. >> the post office plans to cut saturday delivery, cutting some of the places, is that a valid plan? >> no, and here is the problem. what the postal service says is we're going out of business, losing billions a month and therefore we need to radically shrink our network. that's not what's going on. they're losing as i said the equivalent of a half a penny. clearly you got to right size the network because first class is in long-term decline but the problem with all network companies is if you cut the network too fast you accelerate the very problem. >> can i make a point i learned in russia? one of the things governments do is ensure that parts of the boundaries of the nation are populated and sometimes it gives subsidies for that reason and if you removed postal service from rural routes, people may not live there so that's a subsidy to that. >> if you changed the price and said we'll leave the price for

regular mail for individuals. >> and raise it for -- >> raise it for commerce, people say it's a tax on business. >> they will. you're right, andrew. >> i agree with that. i agree with that. there is a great thing of value for our nation. we need to step back, need a comprehensive plan that asks these questions, what do you want to pay for, what do you want to not and everyone -- look, and he was asking me earlier, there's going to need to be sacrifice here, but the idea that we sort of rush into this thing and annihilate the network -- >> how much time do we have? >> depends what congress wants to do, if they would remove this pre-funding burden, we'd have some time. >> but the key here is you cannot have congress complaining about the cost of the postal service and at the same time putting the mandates on the postal service that create the reasons for the complaint. >> that's right. >> is there any argument to be made about the pension fund at all? >> the pension fund is overfunded. >> so there's no reason to worry at all. >> no, that is not the problem. i know people want to annalogiz

it to general motors. it faces long-term secular problems but we shouldn't pretend what it is. >> ron, thank you for your work on this topic and good luck with that. >> come on back, this is a fascinating topic. >> it is. still to come a focus on commodities, ahead of the morning's gdp number. the trading block has it covered the top of the next hour, the other side of sandy weill's idea of breaking up the banks, a man who rarely minces words, dick kovacevich, you'll want to stick around for that. time now for today's aflac trivia question, what stadium holds the record for the world's largest scoreboard? the answer when cnbc's "squawk box" continues. lac pays cash. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for?

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to experience the ultimate expression of power -- control. ♪ during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. ♪ now the answer to today's aflac trivia question. what stadium holds the record for the world's largest scoreboard? the answer? dallas cowboys stadium. >> aflac! >> take a look at the futures this morning after the big gains yesterday, dow up by 211 points

yesterday it's indicated to open up about 34 points, at least if it were to open right here, merck was out with dow components, the stock is indicated higher this morning. also britain's sport and culture minister had a little bit of an accident with his bell today after three minutes of bell-ringing in honor of the summer games in london. while giving a tv interview after the ceremony, minister decided to show off his bell ringing skills and seems the three minutes of bell ringing earlier was a little too much for that bell, it broke off and flew towards a group of people. nobody was hurt by this accident. >> maybe they're not ready for the games. >> no damage except for maybe the minister's ego. carl will join us with more on the olympics in a little bit. >> okay, if you've got comments, questions about anything you see here on "squawk" including funny videos like that, shoot us an e-mail and follow us on twitter@squawkcnbc is the handle.

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welcome back to "squawk box." i'm steve liesman along with becky quick and andrew ross sorkin, checking the future this is morning we were up pretty good, 29, wide open, taking a peek out there, the value of the s&p up 4 and the nasdaq up 4 as well. there's the fair value board right there. we are about an hour away from the government's latest data on economic growth. economists surveyed by dow jones expecting it to be up 1.3% and merck reporting quarterly results a short time ago, earnings and revenues beating the street, full year earnings guidance straddles. exxon downgraded to neutral from buy at ubs, it cites risk of reduced pace of share buy-backs, increasing low quality earnings and material outperformance versus peers.

i don't think they liked anything at all, becky, about exxon's earnings yesterday. >> i have to agree with that. thank you, steve. let's get to our trading block for what's happening in the energy and commodities markets. matt smith is a commodities analyst at summit energy and tom essay, good to see both of you. tom, why don't we start off talking about stocks. things are looking good coming off a 200 plus point gain from yesterday, green arrows this morning for the dow futures. we have gdp coming out in less than an hour's time. what are you expecting with gdp and what do you think the market's reaction might be? >> i think we're looking at a low 1% is what i think the general expectations about 1.2% and i think that makes sense, given the very slow economic data we've seen. if you see something much less than that you'll see a bounce in commodities. that will bring forward any qe from the fed. >> that's my question, bad news becomes good news at a certain point because you think the fed

will step in? >> that's exactly what it is and we saw that earlier with some of the weak economic numbers as well. the key to watch is gold in the commodities space. watch what gold does out of the gdp number. if it rallies we can expect qe sooner or a bigger qe than we thought. >> we have peter fisher, our guest host today and peter, this is a question that's a big one. is good news bad news, good news good news? if the fed steps in can they help things at this point? >> it will be temporary good news for markets but i'm nervous that the fed can't push growth forward if they just push the markets forward a little bit. the weakness with he see in the economy that we see all around the world is something the fed isn't going to be able to cure with a shot of qe even if it gives the markets a boost in confidence. >> the other big question is what happens with the jobs number next week, also trying to figure out if the fed will act now or later. if you're sitting at the fed if you were bernanke, would you wait to see what happens with the jobs report or would you

want to get out in front of it? >> depends on how bad the number is. if it's worse than they expect the feds have to revise down their forecast right away. the fed would like to have a better sense of the fiscal policy path so i think the temptation would be to wait for september just so have a little better sense. >> have congress back in session. >> yes, maybe also understand what the cbo and omb's mid year forecasts are that come out in a few weeks so that would be their first choice. if the data is bad enough that's what we've done in the past. >> makts arkets are going to ge wagged by the same story, what the fed does or doesn't do. is europe and the ecb what they do or don't do the biggest issue at this point? >> they're all a factor at the moment. we'll see the inverse relationship with oil is going to propel the dollar lower and oil higher. we saw that with qe2 and likely if they do that with qe3 as well. the issues in europe are reining

in crude and at the same and different junctures depending on the risk appetite and how things are panning out and that's not something that's really going to go away. it's really markets running on hope and fear, the hope of stimulus and at the same time there is this oil specific fundamental issue of the geopolitical tension with iran. >> we haven't even mentioned iran this entire week i think. >> i know it's been quiet. actually we're not likely to see any nuclear talks until at least september, we have europe rumbling on and iran rumbling on, nothing that's going to get resolved in the near term. it's lending support to crude and then dragging it lower and that's likely to continue through the next few months. >> so how do you trade it? >> you don't. >> so you steer clooer? >> you probably do. the fact is gasoline demand here in the u.s. is just going to pblt! now that gdp is relatively flat and europe is being restrained as well, and then offsetting that, we're seeing growth coming

through china in all demand terms but it's not necessarily like driving crude prices. it's trading sideways. >> i like your technical analysis. >> you have to have the sound effects. >> are there anything that gives you hope what might happen to the economics picture? it might make you think the consumer is a little stronger, too, in some cases. >> i like to focus more on the underlying fundamentals of gasoline demand because even though consumer spending is just kind of trucking along okay, gasoline demand is so flat here in the u.s. and unemployment rate is so high still it's restraining everything and so the earnings really is given a bit of a false indicator i believe. >> tom, aside from this gdp number jobs report next week what are you expecting and what is the market baking in? is this a situation where it's not surprised to see a lower

than expected number so the stock reaction might be very easy to get a little bit of juice out of it? >> yeah, i think so. yesterday's weekly unemployment claims have shown status quo so i think most people are expecting between 50,000 to 100,000. if that happens we get a big yawn i think. unless we get close to zero you're not going to see a major move or if we get 150 print you'll probably see -- actually that may be good is bad in that it will make the fed less inclined to do qe. so really 50 to 100 is probably a big yawn. >> tom and matt, thank you very much. we appreciate your time. >> we should say matt just brought us baseball bats, little baseball bats. >> which you could use on anybody who -- >> not on each other, not on each other. no, please. >> we'll try. >> or on me either. >> did you bring one for joe? >> i did. >> take that back, take that with you. coming up we've got a disruptor from the valley investing in everything from

facebook to twitter. find out what david lee of sv angel thinks of the social media giant's earnings and where he's putting his money to work these days, after the break. monday on "squawk box," two hours with guest host david rubenstein, cofinder of the carlyle group and the restoration of the washington monument. we'll get his answer to sandy weill's call to break up the big banks and talk jobs with aol co-founder steve case. don't miss "squawk box" starting monday at 6:00 a.m. ooern. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade,

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♪ now everybody, have you heard ♪ if you've been living under a rock, today is the opening ceremonies of the olympic games in london. that is the barge that is carrying the olympic torch. opening ceremonies a little later today. they'll be shown here at 9:00 p.m. eastern here in the united states, but that's the boat with the barge, there are the crowds watching. excitement is building over there and over here. let's talk a little more facebook this morning. facebook might have changed the way the world communicates but it's having a bit of trouble

finding friends on wall street. sv angel co-founder david lee joins us from palo alto, and thank you for joining us, as part of our disruptor series. i want to think for just a second about a lot of the new types of investments you're making in social, in mobile, in so many different pieces of the new technology business that, frankly, rely at some point either on facebook or use facebook as a model. when you see some of the shall us that are being used raised by facebook's long-term ability to make money, how does it change your view or does it of some of the newer investments you're making? >> first of all thanks for having me. actually, in terms of the long-term viability, we feel great about what facebook has been doing from a startup perspective, in terms of what they've been doing with the open graph and some of the other really startup-friendly moves to open up their platform.

it's really been great for startups, so on the one hand, you know, there's, with respect to them as a long-term business, the viability of them, we feel very good. we're not public investors, and so we don't really, that's not how we really view the company but from an innovation standpoint we feel very good about the company and they're doing great things. >> david, how much do you key off of the public markets in that when you make an investment you invariably have to think about an exit. >> you know, that's a great question, not as much because it's hard to see. lot of these companies take about, the average, the lifetime to exit for a lot of companies b five to seven years so none of us are fortune tellers. lot can happen in that time and so in terms of right now what's happening in the public markets, i think that has some effect, just atmospherically but from an exit standpoint, from a prospect standpoint, i don't think about it as much. >> david, tell us about a couple

of things that you guys have invested in, and at the same time talk about the business model, because often-times stuff sounds great including some of the things that facebook's created but it's not clear yet there's a model to support them. >> sure. so i think generally speaking, one of the areas where we're looking is of the changing way in which people are buying stuff, goods and services, so i think there are two key areas, the first area is collaborative consumption or the peer-to-peer economy. i think you're seeing a lot of services open up where people are actually utilizing or buying goods and services from other people, air b&b is a great example. >> tell people about air b&b, not all of the audience understands what it is. it's cool. >> sure, air b&b is a service where anybody can rent or open their place up for other people to stay. so for example, if i'm going out to new york, instead of staying

at a hotel i may stay at a nice flat in brooklyn and so what that's done is not only has that opened up a new economy, but you're also seeing relationships form among the community members, and that community is something that is really driving a lot of these services. >> a number of the services that you've invested in recently rely on consumers to pay, using their credit card, but it almost seems like the social media 2.0, if you will, is still dependent on advertising, and how do you see that sort of shift in terms of your thinking and how you think about it making investments? >> sure, so i think it's a combination of both, actually the secondary that i was talking about was this area of ecommerce or ecommerce 2.0 or social commerce, the changing way in which people are buying stuff. i think for the first time ever, it's funner for some people to shop online than it is offline, if you think of companies like pinterest or warby parker.

i think there will be some in terms of changing in the way in which demand is created and harvested, and then also advertising which traditionally has been a way of monetizing engaged audiences. >> is it possible that all of these companies, which many of which are layered on top of facebook, ultimately they're successful but facebook, which you could almost consider as the inf infrastructure behind a lot of them in some respects isn't going to have the same success? is that a possibility for you? >> in terms of the other companies or in terms of facebook? >> in terms of facebook, when you think about facebook. >> no, again, i think you know, facebook has all the hallmarks of you know, just an unbelievable franchise, in terms of their, the talent there, the software engineers, what they've built, and so you know, they've said explicitly that they take a long-term view in terms of what they're trying to build, and i think a lot, most of the startups or all of the startups

that we talk to or that we know really rely on them as a long-term franchise, and view them the same way as great software engineers building a great software platform for the startups. >> david, we're going to leave it there. thank you for joining us this morning, from palo alto. >> thanks for having me. note to self, next time you have to sneeze, go ahead and just sneeze, don't try to stop it. we'll have more from guest host peter fisher on the swaition in europe and the united states and the top of the hour the special interview with the man who wanted to refuse t.a.r.p., dick kovacevich will join us to defend the big bank model.

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pinterest. gdp report out at 8:30 a.m. eastern time that, leads to next week's fed meetings and the july jobs report. squawk market master peter fisher of blackrock's fixed income group. in the commercial break you were talking about how negative nominal rates are a huge story and what this means, if you look at the short end of the curve when you go to japan, europe, what is this telling us? >> it's telling us there was a premium on cash. we were talking about the italian and spanish yields way out, there's an extraordinary bid for everything under a year in europe, leading us to negative nominal interest rates. that's not going to be good for banks, if we want to create credit, banks having a destabilized deposit base isn't going to make them feel good about writing loans. there's some people out there think gee, let's drive rates really low and the banks will

have to lend more. >> they'll say it won't make any sense for them to keep it at the federal reserve, if you're basically getting nothing back but right now they're basically getting nothing at a quarter percent. >> yes but imagine the fed as alan was suggesting goes to zero or negative rates on the reserves. the fed's balance sheet is somehow unstabilized. everyone will drain away the liability side of the fed's balance sheet. i thought the fed was trying to stimulate the economy by growing its balance sheet. which is it? it's hard for investors and money markets and pension funds. this is a big game changer for us. >> what should we do? almost sounds like you want them to raise interest rates. >> no, i think they've got to think harder about the slope of the curve they want. they've been assuming and this is why i disagreed with twist, that they wanted a flatter, low curve. i think you want a steeper curve with it flat at the short end. that's why i disagreed with twist. i hope they don't do more twist. >> steeper curve, banks borrow

at lower rates and lend at higher rates. >> and marginally help them not shake their balance sheets. you want them to lend more. politicians are complaining they want more lending out of the banks. gee, why make it harder? >> let's go across the pond, what is your expectation for the ecb next week, what does draghi have to do next week, given what he said yesterday? >> i think he has to give us more detail on how he's going to behave. he may not have to come out with guns blazing and buy a ton of spanish and italian bonds on the spot, t i think he's got to lay out more of a framework. he says he owns the long end, says he's going to do whatever can he. he's now got to show us is the council along with him. i don't think he's got to act. he may lower rates again but i'm afraid that will give us negative nominal rates deeper in the short end. >> so you don't think a quarter point from the ecb is baked in necessarily? >> no, i don't think it's baked in and the fact that he was

talking about the long end and not easing tells me he's thinking that way. >> let's leave your thoughts about what the fed has to do next week for the next hour, it's a week of monetary madness, guys. >> monetary madness. >> ecb and fed both expected to do something, going to be an interesting week for stocks and investors and us. when we come back, dick kovacevich disagrees with sandy weill's call to break up the banks. is he our guest. and mitt romney economic adviser glenn hubbard talks the economy and the campaign.

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responding to sandy weill's call to break up super market banks. >> what we should probably do is go and split up investment banking and banking. >> former wells fargo chairman and ceo richard kovacevich says weill is wrong on this one. [ buzzer ] he's also the guy who wanted no part of t.a.r.p. during the height of the financial crisis. >> i'm not one of you new york guys with the fancy products. why am i in this room talking about bailing you out? >> he'll talk to us next.

a key report on the strength of the economy. the second quarter gdp at 8:30 a.m. eastern, the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, first in business worldwi worldwide, i'm andrew ross sorkin with becky quick, steve liesman in for joe kernen. our guest host peter fisher, head of global equities at blackrock. the futures at this moment, we have green arrows across the board, the dow would open up about 30 points higher as would the s&p 500, which would open up about 3 points higher and the nasdaq 3 points higher as well. in the headlines, dow component merck earnings and revenue beating the street's expectations, results helped by continued strong sales growth

for its diabetes drug genuvia. you can see the bid is at 44, the ask at 44.97. the stock closed yesterday at 43.33. the stock is higher today. facebook shares falling sharply in afterhours trade after the company's quarterly results. the second quarter earnings and the revenue were roughly in line with expectations, but the company offered no forecast to try and ease worries about the prospects for boosting advertising, a lot of questions about what's happening in terms of that mobile strategy. lot of questions about how much they're spending and how and when that's going to be paying off. earlier this morning, we spoke to david kirkpatrick author of "the facebook effect" about facebo facebook's chief operating cher cheryl sandberg. >> she is an amazing monetizing. she was doing all the explanation on the call about money stuff, you know, not the quarter but long-term plans for the ad platform and she's brilliant at that, and she's got a ton of good things going on,

and a lot of them are super promising, but it is a very fast-changing landscape and it's still very new. we are half an hour away from a key piece of economic data, the government's first read on second quarter gdp will hit the tape at 8:30 eastern. forecasters are saying the u.s. economy probably grew at its slowest pace in a year. the dow jones survey calls for gdp to explode to an annual rate of 1.3%. other surveys puts the number at 1.5%. we'll be watching it closely. >> can we talk quickly about amazon? there was an interesting report yesterday, initially came out the stock traded lower and the reason why it was pressured is because of their capital spending and then it ended up at 2%. to me, that's one of the few hopeful signs i've seen in a very long time that a company that was investing in its business, the stock was bid on it and i have not seen that in a long time. we're waiting for the day when wall street rewards companies for hiring people and spending

money. it has been the opposite. companies have been rewarded for cutting employees and spending and i just want to make that point, that that was an interesting trade yesterday. >> okay, let's talk about dick v kovacevich. comments made on this show is still rocking the financial industry, sandy weill's change of heart on financial super markets like the ones he created. take a listen to this for a second. >> what we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans and have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail. the banking system is really very, very important. i think that the problem that was created was created by too much concentration in investments in the banking

system, way too much leverage, very little transparentally with lots of off-balance sheath things that didn't really count and i think a lot of those things have to change. i think that there should be transparency and nothing off the balance sheet. if a bank or institution wants to do something they should have it on the balance sheet. they can call it special purpose vehicles or whatever they want to call it, but it should be shown. >> our next guest does not agree with mr. weill's notion of breaking up the banks and he knows a lot about banking, dick kovacevich, former chairman and ceo of wells fargo, also note while running wells fargo during the financial crisis he strongly protested against his bank needing part of the government's bailout program. good morning, great to see you this morning. >> good morning. good to be with us. >> there's a couple ways to look at this. some people say the banks should be broken up because of the safety and soundness issue.

sandy weill's proposal really was about breaking up the banks because ultimately he thinks they'd be more profitable and the shares higher. you say he's wrong on both counts? >> yes, i do. >> because? >> well, first of all, i think the way our industry should evolve, should start with the customer and what they want and what they need, and in addition to the traditional banking products, our customers need capital. they need our help in underwriting bonds and equity. they need our help in merger advice, acquisitions, divestitures, institutional investors in particular need our help in buying securities that they want and selling securities that they don't want. they need our help in reducing risk. >> right. >> interest rate risk, foreign exchange risk and commodity risk. we are a financial institution. these are financial products, and these are our customers.

why shouldn't we provide those products to our customers? now sandy says the reason we shouldn't do it is that these products are risky. would you, please, tell me what are the risks of providing these products to our customers? >> let me take one step back. i think the sandy argument is that, given the environment, the regulatory environment, the public pressures on banks, the way the markets are analyzing and valuing, frankly, the shares of these companies, that there's somehow an opportunity if they're broken up to actually create more value, and i think there's a distinction and this is what i'd be curious to hear from your perspective, wells fargo has always been a relatively simple bank but many of these other banks, jpmorgan or citigroup or bank of america are a little more complicated, no? >> well, they're different, and perhaps more complicated, but i think we should leave it up to the management of the

institutions to decide how to maximize shareholder value. they don't have to be complicated. they can be very narrow. i happen to believe that, because we're in the risk business, you have to be very diversified and diversified in your revenue streams and that leads somewhat to complications, but it reduces risk, and if you aren't diversified because of macro economic factors or you make mistakes, you can have very serious consequences. i don't think it's up to sandy or regulators to decide how to maximize shareholder value. >> by the way, dick, i think what he is suggesting, i'm not sure he's suggesting that regulators break up the banks. i think he's saying if you're a ceo, jamie dimon, you should do it yourself. >> no, that's not what he said. he said that commercial banks should not be in investment banking, very clearly, should not be. >> dick, i think what you're --

>> it's too risky, because it's too complex, and so on, and the only risky part of investment banking is not what they do for the customer, it's what they do for themselves. they do structured products that no one can figure out what they are and take triple b and triple c tranches they can't sell and when the products fail they have big write-offs and they leverage their institution to 30 times leverage with proprietary trading and proprietary investments. there's really three types of financial institutions i think throughout there, there should be hedge funds which is where your pro pr excess proprietary should be, there should be banks as we call them that are really kind of a combination of the client base of investment banking, and old commercial

banking and then there are boutiques and boutiques basically do the client part of investment banking but they don't take the risk the investment banks do, and if you do all of those things for a lot of different clients, and have a lot of different products, you could have consistent revenue growth over a long period of time without risk, and eventually the stockholder will benefit, because of that kind of consistent revenue growth. >> all that's well and good, dick, but i mean, you say the managers should decide and you should do what the clients want, but right now, what we're talking about is where the public interest coincides with the decisions of managers, and i think the conclusion has been that the managers and the decisions that were made, for whatever reason, either because of the client, has ended up with a potential bill to the taxpayer and that's the nexus for the government getting involved and saying you know what? banks should be limited as to what they should do. >> hold on, we were talking about public interest or at least i was, that this was going

to reduce risk, not increase it, and i think andrew was talking about, it's good for the stockholders, so you're going both ways here. which way do you want to discuss this? i was -- i believe it's in the public interest and it will be in the stockholder's interest that we focus, banks focus on client needs and these needs can be done without taking excessive risk, if you're diversified, and i do not believe that the client side of investment banking is risky. in fact, it is riskless, and we need that kind of additional -- >> just to be clear, dick, you're in favor or not of the volcker rule? >> i think it's how you execute the volcker rule. i am in favor that you should not have excess or extreme levels of proprietary trading and investment. you shouldn't have extreme, none

of your businesses should be over 10% of your total. it's all it diversification. >> dick when you see what happened with jpmorgan inside the cio and some of the trades, is that something you think is appropriate, inappropriate? >> i think you bring up a very good point. let's look at what happened at jpmorgan. i happen to believe that this was an aberration. i don't think there's systemic risk within jpmorgan. let's see what happened, they lost a lot of money, self-inflicted that jamie said very clearly was a mistake, but because they were diversified, they still had an outstanding quarter. their credit card business did extremely well. their mortgage business did extremely well and three years ago when they were writing off credit card losses and mortgage losses their investment bank was doing really well, so we cannot avoid problems. problems will occur, some self-inflicted, hopefully few, but there will be.

we all have made mistakes, and some that are macro economic, but if you're diversified, you can handle those problems without putting the tax at risk and investors at risk. i think the jamie dimon example proves my point of the value of a diversified financial institution. >> dick, peter fisher here, fixed income at blackrock. i have a lot of sympathy for the government coming in and slicing up the banks doesn't give me comfort and in particular i don't think the classic glass-steagall dividing line between writing loans and underwriting loans makes a big difference but as a bond investor, looking in at some of the big holding companies and having heard the government, as steve was saying, saying never again, you bondholders are going to eat it, it's pretty hard for the bond investor to know where am i going to eat it? where in these big holding companies with all the debt they're issuing is the government going to stick us with the tab for a systemic resolution? and so there's a case i think for simplifying the holding

company's structure is making clear what's going on in different subs. forgive me but a little more 23a, a little more division of how subsidiaries lend to each other, even accepting your argument about diversification, what do you think of that? >> yeah, i'm in favor of that. by the way i'm in favor of bondholders taking a haircut, should there be failure. i think the best people to control financial institutions in their size are actually the bondholders because they have no upside. the equity holders have upside. >> both the leaders and cfos of the big banks have to tell us where that's going to come, at the holding company or all the subsidiaries. >> sure, and i think that is -- disclosure is good, and whatever is needed to make sure that is understandable is good. and i think some of the simplification that is going on, is a positive step. i don't think we need 5,000 subsidiaries in our financial

institutions. and i think simplification of some of the regulatory areas and not having this distinction, false distinction between investment banking and commercial banking, and so forth will benefit that, but i totally agree with you and think it should be done. >> dick, let me ask you about something else sandy weill said. he said that in terms of dodd frank, he doesn't agree with it, it's 2,300 pages long, a little too confusing. he said he could do what you needed in two or three pages, pointed out a few things, limiting leverage, making sure there is no such thing as off balance sheet, everything is fully reflected, like having derivatives trades so you can have mark-to-market every single day. what it b those ideas and what do you think about dodd-frank? >> i agree with sandy on that. i think dodd-frank had little to do with, if dodd-frank was in effect, the crisis still would have occurred, and it won't keep

the next crisis from happening. there are so many things in there that have nothing to do with the crisis, and in fact, you know, the really crazy thing about dodd-frank is, let's face it, this crisis was caused by about a half a dozen investment banks and about two dozen s&ls. there's only one commercial bank that was involved in perpetrating this crisis, and yet 8,000 commercial banks are being reregulated for doing nothing wrong, and what we need to do is clean up the investment banking side of things and get the excessive proprietary trading and investments out of investment banks. there are no investment banks left. there's just boutiques and morgan stanley and goldman are basically banks today. so again we have three categories, hedge funds, which are unregulated, never be 30

times leverage because no one will lend to them at that level so that's mostly equity, which is good. you have boutiques, who are very limited in what they offer, again, not risky, and then you have banks, who, in my opinion, have to be very large and diversified in order to satisfy their customer needs and not be a taxpayer risk. >> dick, bill isaac interviewed you on breaking up the banks for his book "senseless panic." you debated these issues. i'm curious, do you have any change of heart now, not so much about what to do about the banks but when you go back and think about t.a.r.p. and all of the things that have happened since 2008? >> do i have any change of heart? >> in terms of pushing back, for example, on t.a.r.p. at the time. >> oh, no. i think t.a.r.p. was one of the worst economic decisions in the history of the united states. >> t.a.r.p.'s made money for the treasury. what was the problem with the

whole layout? >> well the premise of t.a.r.p. was that, if we gave billions of dollars to all financial institutions, including those who didn't need it, is that the confidence level in the industry would increase, right? >> um-hum. >> so what happened? >> but do you think the banking system -- >> hold on, what happened, andrew? within three months of t.a.r.p., the stock market fell by 40%. >> right. >> and the bank industry stocks, every one of them, those who needed the one and knows who didn't, fell by 80%. how can you conclude that that action increased the confidence in the industry when you have that kind of reaction? >> isn't there a counter fact to be made when you look at a bank like citigroup, b of a clearly, wells obviously there's still questions whether you needed the money or not. >> there's no question, there is

no question, andrew, within three months of t.a.r.p., we had record earnings. if we could take a bank who needed $25 billion and in three months cause them to have record earnings, with he should do that for every corporation in america. we've had ten quarters of record earnings in the midst of the worst recession ever. what doubt is there? >> dick, we would have to continue this conversation. >> so would i. >> maybe we can have you come here the next time you're in new york and talk about it. >> dick, you can come by every day. i don't know why we're getting out of this conversation right now. >> thank you so much for being here. i really appreciate it very, very much. >> okay, thank you. >> wow. coming up, we're hours away from the opening ceremonies of the london olympics. carl quintanilla will report next and at 8:30 the government's report on second quarter gdp and bring you the numbers and analysis from joe mayoff. and comments from glenn hubbard, economic adviser to the romney

campaign. we'll be thinking about what dick kovacevich just said, you do, too. recovery. long-term, bp's made a five hundred million dollar commitment to support scientists studying the environment. and the gulf is open for business - the beaches are beautiful, the seafood is delicious. last year, many areas even reported record tourism seasons. the progress continues... but that doesn't mean our job is done. we're still committed to seeing this through. i don't spend money on gasoline.

i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪

four years ago carl quintanilla had the assignment of covering of olympics in beijing and there were plenty of fireworks.

>> there's a lot of different things going on and we'll have to see, a lot of speculation. >> that's right, carl and darren ravell were on the air as the opening ceremonies were starting in china. that won't happen this year. carl joins us live in london where the opening ceremonies are hours away. carl a lot of excitement but maybe not the fireworks we saw last time around. >> reporter: nowhere in ap. chore school do they tell you how to conduct an interview while fireworks are going on behind you. good to see you guy this is morning, seven long years of planning coming to an end. tonight opening ceremonies are a few hours of way. the duke and duchess of cambridge welcomed them to buckingham pal plas, david cameron and his wife took it to parliament square. it just arrived in city hall and next be visible to people when it is lit, lights the cauldron at olympic stadium tonight.

it has not all been roses. the london press is going to town on mitt romney, you might have heard he told brian williams when asked about the olympics that "it's hard to know just how well it will all turn out." said it was disconcerting some of the stories about the security personnel shortfalls. david cameron in response said it's easy to hold the olympics in "the middle of nowhere" potentially on illusion to salt lake city which romney ran and boris johnson the mayor of london lashed out yesterday at a rally in hyde park. >> there's a guy called mitt romney who wants to know whether we're ready. he wants to know whether we're ready. are we ready? >> yes! >> are we ready? yes, we are! >> we should mention as well romney was on the "today" show and said it does look like london is ready, those were his words, backtracking just a bit. big day of coverage coming up this morning, later on "squawk

on the street," mick krzyzewski, the coach of the u.s. men's basketball team will talk about the lessons in management post lehman, we'll talk to the head of bmw, ludwig willish and brian roberts, ceo of comcast, head of ad selling for the olympics. we're not sure who is going to light and speak tonight. there are rumors swirling around. tickets, there are a few tickets still available, if you have 2,012 pounds, get it, 2012? 20% chance of showers. it's about 77 degrees right now, 50% humidity, so we're obviously hoping that weather is not a factor. there are about 20,000 seats that are actually exposed to the elements, so if it does rain, some people are going to get wet. >> bad hair days but i'm sure they will bring their cover-ups and hoodies, right?

>> yes. >> all right, carl, we are looking forward to it. we will see more from you throughout the morning and can't wait to see these events tonight and i'm sorry there's no fireworks this time around, that was the best video ever. >> thanks for taking me back four years, that was nice. >> you're welcome. >> looked good. coming up we're a couple minutes away from the government's first read on second quarter gdp, we'll bring you that data and instant market reaction and get commentary on the gdp numbers from glenn hubbard, economic adviser to the mitt romney campaign and dean of the columbia university business school, after the break. [ male] when he was only 4 years old, jonathan horton climbed all the way to the ceiling... in the middle of a department store. some parents might have scolded him. ♪ jonathan's parents gave him... gymnastics lessons. ♪ it's amazing how far you can go with a little help along the way. ♪ td ameritrade.

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welcome back to "squawk box." in our headlines there is a shuffling of executive chairs at jpmorgan. press release says jeff staley, ceo of the investment bank will become the chairman of jpmorgan's corporate and investment bank, that is a new position and mike cavanagh and daniel pinto will become kro-ceos of the corporate investment. matt zain will become co-chief operating officer of the entire firm. >> that's very interesting, inside jpmorgan, very interesting news, mike cavanagh by the way was before the cfo but working on the cio investigation. coming up the government's first read on the growth in the second quarter, we'll bring you

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okay, welcome back.

big buildup this morning, seconds away from the first read on the second quarter gdp. rick santelli is standing by at the cme in chicago. we expect to have joel marov in philadelphia. three, two, one, my friend. >> here we go, up 1.5, a bit better than expected, a bit better than i expected and last quarter, the 1.9 was actually trickled up right to the 2% mark, so quarter over quarter, 2% last look, up 1.5. if we look at all the internals, the price index moved up a bit from expectations to 1.6 but that's less than at 2% and last look, if we look at personal consumption expenditures, pce quarter over quarter up 1.8, pretty much as expected down to a revised 2.2, last look and personal consumption in general, 1.5, that's a little bit better than we were looking for, but

it's a big drop from our last look at it up 2.4. how do the markets digest it? we're up 54 in the preopening futures, we're up 47 in the dow futures so it's up a bit, 148 ten-year, it was at 1.47, so a bit of a higher yield on better data, you'd expect that but still not much and what came into a solid pre-opening equity futures market, remains so, it's moving up a little bit more, about ready to test up 60. university of michigan today and we'll digest the 99 billion in supply this week, even though there were a lot of records set at auction in terms of low yields the demand especially for the fives and sevens wasn't right up to the expectations of the street and maybe that has something to do with of course the dynamics of europe and obviously the ecb thinks their balance sheet is superman because that seems to be the direction they're headed. back to you. >> rick, thanks very much.

i'm going to skip some of the data. joel, peter remarked on something, i'll say it out loud anyway, "hard for the fed to act with this number." what is your take, joe snell. >> absolutely. i think the fed is very much aware that there's not a whole lot that they can do by coming up with another quantitative easing. you know, we're looking at a situation where the economy is obviously not growing very well, but at the same time there doesn't seem to be any threat that the economy is going to move into a recession. this kind of growth rate is soft, but there are other factors out there that the fed can't change. the fed's not going to change the problems created by the fiscal cliff, and the lack of confidence that that is causing. >> let me stop you, though, because i think peter's analysis is based on the level that given the level of growth right here,

at 1.5%, first quarter revised up to two it's hard for the fed to act with the numbers. >> it shows the u.s. economy is resilient. i've had a view, at 2% sometimes a little faster, sometimes a little slower. europe and asia is having a bad time but the u.s. economy is pretty resilient. >> let's talk about some of the numbers here. consumer spending as rick said, 1.5%, durables down 1%, non-durables up 1.5. business investment falling to 5.3%, joel, and then a big part of why we're hurting here, 1.4% decline in government purchases, of which 2.1% is the state and local government. what's going on in the economy, from those numbers, joel? >> well, there's a couple of things happening. obviously we had a surge in vehicle sales in the early part of the year. they slowed down a little bit. they seem to be doing, you know,

reasonably well, and i wouldn't be surprised if we saw that turn around, probably what was most heartening to me in these numbers at least on the consumer side is that services spending has picked up, that's been the missing link in this whole recovery. we haven't had services. it's 65% of spending, 45% of the economy. >> yes. >> that's beginning to come back. >> up 1.9%, yeah, one of the best quarters we've had in that in a while. is it disheartening, joel, to see business spending come down? >> yes. >> we thought we were having a good business expansion here and that's one of the strong points and seems like it's tailing off. >> yeah, these numbers are a little bit volatile. i am disappointed by that. again, we've got a situation as far as business decision-making right now and this is going to be for the rest of the year, do you get bowled up when you don't know what congress is going to do in december or january? i think businesses have to be a bit cautious. the fact they're spending at a reasonable pace is good.

we like to see them spend a whole lot more, and that's going to be a problem, though, that's going to keep the economy from slowing really from accelerating for the rest of the year. >> how about government spending? how much are you dialing in, in terms of a decline there for the rest of the year, joe snell. >> joel? >> i don't have the government spending declining going forward. i think what we're starting to see on a lot of state and local governments they had major cutbacks to finish off this fiscal year, but the budgets that we're seeing coming out of states and even in some of the local districts, they're beginning to stabilize, they're not cutting as we saw over the last two or three years, so i think while they're not going to add a whole lot, i'm not putting any decline in as far as state and local governments and still looking for the federal government to start moving ahead as far as defense spending goes. >> right, that was one of the things i noticed a week or so ago you thought what happened in the first quarter was a bit of an aberration. let's go back to the fed quickly. is it your expectation they do

nothing or just do nothing next week, joel? >> right now, unless we see that this economy falters further in the third quarter, i don't see why the fed has to do a whole lot. they can continue the twist program if they want to. i know they're working real start on keeping mortgage rates down and the housing market is coming around so that's actually helping, to some extent. i think that's all they really need to do. i don't see any sort of qe3 coming down the pike and that's all i'm expecting them to say when they meet. >> joel thanks for joining us this morning. it's been a while since we've had you on and hope you join us again soon. when we come back more reaction to the gdp numbers from the romney campaign. glenn hubbard will join us after this, the dean of the columbia university business school. don't miss "squawk box" on monday, guest coast is david rubenstein, co-founder of the carlyle group and talk to

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welcome back to "squawk box." futures right now, i guess we're a little stronger, guy, since the number came out or was it right around the same? i didn't look at it just before the number but we've been up right around this area all morning and maybe just a touch stronger before we started off in the morning. .6% decline in aftertax

corporate profits in the national accounts, revision from the first quarter was 5.7, so corporate profitability overall in the economy, this is not the s&p 500, it's the entire economy, after taxes, worse than expected by almost three percentage points. >> joining us now more reaction to the second quarter gdp report is glenn hubbard, former chairman of the council of economic advisers and dean of the columbia business school and also an adviser to the romney presidential campaign and mr. hubbard, thank you for joining us this morning. >> my pleasure. >> 1.5%, better than a lot of people anticipating but hard to say 1.5% is a huge knocking it out of the park. >> it's not far off economist expectations but i think it's disappointing for the future of the economy, it's about the economy, half of what potential growth is in the economy and recoveries should be much more vigorous after a financial cries, if they keep up at this rate we may never get back to full appointment.

>> as his campaign adviser, each side is going to try to put its numbers on this, where would you paint us as to where we are and what are you looking for in next friday's jobs report? >> i think what we need in the economy is a couple of things and joel mentioned this before your break, with unis so bring down the enormous level of policy uncertainty in households, seeing this in consumption and weighing on business leaders which you see in investment. the other is a pivot to more pro-growth policy. we're likely to see another middling employment report when you have gdp growth sluggish it's hard to have a vigorous employment recovery. it's got to be about growth. >> and how do we get that growth? that's where the two sides just don't agree. >> there are two things, one is the long run and the other is the short run. in the long-term we need a policy mix that promotes growth, which is about tax reform, it's about spending restraint and getting the budget in order. in a short term we need to take off the shackles for the

recovery, which come from policy uncertainty, regulatory uncertainty, and ineffective fiscal policy that we've seen. i know the fed came up earlier, this really isn't the problem for the fed. there's not a lot for the fed to do here. >> sure, it's left to the policymakers and that's where we've seen no action taking place. >> correct. >> we are going to have our hand forced later this year with the fiscal cliff. what do you expect will happen, and what do you think should happen? two different questions. >> well, on the should, certainly the next president, whether it's governor romney or reelected president obama, will submit his tax and spending plan, taken seems that the congress should extend the goal post, that is, extend current law, to give that new president or reelected president a chance to do so, and to be clear that that's going to happen. in either case, that ought to be tied to tax reform. governor romney said what his is. we're waiting on the president's. >> okay, in terms of tieing to

that tax reform, though, romney has laid out a pretty complicated plan. there are a lot of points, what is it, 57 to 58 points that are in it? >> 59 points in his economic plan but the tax reform plan is pretty simple, the old-fashioned cut marginal rates and broaden the tax place. the budget plan is simple, get spending back to 20% of gdp by the end of his first term. >> you know the other side of the aisle is very keen on terms of raising revenue. is there any compromise between these positions or are you willing to jump off the edge of the fiscal cliff, too? >> i don't think anybody is going to jump off a fiscal cliff, in the long run i think our leader also get together. certainly if governor romney is elected president he'll work with the congress to get his plan enacted. if we grow and have tax reform we will raise revenue. >> if you don't control both houses of congress, it doesn't matter if you say i'm willing to reach some sort of compromise. my question is would that compromise be a point you

believe romney would be willing to make in terms of raising revenue if you follow simpson-bowles, most have something where you agree to cut spending by $3 for every dollar you raise in revenue. that plan something you think one would work, granted not your first choice but would you use that as a compromise with a divided house? >>, if of all much of the architecture of simpson-bowles is what governor romney proposed on the tax plan. it's the president who forgot about simpson-bowles. >> higher revenue is part of simpson-bowles, it's not cherry picking and taking what you want. it's taking the whole thing because some part of every bit of it makes your stomach churn, depending on which side of the aisle you're on. >> with respect it's not about cherry picking. it's about do you want to right the fiscal ship by bringing down spending and raising taxes. i can't speculate what a congress will do next january but i think our leader also come together. what the american people have to understand is if we're going to solve this raising revenue it

would be tax increases on everyone. >> you just said you think our leader also come together. unless you assume that one party wins all three areas, the house, the senate, with the majority of at least 60, and the presidency, you can't get there without compromise. is compromise something acceptable if you need to get that, to get something done? >> look, you can never tell who is going to be in the congress. i can only tell you that we will get there and the choice for the american people is do you want to do it on the spending side or the tax side. i think the romney plan offers abundant hope for compromise and bipartisanship. >> go ahead, peter. >> peter fisher here. you said january. don't you think it would be better if congress did something before january? >> oh, absolutely. i'm saying it's so bad -- >> you'd like to see them do it before january in the lame duck. >> i'd like to see as governor romney suggested, extend current law for a period of time, tie it to principles of tax reform and

a new president will submit that tax reform. we know it would be on governor romney's side, the democrats and president obama have to work it out on their side. >> sorry. glenn, we thank you very much for joining us. >> pleasure. >> we appreciate your time today. we'll get comments from the white house on the gdp numbers today on "squawk on the street," alan krueger is the chairman of the white house council of economic advisers, he'll weigh in at 10:00 a.m. eastern. >> quickly, the revisions to the prior gdp, 09 not as bad, with he fell 3.5, the rebound 2010, didn't grow 3% now they say we grew 3.4%. this will change people's ideas of what happened during the great recession and the tepid recovery. jpmorgan, since we're doing updates, on the moves apparently wanted to do them several months ago, but actually delayed it all. >> because of the whale? >> because of the whale, signed by cavanagh. >> it's not in response to that.

>> it's not in response to that. they were planning to do that and in part to shift power to slightly younger managers inside the institution. so a couple interesting comments out of jp. coming up the view from wall street, we'll head down to the new york stock ex-change for a look at some stocks that are moving ahead of the opening bell, after this.

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welcome back to "squawk box." let's get down to the new york stock exchange. jim cramer joins us now. what's the story today? is it gdp? is it still europe? what's going on? >> facebook, amazon and starbucks are the stories. amazon looks like the worst numbers ever. but turns out to be a strong beat. facebook, i don't know. >> why are they high on amazon, jim? capital spending? >> exactly what you said this morning. this is a company that's investing for the future. why? because demand exceeds the supply. e-commerce backbone -- look, i think we both know when you decide you want to spend, you're

going to miss numbers. >> right. >> we're all so convinced the only way to get your stock to go up is to beat the numbers. that's not the way bezos works. he runs it like a real business. he's not a stock jockey. and the stock goes higher. >> is this a stock-specific thing or is wall street ready now to reward companies who are investing for the future? >> no, stock specific. people have learned to trust bezos. bezos is one of the great -- he's maybe the greatest merchant. he's sam walton. i feel very strongly that you have to distinguish him from others. howard schultz, last night on starbucks, he's talking about moderating june. but the call almost went out of control. as everybody panicked, all the analysts panicked and talked about how june was so bad for starbucks. and then facebook, quizical conference call. >> i'm saying it's a buy at $17.

what's your number? >> i don't know how allow it could go. it's not aided by that strong -- merkel couldn't even get this to trade higher. she's the most powerful person on the earth right now. she might be able to budget to $24. >> jim, thanks a lot. i don't want to take all the trades away from the 9:00. but there's a lot of interesting stock-specific stuff to talk about. unclear if you can draw bigger conclusions from all this. >> jim will manage to do that. when we come back, we'll get final thoughts from peter fischer from blackrock. stick around. s new york state.

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take a look at shares of kkr in morning. posting a 73.4% rise in their quarterly earnings results.

driven by successful exits from private equity investments and a rise in the value of its portfolio companies. the company announcing it would start a new business to offer capital market services to clients other than its portfolio companies. in its latest bid to rake in lucrative transaction fees, we talked to kkr boss last week at delivering ool fa. you're seeing that stock move in a big way away of the markets. really a reflection of kkr expanding beyond private equity. we've talked a lot about how so many of these private equity businesses that have now gone public have really become diversified in many ways. let's get some final thoughts from our guest host this morning, peter fisher, senior managing director and head of blackrock fixed income group. steve, what are you seeing? >> deputy prime minister of spain basically ruling out an eu rescue, saying it's been ruled out. it's not possible. it's not an option. it didn't look like spanish

yields reacted very heavily to it. i don't know if that's not baked in. it's been talked about. >> i don't know what kind of double speak that is. they need some help from the ecb -- >> they're saying that's not an option on the table for spain. >> it's negotiations that they're putting out. they're trying to dance around the issue and we don't know where they'll come out. that's what it boils down to, i think. >> u.s. question. u.s. deficits, you keep loaning a lot of money, i think, to us. how long are you going to keep doing this for? >> well, you can see the short end of the curve keeps getting bid up and up and up. we're getting close to where they are in europe in nominal yields. but we're not there yet. the u.s. looks pretty good. the u.s. economy is puttering along here, compared to europe, compared to china, compared to a lot of eastern asia -- >> would you have that view in two years if nothing really gets done about our deficits? >> no -- >> is there a moment for you?

does it matter? >> we're going to keep -- >> as long as everybody else is second wind, we'll be fine? >> no. but it's the risk of a deflationary world. the biggest news item this week is the rmb has been weakening n. ] . people's bank of china -- >> that's a deflationary impulse for the world. >> it is. the fact that we have negative nominal yields at the short end of japan and germany tells you people are worried out there. the u.s. is doing better in growth and revenues than a lot of other places. as long as that relative trade goes on, i'm going to feel good -- >> as a guy managing a lot of money, you're suggesting, your biggest fear when you go to bed at night is negative prices, falling prices, deflation is far more worrisome to you -- >> it's far more worrisome to me as a citizen. as a bondholder, that's one of

the odd things out here. the central banks are worried about deflation. they're driving up the bond prices. that's funny if you stop and think about it. while they're doing that, it's been pretty good to hold bonds. >> is there a surprise sovereign out there at all? any country that's mispriced when you look at bonds or even municipal bonds -- is there anything where you say, you know what, it's not being appreciated properly? >> i think there are some countries in asia, malaysia is doing a little better than people think. there's a lot more movement in the middle of the distribution of sovereigns than people are aware of. i think you're right. i also think in muni space, there are some cities and towns going bankrupt. other cities and towns are in much better shape. but their yields have been dragged up. that's attractive. >> has betting against default been a good bet? >> against the muni default in aggregate, yeah.