about this morning is the iphone 5. take a look. we've got live pictures from outside the apple store in new york. some of these people have been lined up for days. this is no joke. they camp out, they sell their spot. somebody sold their spot for $400 after waiting there. the device actually goes on sale at 8:00 a.m. local time. so 8:00 a.m. in whatever time zone the store is in, that's when they open their doors. some analysts say apple could sell more than 10 million phones by monday. let's take a look at some video from earlier this morning. these are shopper se are shoppss these are shopperhoppers. steve woz nae being a actually got online and joins hundreds of people who are waiting in brisbane australia. >> well, this is the place where the iphone 5 is being released to the world for the first time in the world. and i don't have to wait 17 extra hours to get it in california. >> very democratic. of course not everyone is so

thrilled with the apple release. at 6:20, we will talk to one company that sells accessories to apple products. it says it is being hurt by the new iphone. and if you haven't heard that, wait until you hear about some of the issues with the maps. big story on the "wall street journal" today. also on squawk this morning, a rare interview with ray dalio. andrew caught up with him in new york. we will bring you parts of that conversation in just a moment. and speaking of the fed and the economy, we have two of the most quoted voices on the topics with us onset this morning. pimco ceo mohamed el-erian and stanford professor john taylor. so a pakd lied line up. but first back over to joe for the today's top headlines. >> i was standing over there to pretends i'm -- you know what i think happened, i think he got the iphone 5 and is using their map. >> i think so.

there was a tweet that was very funny this morning. they said all of you people waiting for your new iphone 5 to be delivered, bad news is the delivery guys are using those ios 5 maps, too. >> andrew is walking around like -- this is not cnbc, but he's awol. absent without leave, right some have we heard from him? >> no, but what could be fun, why don't we call him like live on air. >> what if he really does pick up and go, what, hello? >> let's call him live on air. >> anyway, here are the headlines that andrew would have read to you. james murdoch is lining up to take direct responsibility for news corp's u.s. twielevisions after a report whether it was fit. the report did clear him of any wrongdoing and eu authorities said to be working behind scenes

to pave the way for a new spanish rescue program. an economic program for madrid will be unveiled next thursday. and in u.s. stock news, lipper reports that equity fund in-flows total 11.4 billion in the latest week ending wednesday and that amount is up from the previous week. joe. thank you. in other news this morning -- they didn't change everything yet. andrew would have said that, but i said it. >> you are smooth. >> i am smooth. walmart is looking to open its first retail outlets in india. can't open one in new york city, but it's opening one in india within 12 to 18 months. last week the indian government allowed the mega store retailers to enter the company through joint ventures, but i think it's unions that are keeping them out of new york, isn't it? >> well, it's not just the unions. its eye also just trying to find the space. they like to do the bigger

stores. >> they've made it a shop right or something. >> there was place that they -- in chicago they opened up and they made a deal with the unions. >> big victory for the people who didn't want to open. and what a great victory. but most people -- nobody drags you into walmart. you go there for a reason. and xwrogoogle says it will shus once popular china download music next month. meanwhile gulf of mexico oil drilling is on the up swing after falling sharply after that bp disaster, the deep who are v horizon disaster. the saer baarea is back in fashn with oil companies which is willing to comply with stricter regulations. and another political poll. a new nbc "wall street journal"

mayor wrist college poll is focusing on three swing states. in wisconsin, sprb leading mitt romney by 50 to 45. in colorado, the president leads by the same margin, 50 to 45. and in iowa, obama holds a wider lead, 50-42, but a rasmussen poll had romney up three in i a iowa. the hmaximum margin of railroad is three point, but the difference between rasmussen and nbc is 11. so if you can explain that to me -- really. and then gallup, which after the convention, gallup consistently had obama up by five points and rasmussen was closer. rasmussen has i think the president up by one or two and gallon up it's 47-47.

national polls become according to pundits less important because they you willy twr lact the way you can win the electoral college. and some assumptions that bom so far had ohio and virginia, that romney would need to win all these other states where he's down by more than three. but if you can tell me before all the debates who will win ohio, nobody knows will win ohio. i guarantee you, nobody knows who will win ohio. nobody knows any of this stuff. >> and that's why he we have elections. >> on november 6 we'll take a huge poll. and if you poll even 2,000 people, but if you poll 1500 people, you poll this 1500 and you poll that 1500 -- >> some are likely voters, some are -- >> there's a couple things. right track, wrong track is still improved, but still i

think right track is 39%. and that was a huge improvement. and then the approval ratings are stubbornly -- some get to 50, but just barely. >> these last rounds are the first that got to 50. >> exactly. so in the booth, have you heard from our awol -- >> they tried calling him and i don't think think they've gotten him. >> i think in the and he were, they would give him the tooth brush and he could go right out to start scrubbing. >> i've overslept myself. >> didn't defend him. do those latrines in there need scrubbing? >> probably in the men's room. >> the men's room do. they need those little tablets changed, those things changed, too. those yellow cake -- >> what are those? the hand soap? >> yeah, right. the girls have made that mistake. >> oh, god, don't do that. yeah, the things that -- do you know there are some urinals that actually have little flies there

because people like to -- >> yes, because they aim better. >> yes. that way andrew won't have to scrub so much around -- >> i've done it, too. >> you've aicmed at a fly? >> no, i've slept in. let's go to the global markets report. kelly evans is in london. >> this morning there's been a lot of focus on spain, on italy, on france. even where work hes were threatening to strike ahead of the iphone 5's launch there, but those stores are still open and running. to talk about what's happening in markets, it's pretty much as positive attitude. not a lot of conviction. it feels like things are just floating higher and we've seen stocks come off their strongest levels of the morning. we focus in on the meeting in rome, mario honesty oig has summoned leaders of some of europe's most indebted countries to talk about their situation.

and if you think back to the 1980s, we've had a little fun with this, showing the leaders who will be there this weekend and calling them the, quote, brady bunch. in any days it includes rajoy, kenny, monti, and all of the talks focusing around what greece, lots of speculation over what the leaders may or may not be discussing when it comes down to the sustainability of their sovereign debt levels. and keep in mind citigroup this week reiterating its view that it views a grexit as still a 90% likely scenario and debt restructuring for portugaportug ireland, italy and spain. spain is still showing some relief. prices up, yields done to 5.77%. also we have reports that the cost of the -- or the capital

needed for its banks, the recapitalization plan, may be slightly lower than expected. spain cheekily wants to use the rest of that line to help fund its sovereign, but it's getting in some sense a firm no from those involved. and as for the rest of the bond, gilts, bunds showing yields showing higher. and a quick look at currencies because we are seeing weakness in the dollar this morning. not entirely clear what's driving it. i suspect it may be something to do with comments about the fed being in easing mode until unemployment hits levels of 6% or 5.5%. the euro-dollar has turned around back to the $1.30 level. sterling at about a four month high against the dollar. several currencies showing the same thing. so my purchasing power isn't getting any better. back over to you guys. >> kelly, you you are channeling

madonna. >> we knew it would happen. >> that's not a britishism, is it? >> you can't enteven tell. she doesn't even know. are you thirsty, did you need to go to the bubler and get a drink? >> no, but i'm sure i will be at the pub later. no, and i'm off to have my tea now. it's done. >> having a pint. that goes without saying with you anyway -- >> having a pint at the pub at about 4:00 p.m. >> thanks, kelly. now i'm getting worried. we haven't heard from andrew. i figured he'd be strolling in here like -- >> it's a friday. out a little last night -- >> here's the thing. when you have a bridge between you and where you work, it's bad. especially in the winter. ice or things fall from the bridge. you never know what it is.

so living on an island has its advantages and disadvantages. but here is andrew's news interview. a squawk news maker sat down for a rare interview with andrew. the world's largest hedge fund manager ray dalio from bridge water associates. his fund currently has $130 billion under management. let's he hear what he had to say when andrew asked him about qe-3. >> no, i thought it was a reasonable, good plan. >> is there a historical core later? >> oh, yeah. it's always the case. in other words, historical corrolary -- >> but at this point in the game. >> just recognize i think that recognize that quantitative easing is the new interest

rates, right? so ask yourself when everybody's used to interest rates and they're making a big deal out of quantitative easing like it's something radically different than easing interest rates. the big difference is when you ease interest rates, you stimulate private sector credit growth. private of private sector credit growth is no better than printing money. in either case, you have to ease. so if you have a growth rate that's bad, you now do quantitative easing. >> we also got the chance with andrew to hear dalio's thoughts on how competitive the u.s. dollar is in the world right now. listen to this. >> dollar overvalued, undervalued? >> well, i guess over the near term, i think that it's going to decline because as we're alleviating -- there's a short squeeze in dollar. there's a lot of dollar denominated debt. so that means there's a lot of promises for dollar. that means people need dollars.

so when we have the movement in emerging countries and capital flows that way, europe and european banks lend dollars. they have a funding problem so they need dollars. that all creates a squeeze. but like any market squeeze, once you have the market squeeze that'ses passed, then it goes down and i think we're in the phase of that happening. but it's an you gougly contest. do you want the dollar, the euro or the yen? it's an ugly contest. so i think over a longer period of time, those currencies have their problems. and then we have emerging market currencies. they're not very well developed, but it they have a much hr fundamentally strong position. and then we have gold as a currency. so that's the comparison. >> in the second half of the hour, we'll hear dalio's thoughts on europe and social unrest as well as why he thinks you should own gold in your portfolio. >> he was unequivocal. why would anyone not own gold given what's happening around

the world. coming up, the sports stories every's buzzing about this morning. plus your weekend weather forecast. and then apple fans are lining up at stores this morning because they're still using old maps to find the stores, not the new iphone 5 map. it officially goes on sale 8:00 a.m. local time. a look at some of the controversies next. [ male announcer ] for the saver, and a big first step.

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time for squawk sports. starting with football. guy au giants routing tpanthers. college football, number 24 boise -- woah! there's that field. playing at home obviously. people don't really follow you, you put in a field like that and it's almost like when a golfer

wears those weird pants. you better be good, though, to have a field that's that color. boise state holding off byu. this sounded like major league baseball. 7-6 was the score. the game was dominated by defense apparently. and marred by turnovers and penalties. and here is the real news. why we would bury the lead is i don't understand me. the reds clinching a playoff spot even with dusty baker missing. he was side lined for a second straight game after being diagnosed with an irregular heartbeat. we hope he'll be okay. cincinnati became the first team in the majors to clinch a spot so far this year. and i haven't -- what happened to the mets last night? >> haven't seen it go by yet. >> they came back or they lost? oh, good. so el-erian's coming on.

beat hit him with that first. and you know who his other team is. >> jets. >> yeah, jets and mets. >> prepare yourself. all right. let's get to the weather. alex wallace joins us from the weather channel. i guess more of the chilly temperatures coming around? >> that is certainly going to be the case. fall officially coming in on saturday. it will feel like it for parts of the midwest and northeast. right now, though, we're tracking some rain in florida. the sunshine state, not too much sunshine to deal with. we'll be dealing with the rain in and around miami throughout the day. the bulk of the activity just offshore. middle of the nation, showers in the upper midwest, but steadier rains southern parts of missouri. storms have produced hail out there, so we'll keep a track on that. as we head through the rest of the day, most of the southeast is dry outside of florida, heading up into new england, not a bad day around boston, but cool. 63 for your afternoon. and then we've got 70s right around there in cleveland.

showers will sneak into northern ohio. southern plains, that's where we're keeping the summer warmth. 95 for you in oklahoma city. west coast, we stay dry. the bad news here is we need rain particularly the pacific northwest. we continue to find some of the wildfires burning. no relief coming in site. bad news is we'll watch storms come in there and some may produce lightning that could spark off more wildfires. for the weekend, there's that cooler air starting to show up in the midwest. 50s and even 40s for highs. >> wow. okay. alex, thank you very much. there are a lot of customers who can't wait to get their hands on the new iphone 5. they've been lining up this morning. they're outside apple stores like this store that's in new york city. this will be one of the ones where people are hoping to be the first to get their hands on this new device. of course not everyone is quite so enthusiastic. some companies are furious that

their accessories are no longer compatible. joining us is co-inventor of the cord light illuminated dot connector. also with us onset, lex has written a number of books and currently a writer for mac world. explain to us the cord that you have and i guess it's no longer compatible? >> so the cord light is an i will wlum natured charger cable for the iphone. so it's basically all those people that have trouble plugging in their phones at night when it's dark, the cord light helps with that problem. and so i wouldn't say that it's not compatible. it's compatible with all the other iphones and devices that are out there right now. >> but not the new one. >> no, it's not. the new lightning connector that has been released, we will have to basically start over and design a new one around that. >> are you upset about this? >> i wouldn't call it upset. we see it more as an opportunity

to build a new device and to have a new product on the market. there's definitely some challenges associated with it. most are schedule based. so we're probably not going to be able to release the new cord light for the new lightning connector until next year. so we'll miss the holiday season which is a challenge. >> that's a disappointment. but part of being somebody who is piggybacking off a lot of their products. that's just the way of doing business with them. >> absolutely. and there's countless other accessory makers that are in the same situation. >> lex, why don't we talk about issues with this, i guess you have to expect. something that's created a little bit more fury, though, has been the new map system. have you tried it? >> i've used it and i think the success of the map app depends on where you are. if you're in an area where the map's coverage is really good, then the app is great. but if you're international or just in an area that the apple

map doesn't have great coverage, you'll be disappointed. >> are you be disappointed? >> right now you can use the mobile website. it's not the same as a native app experience, but still pretty good. and my expectation is that at some time in the coming weeks, google will release a map app of its own. >> that you can download to the iphone? will they sell it on the iphone? >> my guess is they'll give it away. >> would you now? >> google makes its money on advertising. >> i'd stick it so hard -- yeah, you can have this, $1800. download it now. >> i spoke to apple yesterday and they believe the more people use their app, the better it will do. it will learn over time. >> there are embarrassing spots.

>> google's been doing this a long time. apple's trying to get up to speed. but is this a move that's going to backfire by kind of taking people away and saying you have to use our map? >> i think the question is whose choice was this. did google say we're no longer licensing the if he can knowled technology to you? >> that's not what we letterheam the google people. >> i wonder is this something steve jobs would have said, are you guys crazy, would he have said this is not ready to go? >> i would say that apple is confident they can get maps where it needs to be. it is a black mark to say it's not where it should be right now. >> what was the last thing, it was the wrong color or something? >> each time there's something. i don't think the iphone 4s had

a controversy, but i can't imagine that ios 6 adoption, i think people who have trouble with stick with the google website instead. >> or not upgrade to the new phone or go with an android. that's the bigger risk. >> i don't think anybody today is worry that had people will switch to android because of the maps app. there are enough other solutions available. >> all right. gentlemen, thank you both very much. we appreciate it. coming up, why ray dalio says you need to own gold right now. a big shakeup in this year's rankings of the best u.s. luxury hotels. saint regis is the number one luxury brand overall, that according to the business travel news 2012 u.s. hotel chain survey. four seasons number one last year dropped to fifth. luxury hotel occupancy rates

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oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. save 50% on banners.

welcome back to "squawk box." i'm joe kernen along with becky quick. >> we found him. >> overslept. two kids, how to you -- >> that's why you oversleep.

>> we have to find out whether he was out or something. thursday night in the city. >> those who still have lives. >> exactly. >> i went out for the first time last night in six months, eight months. >> i'm not going to -- >> i'm back. >> i'm not going to tell people what time you ate dinner. i can't do it. i mean, i immediately thought of seinfeld. >> i think i made them look like night owls. >> you did. >> went in and tried to order dinner and they said we don't start serving until 5:00 and you admitted that to me. we don't start serving until 5:00. oh, okay. sorry. we're early. do you know any restaurants around here that start before 5:00? >> the place next door did. >> did they have a drive through? >> no. it was a very nice restaurant. >> people there are going -- they've still been up, finally going for a late night --

anyway, among our headlines this morning, u.s. leveraged buyouts almost doubled in the third quarter from a year ago. the volume reaching the highest level since before the crisis. and cheap financing fueled private equities appetite for those deals. >> andrew's here! >> wow. look at the hand in the pocket, the -- he has the little pocket protect tore. >> pocket square. >> yeah, sorry. do you know? how do you know it's not a pocket protector? could have pens in there. all right. we used to do that when faber would -- yeah. >> he's on his way. that's the good news. >> yeah, he is. >> it is not every day that the founder of the world's largest hedge fund opens up to the media. andrew actually stat down wiat ray dalio and he asked about about his biggest worry about the global economy.

>> i don't know whether we're beyond the point of being able to successfully manage this. i we aorry about social disrupt, about another leg down in the economies causing social disruptions. because deleveraging can be very painful until they're managed. but when people get at each other's throat, the rich and the poor and the left and the right and so on and you have a basic breakdown, that becomes very threatening. foe for example, hitler came to power in 1933 because of the social tension between the facts. so it's go end on how the people work this through together. >> not surprisingly he's also a big believer in gold. he here is what he said about owning the precious yellow metal. >> i think gold should be a part

of everybody's portfolio to some degree because it diversifies the portfolio. it is the alternative money. we have a situation now where when you have too much debt, too much debt leads to printing of money to make it easier to service. so all of those things mean that some portion should be in gold. >> warren buffett won't touch gold. >> okay. >> do you think he's wrong? clearly you must. >> i think he's making a big mistake, ye yeah. gold is an alternative version of cash. so long term, it's in the best investment. over long term, it's a little bit better than cash. however when you're having a monetary crisis, when you have a fiat monetary system and you have the need for money, debt is a promise to deliver money.

so if you look at each of those devaluations that have taken place, march 1933, president roosevelt closes the banks and then opens them and says you can get your money. and then they broke the link with gold. and so the history over that period of time is that money can be produced. gold is somewhat limited. it's an alternative that should be part of everybody's portfolio, but not in a big way. >> in the next hour, hear what he says about the u.s. economy and his investments right here at home. >> they're doing a lot here. mac is working really hard with andrew. they have a mike on the -- they have a mike taped to his picture. they have his ifb taped next to -- you know, i might as well -- >> andrew, you're not saying a lot. >> what did you say, andrew, what do you want me to do to

myself? i can't do that to h-- actually back in high school, i might have. no, i can't do that to myself. should we do the -- ross has already done that. and that was not a picture in the chair. >> no, there wasn't, p. >> when clint was doing that. >> you're good at channeling clint. that was impressive. >> he's 81. i'm getting better and better. you know what, they took polls after that whole thing. >> about what people thought? >> right. democrats that used to like clint hate him now. republicans like him so much. >> he has a new movie coming out. >> he does. we'll see whether we can interview him again this year. hopefully. when we come back, we'll head down to the futures pits in chicago. find out what traders are saying this morning about what is

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welcome back. joe takes his responsibilities seriously and if he says he's going to be somewhere at a certain time for an interview, he shows up no matter what happens. and he joins us now from chicago. >> even one hour earlier than you guys. >> you set an alarm clock, you get up, even if you don't want to. you shower, you live up to what you're supposed to do, right, typically? >> yeah. >> anyway, what do you make of -- >> actually, joe, last segment maybe should you start every

interview with are you feeling lucky, punk. >> people say that i'm not that nice half the time. that's what i'm hearing. anyway, yeah, make my day. tell me the hmarket's going to going up. >> i think i can make your day. two factoids to keep in mind. as understand, it is quadruple witching day. we've been up the last eight in a row going back to 2004. so we'll see if that trend continues. and also up the last eight fridays in a row. so in the early morning, it looks like we may be able to continue that trend. and actually all the traders down here are talking to people, we're at the 1460 level on the s&p 500. many think we can go up to 1472 here over the next week or so. there's a level up there that many of the traders down here really believe we do have to go test. so there is some hope about for you on that one.

and again, that would equate a thumb nail to 120 to 150 points to the up side. >> for some reason we get so use aed to discounting things, i was thinking, i wonder if the whole qe-3 is in the market already. does it keep going. and i realized they haven't started yet. it's $40 billion a month for the foreseeable future that's got to go somewhere. so we haven't even actually seen that money going into where it's going and then going downhill wherever it goes. equities, bonds, whatever it does. wherever it shows up. so that's a ridiculous question to ask if it's already discount discounted. >> on the last two, it took about six months. you saw psychological effects in the market so to speak, but if you think about businesses, it really took about four months to see a little bit or six months

before you smau effect whatsoever. so you're going in to the middle of first quarter of next year before theoretically you will start to see some things happen to the businesses, et cetera. i think again we saw psychological lift right away especially when you combined europe the week before. but in reality, it really shouldn't hit as you say for a few months. >> and then you add in the lead story of the journal, value grows $400 billion. so everybody feeling more flush with their houses. and so when we were saying does the fed know something, they knew this and things were already going on a little bit better and wait until we get that next employment report where it's 7.9 and then the one in october where it's 6 p.9 rig before the location. >> are you going to say are we going to revise after the election, is that -- >> then we're back up to 8.3.

oh, yeah, we got a couple revisions. yeah, i can definitely see that happening. couldn't you? >> well, yes, i could, but -- >> we won't see 6.9 on november 6, will we? they might say, you know what, we got to keep this looking like it's possible. we can't cook them too much. >> maybe that's what andrew is doing right now is helping them work on it. >> yeah. he's there with -- thanks for playing along. >> how many fridays in a row are we up. >> >> eigeight fridays on a row. >> this guy on tweet says too big to show up is what he's saying. >> poor andrew. >> he should have the producers play i'm too sexy as he walks in. >> for a while after we were really kidding around at the beginning, it was like, wow, we really haven't heard from him. but now that we know, we're back to just -- i got a tooth brush ready and he's going in there. >> do you think he showered? >> do i think he showered?

>> why would he be any different than any other die? no, i don't think he did. >> when you wake up in a panic, you're lirks oke, oh, my gosh. >> i hope he did not shower because he's heading in to the latrine with a tooth brush. he is. >> we are waiting for andrew. so we've sent our cameras around the building. >> going to the brig. >> is he in the green room some let's check out the green room. i don't think it's andrew. >> no. >> it's mohamed el-erian. >> he's looking at the sports pages. 16-1. how is that mets pitching this year? >> the squawk master will be our guest host today. wow. if andrew doesn't arrive soon -- >> apparently andrew is in makeup, so he should be here by 8:30. up next, we'll also talk sports. the mets moving in to a new home. brian shactman joins us live

from there this morning. >> listen, professional sports back in brooklyn since the dodgers left in the late '50s. we talk exclusively with the ceo of the mets coming up next on "squawk box." let's -- let's start over from the beginning. we were just driving along, comin' back from the lake, and all of a sudden, ka-plam. it blindsided us. what is it? our college savings account. how do you think it happened? not sure. i think something we bought a while ago turned out to be something else, annnnnd, i remember a lot of other stuff in there had the word "aggressive" in it. is everyone okay? well, now, yeah. who knows later. ♪

welcome back. brian shactman joins us from the nets new home in brooklyn. looks like a pretty fancy place. >> it is. and in fact they haven't even -- there will be a big reveal later that will make it look fancier, cost about $1 billion and of course a lot of years and a financial crisis were some impediments on the way to get here. i want to bring in exclusively on cnbc, brettoria, ceo of the nets. thanks for come on. the guys in the studio might have some questions, too. this has been a long time coming. you're coming into a hugely competitive city with the most famous arena in the world some say and huge following with the knicks. how is this team going to carve out its niche? >> the brooklyn factor gives us our own niche and it has taken us longer to get here than

anticipated. we've built up an incredible amount of anticipation for today, people are buying season tickets, we're closing in on 11,000, which would be an all-time high for this franchise. we're not concerned about the other players in the market. we're concerned about bringing brooklyn the best sports and entertainment. >> reporter: jay-z owns 1/15 of 1% of the team but yet he's all over the place. i think everyone asks me, how does that work, that relationship, does he walk in and say that's what i want, that's what i want. how does that work? >> it's a great working relationship, jay and i collaborate on a lot of different things. he's obviously a taste-maker and got incredible talents and he's on our arena board and he lends advice. he provides input and he's got great vision, so it's a partnership with him, no different than any of our other owners. >> reporter: the logo, how long does it take for jay-z and the nets to come up with the logo or

the herringbone thing on the floor of the basketball court in. >> it doesn't take as long as you think. when he feels it and sees it, he goes there. >> reporter: you just say okay? >> well, no, i'm not a yes man, but we work on it together and obviously he was the inspiration for our logo. people wearing black and white throughout brooklyn today, we're a top seller in the league and excited about it and his vision for it put us in a great place. >> reporter: barclays is a global brand but they don't have a retail footprint in the u.s. yet commit $400 million over 20 years. what do they get out of it? they don't even have atms in the building. >> this was a pure brand play for them. when we did this deal years ago, barclays was a brand that was perceived to be a big bang from the uk, they didn't have roots here in the u.s. and this gave them an incredible footprint. i think it's more important to barclays than it's ever been, they'll use it as a hospitality

forum, we entertained some of their board members last night when they took a tour of the building, they're extremely proud of it and we're extremely proud of the relationship. >> congrats could you, brian, what a great gig you got. this is cool for you. ravell left a lot of product and ryan, use the same product. that's a great gig. brett, i think of all the places, i've seen football teams move and it makes no sense and everyone gets mad, but the dodgers left brooklyn. >> still scarred. >> you go back to brooklyn if it was a city how many people would it be, in the top -- >> subway right there. >> reporter: 2.4 million. >> you get to mess with spike, you get to mess with him. he doesn't know what to do, has so many ties -- >> they're still going to have

the manhattan team, brooklyn. >> his loyalties are with brooklyn. this is like a metaphor. this is great. >> it's going to be a big day for brooklyn and to answer your question earlier there's about 2.6 million people in brooklyn and yes this market has been underserved in the area of sports and entertainment since 1957. in some respects we're the new dodgers and we're excited to be here and we will make brooklyn proud. >> i bet you get unbelievable fan support and new jersey, i don't know, it wasn't, you know -- >> you can take the subway there. >> yeah, if you want to still go. >> if you look to my right, obviously there's the subway stop here, it's 11 subway lines, long island railroad, we encourage people to take mass transportation, easy access to this building, and we anticipate people coming from throughout the tri-state area to visit us for the brooklyn nets, concerts, family shows and college basketball, there's a little something for everyone out there.

>> reporter: i don't think you want to drive, becky and joe. also this brooklyn-themed food what, does that mean? >> our goal was to bring the flavor of brooklyn inside the building. >> reporter: good hotdogs? >> working with 30-plus key vendors from brooklyn that have defined the brooklyn taste, if you will, for years and they've all been invited to come into the center and be a part of this big moment. >> reporter: if i was truly going to take the ravell mantle i'd have five things shoving them in my face so i have to figure out getting the food component. >> i've seen you play hockey. you have to get a lot less coordinated to be ravell. when he dove in the pool, remember, he said he wasn't kidding around. >> reporter: i remember that outfit, too. >> you couldn't do it if you tried, brian. thank you, guys. i think that's cool. >> thank you. >> it's exciting. coming up -- >> bait. >> oh, now he comes in so we have to drop everything because he finally -- >> i decided to, you know, grace

my presence here. >> too big to show. >> i was going to be on tape with greg dalio. >> hey, i did an interview, i'm coming in when i want, i'm sleeping in. >> this was the great professional nightmare of all-time, took my blackberry and iphone, double alarm, and the home phone, and i took all of them and they were next to my bed but for some reason i put them on the floor and somehow in the middle of the night i covered them with pillows, unclear why, and my wife at 6:23 says to me, says, to me, andrew, is everything -- are you not doing the show today? what's going on, and i look up and it's like dark and i go, oh, my god! >> andrew, did anything go on during the night, were the pillows getting thrown all over the place? >> i wish. >> was it particularly wild last night? >> i wish there was a better story to this. >> we got to go. more from ray dalio and

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creating job opportunities and boosting competitiveness. >> oh, the pressure! i can't take it! >> we're talking to the greatest minds from harvard business school. and pimco's mohamed el erian joins to us talk europe, the state of banking and the cloud of uncertainty still in the job market. plus, what hedge fund giant ray dalio thinks about america's economy. >> there are reasonable risks that it will not be managed well. >> more of andrew's exclusive interview, as the second hour of "squawk box" begins right now. ♪

>> good morning, everybody. welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen and yes, andrew ross sorkin. yea! we're all here, ready to go. >> he's so -- >> i am well rested. >> rosy cheeks. >> you do look pretty good. >> mohamed, where were you, weren't you in europe somewhere? you made it like on a 24-hour, i mean, flight from somewhere and still got here on time, got here at the same time as you you had to go across a bridge, a 15-minute drive over here. >> yes. >> we need to hear what really -- feathers flying, i mean -- >> just a pillow dropped. pillow dropped over all the phones and alarms and everything. it was -- >> i don't wake up to find covers and pillows just strewn across the room. did you have an ambien thing? >> no.

>> sleepwalking? >> no, there was nothing, nothing. >> how did the pillows get strewn around the floor, andrew? >> don't try to, you know, i know where you're going with this. you got the music and everything. >> three alarms and none of them worked. >> nope. they were all under a pillow. >> that's whey mean, covers, blankets. [ alarm sounding ] >> let's take a look at the futures this morning. >> you're young, you're in love. why are you embarrassed? >> eight fridays in a row we have seen gains for the markets. we'll see if things stay on track this morning. right now dow futures are up by 28 points, the s&p futures up by just over three points. in our headlines we're following shares of two well-known companies that have hiked their quarterly dividends. mcdonald's raising its quarterly payout to 7 cents on 70. texas instruments pushed its dividends up to 21 cents from 17 cents, increase of almost 25%. google is shutting down its music download service in china

because of disappointing user response, coming two years after it shut down its china search engine in a censorship dispute. google started it in 2009 and shockingly nobody shows up. >> so it's not that they're not buying our music, it's that they're getting it -- >> they're stealing it. >> they're stealing it. >> today is the quarterly quadruple witching day on wall street. and here's a little nugget for you. the dow has risen on september quadruple witching days for the past eight years in a row so you have eight fridays in a row going for you, you've got eight years of quadruple witching days in september, hey, what could go wrong? >> it used to be more fun before they do whatever they do. >> roll it, try to ease out some of the volatility. >> stuff used to happen, made it exciting. here's another thing exciting to this morning a story a lot of people are buzzing about the iphone 5, check out

these live pictures right now from outside the apple store in new york, some of these people have been lined up for days, the device goes on sale at 8:00 a.m. local time so 8:00 a.m. in whatever time zone the store is in. some analysts say the apple iphone could sell more than 10 million phones by monday no less. this is video check this out earlier from, these are shoppers picking up new iphones in australia, singapore, hong kong and japan. apple co-founder steve wozniak joined hundreds of people waiting in line in brisbane, australia. >> this is the place where the iphone 5 is being released to the world for the first time in the world, and i don't have to wait 17 dpra houextra hours to n california. >> check out shares of apple in premarket trading, $701 is where we stand right about now. >> go ahead. >> he looks very democratic, like you said, that's if you don't realize he flew his

76 down to australia to stand in line. i don't know if he does, he probably does. right? >> he's a good guest. >> he went to brisbane just to save the 17 hours? >> you would, too, if you could. >> right. >> got the time, got the money, why not. >> right. we've couple of early stocks to watch based on afterhours action. shares of michael kors, banking on a strong global says outlook and raises expected earnings. shares of oracle is seeing software growth but the company says hardware sales are expected to drop further after tumbling 24% from a year ago. oracle is trying to turn around its sun computer division and tighten up its technology budget. you know what? i think that's rain. somebody said the weather crawler is showing snow in miami. i think that's rain but we'll

take a look at it. >> and the nationals clinched, too, we said only the reds did. >> nationals did, too. the nets not so good. >> let's talk about ray dalio. i got a chance to sit down in a rare interview with the world's biggest hedge fund ray dalio, founder and chief investment officer of bridgewater associates. one of the many topics we covered was the possibility of a significant downturn in the united states economy. >> so if you have a downturn, there's a possibility that you don't have that right mix and that you could have a downturn. the odds of that are comparatively low but i worry about it because it's significant possibility. i described it as though, imagine you're on an airplane that's flying from here to los angeles, you're probably going to get there okay but if you hit an air pocket and meaning if the economy goes down, there's not an easy way to reverse it. monetary policy is less effective because when you buy a

bond, when the federal reserve makes a purchase, that has the effect of giving money to somebody who won't put that money into something like that bond. and that money does not easily go to people who spend it, that's a balance between monetary and fiscal policy and i worry about the policymakers getting that balance right. that's a possibility and a scary possibility. other than that, i think the most likely situation is we will fly successfully from here to los angeles essentially but we have longer risks. you need a balance between austerity and sometimes debt restructurings, and monetization. if you have too much monetization, you're going to have an inflationary problem. you have too little stimulation, monetary and fiscal policy, you're going to have a depression. being in the betting business i also know what i don't know. i would say that there are reasonable risks that it will not be managed well.

>> wow. there is an interesting fact that some viewers may not know, dalio forecasted the u.s. and european debt crisis back in 2008 and based on his template for all of this, he calls it the economic machine, that's how he thinks about all this, and it's worth reading. you've probably read it before, what were you going to say? go ahead. >> forecasts or forecasted? i looked it up, i saw it coming up. >> that we were going to say he forecast. >> both are used, but forecasts is the preferred form. forecasts is an irregular verb meaning that its past form don't follow the generalu ulrule of adding "ed" to the base. >> i would have added "ed." >> real quick, though, the paper is called the economic paper works dot-com. >> who are you?

we'll have more of our exclusive interview? >> we are. you interrupted all of this. >> when did you do that interview? you had work after the show was over so you felt you worked some overtime that day so you, i mean i've heard the whole story about the alarm clock and everything. >> pretty much. >> you deserved to come in at 7:00? >> that's pretty much how i think about it, yes. >> i know. joining us with reaction to some of ray dalio's comments and thoughts on the economy, mohammed el erian, ceo and cio of pimco. you were watching "squawk box" somewhere, where is that? >> in europe. andrew is sacrificing himself when i heard you pick on my nets i agreed i need a diversion and andrew, you're giving him a hard time -- it's worked but he's taken a lot of heat. >> you saw i hadn't seen the score. in fact there was a time when we were talking about our teams being in first place earlier this year. what happened? >> that didn't last very long.

>> 443. >> let me tell you one fact, if you exclude two innings when they gave up 15 runs it wasn't such a bad game. it was a 1-1 game. >> right. >> just two innings, the first and the ninth. >> that's like we added 4 million jobs in the last 15 months, if you get rid of the two innings, we're much better off. >> you're on a roll. what's in your coffee this morning? >> much better off than last year. >> i want some of your coffee. >> you're in europe, what city? >> i was in germany. >> you were in germany, but yesterday i asked the same question a few times could chanos, should we be adding the shorts in europe, getting rid of some shorts, lessening up on the shorts or going long? i said to you earlier maybe we missed it. you're not so sure, are you? >> what you've missed is the massive rally in the short end of italian and spanish bonds which is huge and rightly so because the ecb has cut off that

tail. >> isn't that the first thing that would happen in a real turnaround, isn't that the way it would play out? >> be careful. it's the same issue in the u.s., it's the same issue else where. central banks are very good at trying to limit the left tail and certain sectors benefit hugely, financial is one of them, so they're very good at limiting the left tail but they can impact the right tail, what can go well, be careful central banks may also be containing the recovery because of the distortions they impose, and secondly, they have taken valuations up here but fundamentals stayed down here so investors have no not only get excited about central banks can take the valuations up, they have to ask the questions how will fundamentals manage. this is complex. >> you've used it many times in its past. >> i think the stock market is

reflecting the fact that central banks are all in. the next step is going to be more involvement. >> what did you want to ask him, dalio, you want to ask him specifically? >> specifically he has a real concern this goes off the rails. from a handicapping perspective he's saying we'll get as he said from here to l.a. and everything will be fine. if you hit the pocket, all hell breaks loose. >> we agree. he says the probability of something going badly and uncontrolled, unmanaged downturn is reduced but our ability to respond, should that happen. >> should that happen -- >> we have very little ability because policies are taken into unfamiliar territory. >> how do you invest under that scenario? >> first of all do you it obviously in a differentiated manner. for example, yes, play the wave of central bank liquidity. it's a huge wave, play it, but understand that it will not -- >> when you say play it, what does it mean to play it in. >> there are certain sectors that will benefit tremendously

from the activism of central banks. there are others for example if you're investing in a company or country like greece that is highly levered and negative cash flow, no amount of central bank liquidity is going to help you out. this is a time of incredibly differentiated approach, not only in the equity market and the corporate band market but also in the government bond market, and people have to realize because you're trying to reconcile three things, central bank action, fundamentals and valuations, and they are a tug-of-war going on right now in valuations. >> okay. i'm still not sure what to do. >> i'll give you a whole list of details as we go along what to do. >> europe is too monolithic to get an answer on. you said greece, doesn't count. they shouldn't have been in the eu anyway. >> that's a real issue because they're one of the big five risks. how do you undo the fact they shouldn't be in the eu? >> there are some other ones that barely should be in. >> how do you undo it?

that's the problem. >> you can't. when it's all said and done at least in the next five years don't they stay? >> if you're a german, a simple choice, either write unlimited checks like west germany did for east germany or -- >> it worked with east germany. >> you have to decide one or the other. the muddle middle, the more muddle middle the more complicated it gets. >> we have to go right now but are you going to help us look around corners in a multispeed universe? >> no, we're going to celebrate the fact that the reds -- >> do you have any new really good, when you guys sit around and you bring down that guy mccully, guy that looks like a her mitt, he's in the lotus position on mountains in san bernardino, do you bring him down and he delivers one more term for new normal or something in. >> i see him on sundays -- >> he's think being the terminologies. >> he's a good thinker. >> so are you, so is gross. >> the phrase i thought you were

going to pick on the reverse volcker moment. >> do with you go back to the g. william miller era, we're further. g. william miller never had any idea he could do all this crap. >> the reverse volcker moment. >> qep, perpetual or qei? >> unlimited. >> in 15 minutes, more of andrew's exclusive recounting of why he was so late -- no, no, of his exclusive interview with ray dalio and get a camera as he cleans the latrines. you are in the brig. drop and give me 20, one-handed. also his thoughts on competitiveness and interesting take on investing in the current market conditions, it's an interview that you can't afford to miss. next, can europe solve its debt

crisis are oor is the eurozone for a breakup? we'll share mohamed's thoughts next. comments, questions, send them to @squawkcnbc on twitter, follow the show, look for updates from becky, joe and the "squawk" staff. "squawk box" on cnbc and on twitter. [ male announcer ] introducing a reason to look twice. the entirely new lexus es and the first-ever es hybrid. this is the pursuit of perfection. we create easy to use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius!

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welcome back, everybody. let's talk more about europe and qe3 with our guest host mohammed el erian, ceo and cio of pimco. you said you think this is the reverse volcker movement. what do you think of that? >> look at what they said and did, and you've rightly been focusing on unlimited open-ended qe. >> tying it to unemployment. >> tieing it to unemployment and rightly about extended the forward guidance to mid 2015. >> until the next election. unbelievable. >> there's something much more. the wording now is they're going to keep their foot on the accelerator well into the recovery so the dual mandate, employment has been raised as an objective relative to inflation. there's good reason to do this because unemployment problem is not a problem, it's a crisis getting embedded in the structure but that has significant indications for what the world looks like, in particular, not only will they

tolerate higher inflation, not only will they wish for higher inflation but they may target higher inflation. >> not everyone says it's structural. wasn't it hubbard or ed lazear said it's cyclical. >> even those who say that's cyclical. >> the new normal, you're selling the new normal crap. >> two that suggest it but even if it's cyclical the longer it persists the more structural it becomes. at the end of the day the bottom shrine is let's do something about it. >> if it's structural and if it continues like this, is qe3 really going to be if eeffectiv? >> he's saying the phrase joe hates, it's necessary but not efficient. >> when i bring them up it doesn't mean i hate them. it means i admire you. go ahead. >> wow, you can say this with almost a straight face w almost a straight face. even they acknowledge it's

necessary but they're building a bridge for other policymakers to get their act together. >> when you say he's got to keep, everyone's keeping their foot on the pedal, what happens? we talked to kevin wahrse about this, somebody else gets in that position, in an obama administration or romney administration and they're boxed in and have to keep going? >> we'll have john taylor on rater, he wrote an op. ed in the "wall street journal" that says exiting this is going to be really hard so even if bernanke is there and gets what he wants exiting will be hard. >> you can't imagine he's going to be there. think about that, that's three or four years from now. >> yet the market is willing to give him the benefit of the doubt so his term ends january 2014, the language extends to 2015 and whoever comes in after bernanke has to stick to that. >> kevin wahrse used to be his right-hand man and said

bernanke's maede his successor' job much tougher. >> ecb, fed, bank of japan, bank of england, we are so deep into unfamiliar territory, so deep into experimental mode that we don't know what the consequences are going to be, so whoever comes afterwards is going to have to clean up the mess, and bernanke talks about it. he says look, it's about benefits, costs and risks. he says there is collateral damage and unintended consequences. he says the benefits far exceed these two things so i have to keep going and that is a historical bet that our kids will be reading about in history books. >> we're going to have more from mohamed throughout the program and this is something we'll explore more. coming up next, turbulence in american airlines, that is our story and check out what's still coming up later this morning, more of our exclusive interview with ray dalio, his thoughts on competitiveness,

leading into our special harvard business school summit on jobs in america, harvard business school dean will be here plus profess professor joining us and top of the hour, john taylor, economics professor and former treasury official. >> which dean from harvard is it? >> the dean of the whole -- >> you forget his name.

up. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again.

turbulence in the air and on the ground at the nation's third largest airline, american airlines canceling 83 flights system wide yesterday, 10% of them unplanned, amid a dispute with its pilots union. >> some of them may have fall an sleep, too. >> but telling people your flight's canceled, it's like you can't do that. it's terrible. reports of maintenance problems by pilots shot up late last week and have remained high and pilot sick calls are up. you no he what this is all about. american employees are upset over cuts in jobs, benefits, and also changed work rules, as the airline works its way out of bankruptcy. >> that is bad news f you're riding with a bunch of disgruntled employees. >> yes. american's ontime performance plummeted as a result of the

turmoil, and the airlines canceled 294 flights or 4% of its schedule from sunday 'til wednesday of this week. only 44.5% of flights arrived on time, 44.5%. what's the mets, 443 was their winning -- >> so we're not disgruntled. that's the difference. >> the union insists pilots are reporting to work as usual and blames the cancellation on company mismanagement and old planes. >> if you're flying you don't care whose fault it is. >> you just want to get there. right, comments or questions, e-mail us at squawk@cnbc.com and follow us on twitter @squawkcnbc is our handle. up next, harvard's business school is hosting the jobs and competitiveness today, we're going to go there live. still to come, john taylor will be sounding off on qe3 and the state of the economy. "squawk" is back in two minutes.

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welcome back to "squawk box" this morning, in our headlines, customers lining up around the world to get their hands on apple's iphone 5, it goes on sale this morning, 8:00 a.m., wherever you are. some were in line for days, waiting to become the first to buy the phone. the iphone 5 won't do much for the blackberry or the system outage. users in europe, the middle east and africa apparently are experiencing an interruption in service. the company says it is urgently working to fix that problem. electronic arts reporting a record first week of sales for its nhl '13 video game, sales up 9. from a year ago. the real national hockey league is in the midst of a player lockout and the league has already canceled all september preseason games so people are playing anyway. >> it happens constantly. >> sources tell cnbc james murdoch will be getting more controls over newscorps' tv

operations after bskyb was cleared of any phone hacking scandal. murdoch will be given a central role in the fox broadcast network. let's talk more ray dalio. in the interview i had with him which you can see only on "squawk," ray dalio shared his views on the economy, gold, qe3 and much more. dalio is a harvard business school graduate and still connected with the school. given the state of jobs and competitiveness in the u.s. i asked him about the school's latest project in keeping america great. >> i think it's fantastic. the work that they're doing in terms of looking at these issues, and converting a lot of conjecture into statistical analysis, so that you could understand what matters how much, is a very important topic. i think that what needs to be done more is an understanding of how that competitiveness effects

future growth, in other words, to what extent is it an indicator of future growth. we've done a lot of work along those lines, and we've had conversations with harvard business law. i think that that can be used as actual policy indicators. in other words, imagine that you now have these indicators, and that show if you change this thing or that thing by this amount, it will have that effect on growth. i think that that's what's needed to get past the rhetoric, get past the conjecture and the politics and the vested interest and i this i we're working toward that with harvard business school. >> let's open up our discussion about creating jobs and xet i haveness competitiveness with harvard business school dean nitin nohria and professor michael porter join us to talk more about this. welcome to both of you. i'm not sure if you heard our conversation in the last block, talking with mohamed el erian, is this a structural problem, is

this structural at this point? >> well, we certainly believe so, based on the results of our project here. this is not an economic downturn. this is really a structural change in the ability of our economy to not only generate jobs, but to support a rising standard of living. the jobs collapse really started even before the great recession of 2008. it was building in the latter part of the '90s and early part of the 2000s, and fundamentally the jobs collapse is fundamentally a skill-driven issue, four out of five of all the jobs lost in the great recession were high school or less jobs, and the fundamental challenge facing america is we are no longer a competitive enough business environment that we can provide a good wage to one of our cens doesn't really have advanced education. this is a deep challenge that we have not faced in this country

for at least 50 years. >> you add to that the challenge that we have with globalization, and that all of these tradeable jobs, jobs that can be done anywhere else and the product can be consumed in the united states, and that's just not manufactured or made in china, it can also be i.t. services developed in india. the reality is america has created no new net tradeable jobs in the last 20 years so we combine our own commitment to only job creation through construction and things like that and our inability to create jobs which are truly competitive in the world, that's why we are in this current situation we're in. >> is the answer though more education or finding some other jobs that are going to be great jobs for people who don't have higher education? >> well, i think we have to create a skilled development system in america that allows people without advanced degrees to actually have a skill, and we used to do that pretty well in

this country. we had a tradition of a lot of job training. that has been substantially reduced. one of the major focuses of our project is to get the businesses actually investing in skills, in america, because they're facing shortages, and they have a self-interest in really making this training system work, but ultimately i think we have a lot of things that we've allowed to happen in our business environment in america, with our high legal costs, with our high regulatory costs, with our high health care costs, with our less and less efficient infrastructure that are working against the u.s. as a business location, wherever a job is tradeable, that is wherever a good can be traded we have been losing out, we win one out of ten of these locational choices whether you want to be here or el elsewhere. the problem is not just an economic cycle. we talk about stimulus.

stimulus is the whole, the wrong formulation. that assumes there's kind of a cycle, and we just have to stimulate and kind of, so that we can get growth going again. it's not like that. this is a structural issue. it's much more serious than the threat poetz eposed by japan. japan was one country in a few industries. we're talking about millions and millions of americans who are going to have a hard time supporting a decent standard of living, and so the challenge we have to do is we frankly have to just get busy working on this stuff. >> right. >> instead of getting busy working we haven't made one significant policy advance in the area of competitiveness, you know, in my memory. >> professor -- >> and we can't fix our infrastructure. we can't create reasonable improvements in our regulatory system. we just can't seem to get anything done while every other nation in the world is working very, very hard to make their environments better. so we've got a real issue here and it's really not being talked

about very well in this political campaign. >> sure, other countries seem more, i don't know, sometimes they seem more business-friendly and michael, a lot of the things you're talking about, what we keep hearing, lower the corporate tax rate, get rid of the loopholes, better immigration policy. i mean a lot of these things we hear about all the time but for some reason helping business doesn't seem to be kind of a popular fashionable thing right now. >> we're in sort of a very dangerous kind of spiral here, because there's been a loss of trust in business, and nitin can talk a lot about that because it's been an area he's been deeply concerned about. that loss of trust means politically it's hard to be seen as pro business or supporting business. businesses are being portrayed as greedy and companies that invest offshore are seen as kind of unpatriotic, and un-american, and we have a spiral here where we're just not taking the steps we need to take.

>> okay. >> we have one of our outputs of our project is there's eight federal policies that we think would be transformational and you mentioned a couple of them, you know, joe the immigration reform, corporate tax reform, infrastructure improvements. when we go to washington and talk to our political leaders as long as we're in their office and the door is closed, everybody agrees with the policies, there's no doubt philosophically everybody agrees with them, economic theory agrees with them but yet we're not getting those done. >> but other things, too, michael, budget uncertainty, we need a way to tackle our entitlement problems, our tax uncertainty, all of these uncertainties, it's the same thing we hear when harvard business school comes up with it, maybe this will speak to you, you want to ask him a question? >> i do. michael, though, i spoke with ray dalio two days ago and one of the things we discussed was the disconnect oftentimes between what it means to be competitive as a country and

jobs, and that it's not clear that by being competitive, you therefore get more jobs. this is what ray dalio was saying, in part because of technology, and in part because beyond the regulatory structure and all of those embedded costs that we've added, there are a lot of jobs that it's not clear, a, either we want, or that we're willing to pay for at those type of prices. how do you think about that? >> i think that the important thing to realize here is that certainly if you're not competitive, the situation will be worse. so you're right that increasing our competitiveness doesn't always lead to job creation in america. we have, in fact, the current times are a disconnect between the microprosperity of companies benefitting from the economic operation created around the world and what's happening in our own macro economy where we don't see that same job creation

occur here. if we were to make america more competitive, investing more in education, we were investing in what we've forgotten the vital community college infrastructure, in america may be worse than our k through 12 infrastructure, places like germany and others by investing in that sector have created the middle skills that create employability even at high wages in their own countries, so we invest in areas that deeply enhance u.s. competitiveness. i actually think we will be able to bring jobs back to the united states as well. >> let me ask you a question -- >> let's not also fall into the trap there's some fixed number of jobs in the world, and we can, you know, either we get them or somebody else gets them. we have a tremendous amount of economic need around the world, there's products and services that customers need, the middle class in the developing world has voracious demand for all kinds of goods and services and the pie is expanding, but if we don't provide a good enough

platform in america to put jobs here as opposed to somewhere else, ultimately we are not going to get our fair share of those jobs, and particularly the ones that require more skill. i mean we have to provide more skill here if we're goinging to justify our higher wages, and our sort of higher skilled people in america are doing very well. we've pretty much gotten back all the jobs that were lost that were high skill, that were higher than high school education. it's the high school educated worker that used to be able to make a good wage in america, those are the people, and that's where inequality is really being driven. >> right. >> it's that issue. the fundamental issue. >> tom friedman said average is no longer good enough and that's ultimately the problem in an environment of deployablization where you can pick off and find your geniuses wherever you want. how do you fix that problem, how do you fix the average

situation? >> i think we need to start by getting rid of all the unnecessary costs of doing business in the united states that we have let creep up because we thought we could afford it and we were the dominant economic power after world war ii, we had an overwhelming lead in every way across virtually every other country in the world. they're all catching up so now first of all we have to strip out the unnecessary costs. we have to take a new attitude towards whether we can afford lousy infrastructure, whether we can afford a lot of litigation and regulatory costs. we have to take a new attitude towards those things and then in the long run, we have to find ways through the community college system or through business-led training initiatives in region after region, which we're starting to see build up to kind of tackle the issue of the skill base of our less non-college educated workforce, and again, we have great hope and see great signs that the business community in this country that are operating

in this country is starting to tackle this challenge. we see now hundreds of exciting initiatives at the regional level around skills, for example. >> let me ask you a very practical question if i may. if you want to go from analysis to influence and impact, you're going to have to break this notion that it's down to cyclical versus structural. how do we break this and how do we convey that it may be a bit of both but we need to move forward and let's stop debating whether it's one or the other. >> i think that there's nothing as powerful as an idea and part of our institutions, why they exist is to put out important ideas in the world so that we can change in some ways the conversation and our real hope, and thank you for having us, this is our hope in being on shows like this, we want to allow people to recognize why we are so preoccupied as one might imagine we should be with this current great recession. these are issues that have been building for the last 20 years

and we're trying to put out our data through business review and various magazines to bring back to people's understanding in simple ways how deeply structured these issues are, and my hope is that once this political cycle is over, perhaps we'll get back to the real business of fixing the fundamentals that have to be fixed, to become a competitive nation again. >> we have been now taking our work all across america, region after region, gathering our alumni and other business leaders and talking about these issues. i think there's, i think there's a great opportunity to kind of break the cycle here on this issue, but we have to keep pounding away, because if we keep trying to forecast whether the next job report is going to be a little better or a little worse we're never going to tackle this issue. the jobs reports are going to be weak for the foreseeable future unless we start to tackle some of these issues. >> the next two might be good,

professor. dean, great to see you, thank you as well. up next the chinale chaening, ray dalio on growth in the world's most populous country and the problem it poses for america. will regulatory expansion hurt the nation's job recovery? that's just one topic we'll talk with john taylor. "squawk" will be back in two minutes.

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china's economy continues to deteriorate, despite government efforts, hedge fund manager and china bear jim chanos expressed his concerns yesterday calling it "a classic emerging market roach motel." in my exclusive interview with ray dalio i asked him what he thought of what's going on in china. >> years past in japan when it was going strong they called a recession anything less than 3% growth. in china anything less than 6% growth is a recession meaning it also has, it causes a lot of financial problems and it's disruptive and it's a problem. so i think that we are in that vicinity, something like that. the fact that they can have 6% growth and think that's depressing and we can have 2% growth and think that's good is a reflection of the difference in our competitiveness. >> let's bring in our guest

host, mohamed el erian, ceo and cio of pimco. chanos yesterday again called i believe it was the "h" class shares the roach motel of emerging markets where foreign money comes in and never gets back out. what is your take? >> there are a ton of this, we are closer to ray, our baseline is that china will slow to 6.5% to 7%. critical is not the cyclical issues. the government can deal with the cyclical issues. the critical issue is can china navigate the middle income transition. only five countries have navigated this middle income transition at high speed, it's like an adolescent that happens, the transition happens at $5,000, $6,000 per gdp, per capita. the big question, can they do that? the political situation is complicating this. our gut feeling is yes, they'll be able to but it's going to be really bumpy and this is one of

the big five risks that the market faces going forward. >> and nobody's ever done it with that many people. >> nobody's ever done it with that many people and nobody has done it when they influence the global economy so much. so this is really uncertain, really uncertain, and it's always good to remember that most countries, brazil, the indonesias, failed at that level. so this is an important stage in history. >> jim cramer is in your mind of thinking that you won't see a slowdown in china but also with chanos, don't buy any securities. >> both of them are correct in the sense that when you buy exposure in china, you are subjecting yourself to a very unlevel playing field, so you better know how you're going to navigate that. >> eight months, nine months ago, i remember talking about it on this show that 6.5% in china was not consensus back then and it would be a hugely more

negative worse situation, more of a drop-off in gdp than anyone was forecasting eight or nine months ago. so you're saying we're there and you look at the shanghai index. >> it's there. >> so it was going to be 6.5, and it did, there's a lot of bad -- >> not just in shanghai. all of the emerging market indices priced in lower growth. >> 6.5 is priced in now? >> i think 6.5 to 7 is priced in. what they're not pricing in is beneficial impact of qe, they're pricing in the bad impact on qe for the rest of the world. >> can you project out further? if you were projecting this nine months what, is your new projection for the next year? >> we think they stabilize at 6.5 to 7. >> you think it stay there is? >> we think it stays there for a while. we don't think they get back to nine or ten for a number of years. >> if ever or -- >> if ever is a strong statement. i think you've got to recognize if the base is getting bigger and bigger, and the underlying changes that have to happen are more complicated. >> it can be the new normal in

china. >> the question that arises is can the political system, based on the implicit contract of little democracy, can it take it. >> we'll have more from pimco's ceo and co-cio, mohamed el erian. still toment could, jobs and the economic recovery, economist and former treasury official john taylor testifying earlier in front of congress on that topic, his thoughts are going to be coming at the top of the hour. check out the apple store in new york, opens at 8:00 a.m. and folks there will be getting their iphone 5, going on sale in just a couple of minutes. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start.

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when we return, he was john mccain's man on the economy when the senator ran for the white house. former treasury official and professor of economics at stanford, john taylor, is going to be joining us, right after this. [ horn honks ]

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a hedge fund titan on qe3 and the recovery in europe. >> i think the euro is likely to stay together. >> more of our exclusive interview with bridgewater associates founder ray dalio. we'll talk politics and the economy with our guest host, mohammed el erian and stanford economics professor john taylor, and the wait is over for the apple faithful. >> oh, boy, is this great! >> iphone 5s going on sale at apple stores on the east coast. the third hour of "squawk box"

starts right now. ♪ we like to seize our day and party all night ♪ ♪ this is how we like to live our life ♪ ♪ i got a feeling is gonna be all right ♪ ♪ so come on welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. he's here. he's in his chair. our guest host is mohamed el erian, ceo and co-cio at pimco and more from mohamed in a minute. but first, becky has your -- >> she's doing a little dance. >> i can't help it. >> really? i resist it at all costs. >> i've seen you're doing it right now. >> one finger moves and slowly -- no, i won't let it happen. >> the overbite going on. >> no, i won't do that. >> sprinkler? >> i might do the sprinkler or

the shopping cart. >> i like the shopping cart. >> push zbl . >> it's a quadruple witching day. the iphone 5 is now on sale at apple stores and mobile carriers in the eastern time zone, this is it, in the last 56 seconds they've been on sale here, you are looking at a live shot from the apple store on fifth avenue in new york city. some of the people here had been lined up for days, that's right, days, meaning they've been sleeping here, nutsos. the phone goes on sale in us australia, hong kong, japan, france, singapore opand the unid kingdom. mobile carriers expecting a boost from the sales of new apple iphone. look right now this is a live shot of the at&t store in ft. lee, new jersey. at&t says the preorders of the iphone 5 have already far outpaced sales of the previous iphone models and let's take a look at some other applelunians,

those folks are in chicago and they have to wait longer, the iphone 5 goes on sale at k a.m. local time so you suckers have 59 more minutes to wait. we've been watching shares of apple today and as you know, closed above $700 earlier this week, $703.49, up another $4.80. i've been watching the twittosphere, trending ios 6, at&t and verizon. there have been a couple of good tweets, "good day to just browse at an apple store." "bad news, delivery guys are using ios maps to find your house." stinks for you. >> what is the payoff, andrew, you wait for days, you get the phone. what is the first thing you do that makes it all worthwhile? >> i don't know. take a picture of yourself

kissing the screen or something. i don't know, what do you do? >> i don't know. >> it's a phone. >> that's why i don't -- >> it's more than that. people are into this kind of technology thing. it's cool. i wouldn't wait in line but -- >> but still to wait in line to be the very first one. >> there are people who love this stuff. u.s. equity futures have been a little higher today. we've been talking this morning about how it is a quadruple witching day and if you looked at quadruple wiching days in september for the last eight years they've been higher, and as j.j.kinehan pointed out earlier the last eight fridays in a row are higher, what could go wrong? futures are up by 38 points, s&p futures up by close to four points and we'll be following shares of two well-known companies that have hiked their quarterly dividends, mcdonald's increase of 10% and texas instruments to 21 cents from 17, an increase of almost 25%.

james murdoch is lining up to take direct responsibility for newscorps' u.s. television businesses, this is coming after a uk report on whether bchib was fit and proper to hold a broadcasting license that heavily criticized murdoch himself. the report did clear him of any wrong doing and this is the latest headlines out of it. i got the chance to sit down for a rare interview with the world's biggest hedge fund manager ray dalio, founder and chief investment officer of bridgewater associates. here is what he had to say when i asked him about the fed's plan for qe3, announced last week. >> i thought that was a reasonable plan. i thought that was a good plan. >> is there an historical corolla corollary? >> that's always the case, yes. in other words the historical corollary is always the purchase of central bank, expanding its balance sheet to buy financial assets and depending on the

circumstances -- >> at this point in the game? >> yes, just recognize i think, recognize that quantitative easing is the new interest rates, right? so ask yourself, when everybody's used to interest rates and they're making a big deal out of quantitative easing like it's something that's something radically different than easing interest rates. the big difference is, when you ease interest rates you stimulate private sector credit growth. private sector credit growth is no better than printing money, in either case you have to ease so if you have a growth rate that's bad, you now do quantitative easing. >> we'll have more of the ray dalio interview and his thoughts on europe later this hour. it's been a week since the fed announced qe3, and you just heard ray dalio. joining success john taylor, senior fellow in economics at the hoover institution, also a professor of economics at stanford university, mohammeded erian our guest host stays with us.

john, i'd almost call that when i heard ray dalio, almost call that sort of against the current thinking, almost nonconsensus what ray dalio just said. so many people said qe3 does, the benefits are questionable, and that the possible negative effects are more prominent. which camp are you in? >> i'm in the camp the benefits are pretty small at this point and worried about the cost, too, so it is quite more favorable about the quaupttative easing than is appropriate. we had a week and the things they focused on like mortgages have not responded, optional adjusted spreads, et cetera. >> he has $130 billion to invest, it's possible he could be long some assets and possible he could be long gold. >> part of his argument is even if it's not as effective or efficient as you'd want, you still spend the money. >> not if you didn't have a dual mandate. >> that's a different story. >> it's a more short term -- >> the fed had a dual mandate

and chose to follow one mandate over the other and now reversed its course. >> i think it's a negative at this point. it's causing uncertainty, people don't know how to interpret all of the different rules forward. >> he's clearly on a different side than that. he believes really that austerity, any form, whether from the fed or on the fiscal side right now, he's more anxious about that than he is the upside or downside of stimulus. >> you thought housing prices are getting better, the stock market at a four-year high. i wonder what -- i can't figure out what the fed was focusing on. we thought they saw something the rest of us didn't see, that was even worse than we were -- >> there's always that concern but this is a new fed, quantitative ease something not the kind of thing we've seen in the past, that's a a new operation and whenever the economy slows down there will be massive quantitative easing. >> john, speak about this fed

put because the market reads what you think about the costs, especially on what's going to happen to liquidity, the functioning of the market sector and says john may be right, i'll worry about that later. right now i want to ride this wave of liquidity. so the market right now focuses almost exclusively on the benefits. at what stage would you tell investors forget about the benefits and start focusing on the cost and make the cost your investment theme not the benefits. >> the costs are already there for the whole economy, for investors some investor also benefit from this, know more about what the fed is going to do in certain areas so for certain investors it's quite positi positive. >> for the equity market as a whole at what point do you say they should not be responding just to qe? >> i think the equity market will respond to these announcements for a while, but the loaning term thing is fundamentals in the economy and i don't see that being benefited by these actions. you might see movement short term and maybe that's what

people focus on but the general movement in the market is based on other factors. >> john you look at government activism and i brought up glooen span before, he says government activism causes corporate, the private sector to delay these long-term investments into fixed assets. he threw the fed it's action into activism, too but mostly the government itself. do you consider the fed's action also to be delaying the recovery? >> this big picture of policy uncertainty talking about it all the time, the fiscal cliff. >> here is the quote i have come to the conclusion the labor recover i have due to poor government policies of which regulatory expansion and policy uncertainty are a substantial part, you shave a whole percentage point, you say it would be a percentage point lower in unemployment without the regulatory overload. >> we don't know exactly but i would say that's a reasonable estimate. regulation, we just had an expansion of regulation the last few years, number of federal

workers doing regulatory activities and number of pages in the federal register. >> chanos yesterday said the regulatory what's been done in the last four years was enti the previous four years and four years before that. >> that's not true. we have hey an expansion in the number of federal workers by a large shot. i compare this expansion compared to the great expansion in the 1980s, we were doing the opposite. >> it wasn't a credit bubble. it was a typical, different type of financial break, right? >> nothing is exactly the same. >> the argument we'll have it until the -- >> including state workers, too? >> i don't know how he -- >> most interesting numbers chanos came up with, said the 1.500 in terms of how much capital expenditures, he said -- >> capital expenditures to businesses, 4 billion. >> back to 4.2 billion, which is more he said than 2008. the issue was it wasn't clear it was happening in the u.s., meaning a lot of these were u.s. companies that invariably were employing --

>> hiring that would go along with capital expansion isn't happening because of productivity or technology or whatever else. >> well we're not getting as much as we did in terms of employment. employment-to-population ratio is down compared to when the recovery began. >> how long can we ride this, the participation rate going down? could they, we're at a 50-year low, it's suiting the current administration for the participation rate to continue to drop because -- >> makes the unemployment rate look better. >> you don't need to add jobs to bring it under 8%. can we keep spanking this thing to below 60 on the participation rate? >> it's going backwards. people are dropping out of the labor force because they're discussing the labor market. >> question still get to 7.8. >> it's not the way to do it. >> will it keep happening in the next two unemployment reports? >> could be. it's a bad labor market and people are dropping out. >> it's a bad labor market but ends up looking better. >> the way we got the numbers. but i look at the number of workers who are working age population and it is going down.

>> so that's a critical number. >> we're going to come back, we're going to take a break and come back. >> we're the only ones alowed to mess up the brainstorming. >> we'll continue our conversation with john taylor and mohamed el erian you're going to grill him? >> i'm not joe kernen. >> shine a light in his eyes, some truth serum. more with the interview with ray dalio and predictions for the european recovery. as we head to break here we go again with a live shot of the apple store on fifth avenue in manhattan, the iphone 5 is now on sale at stores in the eastern time zone. woo hoo. at optionsxpress we're all about options trading.

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all right, let's get back to our discussion with two squawk market masters, stanford economics professor john taylor and pimco's mohamed el erian, we cut you off rudely with a commercial break. >> i was going to ask john about the market impact of qe. there's two views of qe, one is that the fed is targeting an outcome and going to keep on

going until they get an outcome, call it unemployment at 6%, so foot on the accelerator, that's the destination, whether they get there or not is irrelevant because they're going to behave in a certain way. the other one is no they're looking to resist headwinds from europe, from the fiscal cliff, from china, which is it? do you think it's one or the other or do you think they're trying to do both and -- >> well let's talk more about the former, the way it's described, characterized. i think it's what they're thinking and it is quite a change because if you like in this dual mandate it raises the unemployment rate a lot more and i think that's dang ruls because frequently when that happens, unemployment gets worse because of the focus on it. >> we've called it the reverse volcker moment. >> that's a good term. it's unfortunate, i'd say, because volcker did such a terrific job in getting the fed back on track after a terrible time in the '70s and we want to go back to the '70s? no. >> he says we're below inflation targets so they're satisfying both sides of the dual mandate.

>> something bernanke's done, too, putting themselves into all the boxes where you have to look at levels of inflation and levels of unemployment. >> if it's below 2%, really, then he's trying to get that up, too, he's satisfying both mandates. i have people telling me it's 8%. >> it doesn't mean you have to gun it, because you're a little bit below, doesn't mean you have billions and billions of dollars thrown into the system. >> where does the money go, the 40 billion, where does it finally go? >> it goes into the markets they target, the who enis they -- >> where does it go after that? in the stock market? >> no, well we've seen this happen in japan, okay. it goes in two direction, they push certain investors into taking more risk so the equity market benefits. >> even if it's already up on it, it can still go up because it's 40 billion then. >> there's a limit how much of a wedge you can have between valuations that are here because of the fed and fundamentals that are here because of reality. there's a limit to that.

>> absolutely. >> we talked about it in the last hour with mohamed. let's say romney wins and he decides he's going to fire bernanke. put somebody else in that role, which may very well be you. how do you get out of it? >> that's what we've been talking about for all these, since it started, it will be very difficult to get out of it. you got to get the balance sheet back down again. >> how do you get out of it without tanking the economy, given the expectations that have been built up? >> actually you have to do it gradually. >> gradually over, is that over an entire administration, over four years? 12 months? >> fiscal policy is way out of line, that's brought back in line. you can do that gradually, it will be good for the economy. fiscal policy back in order. >> but i'm saying -- >> if we get monetary policy, you have to do it in a gradual way, you can't shock the markets. i look at history and we had monetary policy that was predictable, weren't doing all of these interventions t really

worked well and i'd like to have a monetary policy like that. >> is there going to be pain along the way? >> i hope not. the biggest concern i have is there will be pain so everything has to be addressed to avoiding that with an exit strategy well understood, an exit strategy discussed in advance of the exit strategy so markets know what to expect. guys like mohamed are not going to be surprised how it happens. >> let me take you to an area that's more complex. 11 years ago you were an architect in solving a debt crisis to the south. >> yes. >> today we have a debt crisis going on in europe. how close are they to solving it? >> i think they're unfortunately quite a ways, it's sort of a kick it down the road policy so far, and as you say, emerging markets were in a similar mess ten years ago and policy changed. they basically didn't rely on bailouts that much, the bailouts started to stop and they adjusted their policy and became much better. that's what has to happen in

europe, the sooner the better but i don't think they're quite over that hurdle. >> was the ecb action which was dramatic in terms of saying unlimited purchases, conditional but unlimited, would you say that was a mistake in. >> i don't want to say it was a mistake because their situation is so different, different countries and the central bank operating in an unusual regime but what i would like them to do is alert them this is not how they want policy. they want to get off of this and find a way to describe that. that's what we did ten years ago, said we're going to do a bailout here but that's it. we basically described getting over that hurdle and we stopped and emerging markets worked much better after that as you know, it's been a good time for emerging markets. >> john, back to andrew's point, we have talked to a lot of people, including kevin warsch who thinks the next person to take the fed chairman's job will have a complicated role because bernanke changed a lot of how the fed operates.

if you were say theoretically in the role of fed chairman would you step back from inflation target aing or tying something an unemployment number, tying any of these policies to that? >> i think the transparency about inflation target is good but what i think is needed is a way to have a more predictable rule-like policy so i've advocated the fed actually tries to describe its strategy more and report to the congress about the strategy. i think the dual mandate is a concern. i don't know exactly how to resolve that but the focus on unemployment, whether in 2003, '04, '05, resulted in unemployment. i would say get the fed back to more rules based policy, one that is predictable and does not have so much discretion which causes uncertainty. >> you said you think the focus on it resulted in higher inflation. on higher unemployment and volume -- >> the focus on higher

unemployment resulted in higher unemployment. it's murphy's law. >> i wouldn't go that far. we had an unemployment issue, john, getting so deeply embedded in the structure that you had to somehow find a way to get time for the economy to heal, and we got here because we got drunk on leverage and credit entitlement and sector after sector is healing and we have to give time for the dmoe heal, the handoff from government back to the private sector is not going to occur. >> in terms of my idea, 2005, '54, '05 interest rates were held down low, caused the credit boom because of the low interest rates and we have the crash and we have a concrete example. go back in the '70s, all that effort to get unemployment down resulted in unemployment of 10.8% at the end of that policy. >> and volcker came in at 21.5. >> he said i'm going to get

inflation down. >> we had, we were going to take medicine. >> he did. >> it paid off in the '80s. >> we've already established we're the same age. >> no, we haven't, i'm older, wiser. i don't believe that. this is about baseball. john, thanks. mohamed will be with us for the rest of the show, he is our guest host today. >> coming up, find out why current apple employees are protesting in paris, on the day of the iphone 5 release, and you know what? that's a good tease, i want to find out. at 8:40 eastern bold predictions on europe's recovery from the man who predicted the european crisis. more of our exclusive interview with ray dalio, founder of bridgewater associates. ♪

welcome back to "squawk box." on the morning the iphone 5 went on sale, disgruntled current and former apple employees and former independent distributors protesting outside the apple store in paris. among the issues, apple's refusal to offer perks like meal vouchers and a yearly bonus of an extra month salary.

apparently these are standard for many french workers. okay. when we come back we've got what you need to know as we head into the weekend. we'll head to chicago for a look at what traders are watching in the futures pits. and solutions for europe, more of our exclusive interview with hedge fund titan ray dalio and reaction from our guest host, mohamed el erian.

welcome back to "squawk box." let's look at some of the stocks on the move in today's trading, darden restaurants reporting fiscal first quarter profit of 85 cents a share, a penny above estimates, sees strong sales and earnings growth for the current fiscal year. darden of course the parent of olive garden, and red lobster chains and we haven't seen clarence in a while. >> where is he hiding? >> i don't know, it would be nice to talk to him. he had some stuff happening over the past couple of years, they do some promotions, they've been dealing with the uneven economy. >> he's come on to talk about that. >> maybe he'll come on. vivus and butthead -- no, vivus expects the european regulators to rule aagainst the

qsiva weight loss application. they said if it happens it will appeal or resubmit its application. >> how does that work? >> it's weird. >> and general motors is recalling 426,000 chevrolet, pontiac and saturn sedans in the united states, the automaker needs to fix a condition that could lead to the car's rolling when drivers think they're in park. >> that's bad. >> they don't make saturns anymore, do they? >> no, but they did. >> the older ones, okay. >> the recall affects chevy malibu, pontiac g-6 and saturn aura cars made between 2007 through 2010. gm says at this point it's unaware of any crashes or injuries that stem from that problem. let's get a check own the markets, joining us from the cme in chicago, rick santelli. we had john taylor and mohamed

el erian and ray dalio, all weighing in on qe3, rick. i don't know if you got to see any of it. i'm totally confused now, it's good, it's bad, your mother, your sister, i don't know, the benefits are worse, the costs are not as bad. did you see any of that? >> i didn't. i'm sorry, joe, i'm on the train and working on various points ahead. >> you got to get in earlier. >> move close per. >> sirius xm you could listen to. >> i see everybody on my train with a million devices t takes them 40 minutes if they have to go through a metal detector in their building to take everything off. i like life simple, read the newspaper, nothing in my ears, no devices, sorry for all the technologymakers but there's something said to be a nice quiet train ride reading newspapers. >> i've been asking this question, rick, we're saying qe3, have we already discounted it? does the stock market continue

to go up and i finally realize, we haven't even, the 40 billion per month we haven't spent one month's worth of 40 billion. as that happens in that 40 billion goes, where do you expect it to go, to end up, where will the bubble start or will there be a dislocation? what do you think would happen? >> oh, that's a great question, joe. close your eyes and visualize this. >> all right. >> visualize the biggest fire hose in the world, 20 miles away from a little geranium plant, all right? now this hose is going and going and going, and ultimately, that geranium plant gets a little bit of water but everything around it and leading up to it for miles around is just underwater. that's qe, in my opinion. >> so rick, let me simplify it. markets are investing on the basis of that little flower is going to get water, is going to grow, is going to be beautiful and you're talking about the collateral damage. at what point do you tell investors stop focusing on the

benefits and make the collateral damage the investment theme? >> well, when the water goes over their nose or their eyes, i would imagine. in our analogy to me the real issue is, is that they've admitted, ben bernanke admitted, many fed officials like our guy in chicago, mr., you know, never too much a combination charles evans, they've all admitted it isn't an ideal program. it might not really pass at huge cost benefit analysis but gosh darn, somebody's got to do something, no matter how small the improvement or the impact is. you know, mohamed, in my opinion, the biggest problems with this aren't going to show up for a time down the road. the fed's balance sheet, which as we read in some of those "new york times" op. eds, they crack me up in the morning, this is all free, just accounting just a couple of different categories on the accounting statement. eventually whatever that balance sheet is it will get totally

monetized with the velocity of money, when the economy kicks in. i believe mr. taylor might have written an op. ed a while back that described that phenomenon. when this thing grabs it's going to be like fred flintstone feet hitting the ground moving and probably the reflation, the epicenter probably of this strategy, is going to kick in. so future generations or people that have already been savers that have gotten walloped, thank you, mr. evans, going to get walloped more when the purchasing power they hoped to retire by probably will take them from a sirloin steak to maybe a cheeseburger on the dollar special menu. >> rick, i don't want anything in your ear, but i wish you had seen what he said towards the end of the interview he said a focus on unemployment or an obsession on unemployment by the fed is at this point and has in the past kept unemployment higher than it would have normally been, that the focus on

it being high causes it to stay high or makes it high, all the easy money back in 2000, you cut the lower, look what happened to unemployment in 2008 and 2009, because of some of the dislocations and bubbles built up from the easy money. >> we're not even talking about the misallocation of capital. you know, all these managed programs, you know, that are going to go from one-sixth of the economy potentially in health care to all the other areas, general motors, government motors, these misallocations will also show up in the future, the solyndras, because where the money is supposed to be productive to grow our standard of living, that money wasn't there, because it was misallocated somewhere else and turned into a giant dead end. >> rick, before you go, we were talking with john taylor, if romney's elected and bernanke loses his job, you think the markets go up on that news?

>> you know i love the way you ask it and i really like the way your tone went up at the end of the sentence. it's really simple, andrew. >> welcome to my life. >> it's very simple. president who doesn't like business, and i don't care how you want to gloss it over, it's true, we've all heard it, be objective here. first there's a guy who really understands business, maybe isn't cool, maybe doesn't have a good voice, maybe he doesn't play an instrument but just the fact of him getting elected is going to make all businesses, in my opinion, better. >> on the fiscal side i won't disagree with you at all. on the monetary side, what i was talking about with mohamed before, how does the market take the firing of ben bernanke? >> let me add, rick, how does it take both the bernanke issue and china being called a currency manipulator within days of romney if he's elected, assuming the white house? >> on the china thing, this isn't an easy one but i still

say at the end of the day, you know, we have all the gadgets. they have all the paper. i think we can afford to get tougher on china. as far as ben bernanke, believe me, i don't think that much of the market is going to miss him other than maybe the equity traders but the transition, and i'm sure it will be smooth, this isn't going to be okay, i'm sworn in get the heck out of here! this will be a transition well thought out, i am sure. if there's one thing i would trust in a candidate to be president like mitt romney is he would understand that key positions in the government even if they're occupied by people that you don't agree with have to be dealt with in a procedural fashion that isn't disruptive. >> totally fair answer, rick. completely and utterly fair answer. >> that makes you feel better? >> i'm just saying i thought it was a great answer. thanks, rick. coming up, strong predictions on the future of europe, more from our exclusive interview with hedge fund titan ray dalio of bridgewater associates and we'll get jim

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. welcome back, everybody. these are live pictures at customers at the apple store in new york getting their hands on the iphone 5. store opened 41 minutes ago, lines have been lined up for days. >> ray dalio made strong

predictions on europe. hear what he had to say, take a listen. >> i think in the next couple of years i think that we're going to have a depression in southern europe and it's going to be a managed depression. there will be a combination of monetary policy, printing a certain amount of money to relieve it and at the same time a de-leveraging and restructuring of debt. de-leveragin de-leveragings, restructuring of debt and austerity are deflationary, and they are negative for growth. printing of money is inflationary and positive for growth. you have to have enough stimulation that you raise growth, you have to have a higher level of growth than you have of interest rates and so that process will continue and it will be a 10 to 15-year managed depression. >> the euro in that thesis stays together in. >> i think the euro stays --

>> eurozone. >> -- likely to stay together, although in later years, it's more risky. i think the euro is controlled by southern europeans for the most part. it's a vote of the members, and it will be run that way. and that will help to achieve the balance. i think that the policy by mario draghi and the ecb is a policy to achieve a balance of those things, a balance of austerity, a balance of de-leveraging and a balance and monetization, and i think we'll continue that. if there is a breakup, i think it's more likely that the northern europeans would leave. i think the euro stays -- >> eurozone. >> -- is likely to stay together. although in later years it's more risky. i think the euro is controlled by southern europeans for the most part, it's a vote of the members, and it will be run that way. and that will help to achieve the balance. >> dalio forecast the u.s. financial crisis and the european debt crisis based on his template for how the

economic "machine" works and we also have a bit of breaking news on ray dalio, cnbc's hedge fund specialist, one of our great producers here reporting that bridgewater's $55 billion all weather portfolio is up 12.2% year-to-date, annual return of 17.5%. bridgewater's $75 billion pure alpha fund is up 3.1% in 2012, since 2010 pure alpha has an annualized return of 25.6%. our guest host is pimco's mohamed el erian. ♪ are you you in agreement on the eurozone staying together? >> we're in agreement on the eurozone staying together but the baseline and the risk. we would say europe will probably contract by 1% to 1.5% over the next 12 months. within that we'll see more dispersion between the southern

peripheral economies that are going to have major contractions and the north in particular germany that are probably going to be either flat or positive. the big question is, do the populations tolerate this? the policymakers are clear, he called it a managed depression and its's managed because you pt a lot of liquid in there. we ask the question will the populations accept this. in greece we see major reject n rejection, economic, political, social and financial. >> he seemed to also indicate there's some tail risk. we might be able to get through it for the next year or two but the further we go out the greater risk there's going to be. how does that play itself out? >> so in his, he went, and if it breaks down, it's with the north exiting. so he's gone even a step further telling you if it breaks down, the north will abandon a single currency. i'm not sure that is the case. i will tell you that the most likely baseline is going to be a smaller, less imperfect eurozone

anchored by the big four, germany, france, italy and spain, and if you take one of these four out, it's very difficult to keep the eurozone together. >> what is the tipping point for you then in terms of timing? you agree the farther you go out the more likely something happens? >> yes, the tipping point, it's no longer going to be the markets pushing a country to insolvency as it was a possibly in july when spain's interest rate was over 7%. why, because the ecb is all in right now. conditional but still all in, so the tipping point is no longer going to be the debt dynamics. the timg point is the rejection by the population because if he's right and it is a depression as opposed to a recession, there's a limit to the tolerance of the population. >> do you see a political environment where that happens, angela merkel is no longer in charge. what happens?

mario monti is no longer in charge. >> we've seen what it looks like and it's pretty ugly. there is a major assumption that a merkel will be in charge, a monti-like person will be in charge and on the spain front they'll be able to combine conditionality against policy and financing. the loss of assumption is being built in right now. >> i'm not -- what were you going to say? >> go ahead. >> i was going to go with if you think three or four or five years out. >> right. >> politically, i would think as a betting person you'd imagine somebody else would come in who would be on the other side. >> that's what the market is telling us. it's fascinating to see what's happened to the shape of the yield curve. the front end has collapsed so investors are saying the next two to three years they're okay but then you've had a massive steepening of the long end where they say you're right, beyond that it's going to be really

problematic. and that's exactly how the market has priced, and we think it's correct. that's exactly what the outlook is likely to be. >> it's scary, actually. >> more from mohamed, we have some time left but more from ray dalio on his investment thesis, the short version, those who forget history are too madoomed repeat it.

>> i don't -- i think so many people overreact. they see things in a short-term way. they're up against it. if it didn't happen in your life before, then you're not paying attention. but almost all important events never happened in your life before. so i made up for a lifetime, a monetary system breakdown. 1971, it never happened before. this thing didn't happen before. so i think it's -- when i'm looking at it, i think these things sort of keep happening over and over again. and then i have this temporary plate and then i have these rules, if this happens, that happens probably because it's all happened before. >> that was ray dalio talking

about his investment pieces. let's get down to the new york stock exchange. jim cramer joins us now. jim, you've been listening to a bit of this conversation. where are you on qe3? we haven't talked about that lately. >> i think qe3 is an answer to the gridlock in washington. it's an answer to the fact that investment is going to fall off dramatically if washington isn't resolved and it forces money into the stock market. ray, this interview is fabulous. i think he's the best. i also found more hope in his interview than i thought. i'm going to take the other side. if he has a lost decade in europe, if he has the southern rim in charge, i say they're not going to be competitive versus the united states, that's major. we are taking control, again, of world innovation and world business. europe doesn't sound important to me. >> jim, if bernanke gets fired and we talked about this around the table, as well, today, how does the market take that? >> bernanke is the savior of the

market. bernanke and the media, bernanke caused the bottom, the generational bottom with a "60 minutes" interview that said we're not going to power any bank's failure. ever since then, he has back stopped the u.s. economy, back stopped the banking system and i think he's a voice of tremendous reason. he's not a self-promoter. he's a man of plain english. he wants to put people back to work. and if that's bad, well, it's not the american way. you want to put people back to work. >> i guess john taylor made the point that the more you try to put people back to work with some of this stuff, you more you keep high unemployment levels. he actually said that. i don't know if you actually saw him say that. >> i'm meeting rosswell this morning. there they're saying, listen, because of washington, our business is going to turn down dramatically. i don't know what's the counter balancing force to ssequestrati. what's the counter balancing force? the only calibrating force i see is bernanke.

i don't know who is doing anything right in washington. >> jim, thank you very much. we will see you in just a few moments. >> great interview. great interview. >> appreciate that, jim. see you in a little bit. >> when we come back, we have some parting shots of our guest host today, pimco's mohamed el-erian. monday, uncertainty for households and businesses. the disrupters, start ups that are changing the world of technology. and education nation. an nbc special on fixing the nation's struggling schools. for the latest in market moving stories and interviews, don't miss "squawk box." tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong.

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tdd#: 1-800-345-2550 call 1-866-506-9616 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today. the stock of the day, achel. we've been watching the stores this morning. normally we would, you know, reserve going time zone to time zone for, like, new year's eve, fireworks, something, but in this case, we're doing it for apple because they're selling a stupid new phone in different

stores. so we're actually showing the sun move across the map where stores are opening up to sell this phone. >> and people are waiting in line for days. >> for the iphone 6, do you think we could do the whole show on a plane, we could go from time zone to time zone? >> probably not. it's like qe3. would the rewards be worth it? >> correct. i'll leave it there. >> "squawk box's" book, the book is the center for those who want to understand the modern world of investing. mohammed is our guest host today and here is the actual award. >> thank you very much. thanks a lot. >> we have people who have been writing in who wanted to hear some questions from you. doug cass sent in a great

question. one of them is what less than obvious signs should investors look at that would signal substantial increases in core inflation if you're waiting for this to come up? >> so look at the break evens. >> now he thinks we're going to take requests. ten questions a day. i don't take requests, doug. >> break evens are moving quickly. look at where unemployment is becoming more structure. our own feeling is that we are moving into the era of higher and stable inflation. we've spent 99.9% of the show on what investors should do. at some point, we need to spend some time on how they do it. because if you believe in all these changes going on in china, in europe, in the u.s., the how will become as important as the what. that's about what benchmark people pursue, that's about how risk is managed, that's about expectations. the how is a big issue looking forward. >> we want to thank you very much for being with us today.