good morning, everybody. i don't know what's wrong with october 15th. ides of october, we'll take about it. the most money any japanese firm has ever paid for an overseas take over. david faber first broke the details last week. he'll join us in the next hour. and citigroup leads the earnings parade. numbers due at about 8:00 a.m. eastern time. the banking giant is expected to earn 96 crepts is share on revenue of $18.4 billion. as always, well bring you the results and instant analysis. both of these stories could be keys to the broader markets today. stocks are coming off their worst week since early june. it's been four months since we've seen a week like we saw last week. it was bad across the board for the dow, the s&p and for the nasdaq, but many on wall street

are buzzing for a bullish story which suggests the dow could soar past all time highs. argues stocks are healthier today. our what's working now series continues. in just a few minutes, we have mark mobius joining us with his take on the emerging markets. he travels world looking for the best bets. and at 6:30, the ceo of rbc wealth management, john taft. at 8:00, we'll turn to the fixed income markets with jim r reynolds. plus neel kashkari will be offering his stock selections, as well. and this morning we are going back to school. this is the official kickoff of the squawk endowment. we'll welcome money managers from five top universities. first up this morning, we have

notre dame. unbelievable with football, too. he we won't be talking football, we'll talking stocks. but still undefeated. later this week, we'll also hear from northwestern, the university of texas, university of michigan and stanford. first, though, joe has the top headlines. >> you know in the panic of 1907? >> 1907? >> did start in 1907. that's true. in october. do you know 1929, do you know when the first -- >> i know that was october. >> black thursday, october 24th. black monday, october 2th. black tuesday, october 29th. >> that's why we fear the ides of october because we're getting in to scary sessions? >> mini crash in 97 ta'97, octo 27th. i just -- if you've been a

stockbroker, october is just -- do we know for sure that the 15th is called the ides? >> i know it's march, and -- >> other times it's the 13th or 14th. not necessarily -- >> we would be going into this for the first time because the 139, 14 13th, 14th, 15th, we wrap it up in one day. >> but i don't think there has ever been a big stock market selloff in october of an election year. and especially -- i'm not sure. but especially it would seem unlikely with the fed in the position it's in and the rest -- >> qe infinity. >> right. but then you wonder if something were to start unraveling, i don't know if that would happen now because europe we've been dealing with so long, but do they hand the emergency -- to they have anything left in a big

way? >> my guess is they could coordinate with some of the other central banks. >> you mentioned notre dame. that was dicey there at the end. >> and who else won? >> yeah, i saw. >> rutgers. undefeated. >> that was touch and go for a while, too. >> it was, but in the end -- >> and we have stanford and texas. texas played oklahoma. did you see that score? let's get to -- we knew most of this i think from david faber. softbank's founder and dan hesse announced the deal this morning in tokyo. the japanese mobile operator will buy up to 70% of the third largest u.s. carrier. about $20.1 billion and softbank will get access to a u.s. market that still shows growth compared to japan's market which is stagnating. meantime sprint will get the

fire power to buy competitors and to build out its 4 g network. meanwhile a new poll finds economists forecast only tepid growth. unemployment seen back above 8% for the first half of 2013. good news comes in the quarterly survey by the national association for business economists and that is the housing market is recovering faster than expected those polls say the economy likely won't fall off the fiscal cliff. and nabe's vice president will join us along with steve liesman at 7:30 eastern. at 8:30, september retail sales and the october empire state survey. so we'll see how business conditions are around here. and then at 10:00, we have business inventories and earnings season is in full swing this week. profits of s&p 500 comes are seen dropping 3% this quarter year over year. that would be first decline that

we've seen in three years. 6% of the s&p already reported. 59% of those companies topped expectations. that's less than the average beat of two thirds. half the companies are beaten on revenue while a quarter have missed profit forecasts. >> we got 80 s&p 500 companies reporting this week, a dozen dow components. so get ready. is your chair shorter today? because i feel taller than you and that's not the case. >> do you have your hemorrhoid pillow? >> i always sit on that. >> mac, what's -- >> now i'm going to have you bugged out. >> i don't like being -- how is that? >> there you go. now you're back in our normal positions. >> i don't like talking to mr. potter like -- i hate that. >> i don't like feeling like i'm taller than you. that's bizarre. >> the man should -- well, i don't want to go there.

if women are tall, that's fine. nothing wrong with short people. >> did you see the guy who jumped there the space -- >> i was doing something. i was aware of it because of the twitter, people twitting like crazy. i was swimming. people were into that. >> i didn't think i would be mr. to it. but it was on tv and i just got caught into it, but i was complaining the whole way and when when he -- >> couldn't he have waited pour more seconds to parachute? he can at any tididn't break th. >> but think about how you're spinning that whole time and trying to keep consciousness. crazy. >> i saw his family cheering and

i thought, oh, oh, my gosh, if this were your son -- >> if you were single and went to a bar, it might be something you can use. not something you hear every day. i just broke the speed of sound. >> i was watching the thing as he dropped. i didn't watch the post coverage. >> does a body make a sonic boom? >> i don't know. >> did you see this painting that was sold? how fast -- let's see. 833.9 miles an hour. >> that is faster than the speed of sound, but what i was watching on the screen did not show that it got that high. >> really? >> i just watched on discovery, the quick news drop. >> discovery had the big h-- moe importantly, the third season of walking dead started last night. >> which our director stayed up late for. and so he is the walking dead today. be careful what you do. >> how would that be any different? >> you love paul and you know

it. >> he's probably happy that -- you know, the bengals, it's not always good to receive. sometimes it's nice to give. isn't it? and cleveland was 0-5 and you don't want a team to -- somebody's got to lose eventually. and if the bengals feel, you know, nice enough to -- so now cleveland is 1-5. but the whole cincinnati connection lately has -- >> been going the wrong way for you. >> well, yeah. jeter. >> rough weekend for yankees fans. broken ankle. >> that would hurt, wouldn't it? >> he doesn't have to have surgery, but i think he'll be out for at least three months. >> i was reading about pete rose talking about how unlikely in his view it was that jeter breaks the record of whatever. and he said plus he'd have to get 200 a year hits for the next three or four year, plus he has to stay healthy. and it was just weird that he said that last week. a jinx. take it back. >> let's get to some of our

global markets news. >> it is the ides of october. >> well, some people say it's a scary time. that's not what barons cover story says. if you're watching the future boards, there are a lot of green arrows. and if you're looking to make money in all this, investing globally might be the answer. joining us from singapore is mark mobius, templeton emerging markets group executive chairman and thank you for being here. i know we'll be talking about the emerging markets, but before we get to that, i'd like you to weigh in on the story saying is to bes stocks are at great levels, could be soaring from here. do you buy into any of that? >> we're definitely in a bull market. not only in the uts, but also in emerging markets. and in emerging markets, the valuations are cheaper than what you have in the u.s. so putting this all together and of course looking at the way money supply has been

increasing, i think the bull market will continue. and now we'll probably see emerging markets outperform the u.s. market. this last year, emerging markets have underperformed. now i think they'll outperform. >> it's interesting that you point to the money supply and what the fed has been doing with qe-3 as the reasoning. part of the barons story has to do with where price and earnings are, but you think this is more a story of what's been happening at the fed's level? >> yes. they're the leader globally. they have sort of set the points that everybody else follows, including the europeans, the japanese, chinese, so forth. so everybody of course is competing to devalue their currencies as much as possible without creating big cries cease. >> wae want to talk with b. where you think the best places are to put your money. south africa you think gets overlooked. what do you see there?

>> no question the mining sector is in trouble because of the strikes that we've seen. but their consumer sector stocks, particularly those in sub saharan africa, a lot of these companies moved up north and have started selling to the rest of africa. and that is quite an interesting story. so that's the place where i would think you want to be. not to dump the mining stocks because they may be able to work out the mining stocks. >> i didn't realize south kaafra had the 18th largest exchange in the world. a very liquid market. >> very liquid market, very deep market, it's a coulddiverse mar. you have consumer stocks, department store, mining stocks. which is why it's a great entry point to the rest of africa.

we're in nigeria and kenya and other place, but you run into liquidity issues in some of those markets. >> also when you start talking about commodities and how important they are to south africa's economy, you say if the global economy improves, that could be a real boost to the south africa market. how likely is a situation like that? >> currently what's happened is the chinese have slowed down in their purchases of commodities. but they continue to purchase. so i think we have to be cautious on some of the commodities, but things like oil of course is going to continue trending upwards. i would say nickel, platinum, going forward probably copper will have a nice run, as well. construction will continue. construction will recover globally in china and india and other places.

>> what do you think about chinese stocks? >> we're cautious on the asian market, but we are going in because we think the prices are getting attractive. the nice thing is that it has a lot of consumer stocks that you can't find in the a share or the b market or red chips. these are the ones that foreigners can buy. we've just started an a share if you said. investor will be back, but it will take time. >> we spoke with jim chanos and he looks at the a shares and gets very concerned because as you mentioned, it's not domestic investors, it's foreign investors putting money in and a lot of time having trouble getting any sort of returns on it. what makes you think this is a

different time? >> there are some stocks in china where the margins have been squeezed. there is consolidation taking place. there will be a lot of losers and a few winners. so what we have to do is pick those that are the consolidators, in other words, who will be able to at that time biggest market shares in various sectors of the economy. so in that sense, you have to be really careful and of course you've seen what's happened to the chinese stocks listed in the u.s. but again, there will be some diamonds among the rocks that we have there. so it's a matter of picking stocks. >> when you look at the bric nas nations, do you see them as one group that move this is tandem or can you break out brazil from russia, from india? >> you it definitely have to break it out. india, china, russia, brazil, all very different. the concept, bric concept was very clever because it gives customers who buys funds a good

way to conceptualize emerging markets. >> you mentioned brazil is a place that you're still pretty concerned about? >> i like brazil because it's such a varied economy. you have very active consumer market. you have commodities. bothing ing are growing. the problem in brazil is the currency. it's too expensive. they're trying to do something about it. they want to print, but they went to hyperinflation in the early 90s that they don't want to move the way the u.s. moves. which is why they complain about the currency war. but that's the only negative i would say. otherwise it's very exciting. the other thing we have to watch of course government intervention in the economy.

as you know, they've been imposed upon by the government to do social project which is may not be profitable. so that's something we have to be cautious about. >> we're always looking for new i see you've come up with one. can you explain it to us? >> actually, i didn't come up with that it was some broker, i don't know which one, but bric was a great concept, forget about about all the other acronyms. they're not worth it. too confusing. >> civets was what it was. >> sounds groess. >> how they put it together, i

don't understand it at all. frontier funds are the way to go in my opinion. you have 50 other countries, as well, you can choose from. >> i think you have to shave your whole body to get civets. no way to wash all your clothes. >> mark, thank you very much for joining us and giving us all the wisdom this morning. >> there's like four months where it's the 15th. and october is one of them, wheres it is the ides. i got some other things that i'm looking at here. do you know when the last time south carolina was in the top five? 28 years. i mean, south carolina is not

thought of as a football powerhouse. they're number three now and they play florida this saturday. lets's check on the markets. last week was rough, but it looks good today. up 33 points. beware anything that ends in teen. anything in october in fact for the stock market. and then you have barons piling on being bullish. that's the last thing we need. there's what's happening in

asia. we seem to be getting kind of immune to or desensitize to paying almost $4 a gallon. the ten year hasn't moved aunt don't expect is to. why the euro is 1.30 con founds a people. and finally gold, i saw an article about how much gold has really advanced.people. and finally gold, i saw an article about how much gold has really advanced. you can blame it on whatever you want, but we have had a very accommodative fed and central bankers around the world. and what did bernanke wants people to have stronger currencies? >> did he specifically say stronger currencies? he said the emerging markets, there's not a strong argument to say they're suffering more than

they have benefitted from the global economy getting a boost from this. >> still to come this morning, mark mobius travels the world and you just heard from him. okay. our next guest uses a mid western senseability. the ceo of rbc wealth management, john taft. and i think he is related to all the tafts. >> great grandson. >> you yeah, to all the tafts. there are eight presidents from ohio. an important state. yeah, he joins from us minneapolis, though. first, though, arlen specter died. the 82-year-old switched parties in 2009 and his senate career then ended when he lost the democratic primary as you might recall.

in our headlines this morning, microsoft announcing that xbox music will be available for its game consoles starting tomorrow. it's a digital music service that will be expanded to windows software based computers and tablets later this month and phones shortly after that.

>> suppocardinals took game one the nlcs. beltran hit a homer to help st. louis. the final scorecard natural cardinals 6, san francisco 437 game two tuesday night. i will say on the record i don't like the giants because of what happened to the reds. as it was happening, i didn't like any of the players, i didn't like what her doing. so i'll have to say i'm -- >> going for st. louis. >> draw. sanchez shut down the yankees line up. and football news, aaron rodgers threw a career-high franchise record six touchdown passes to lead green bay to a 42-24 win

over houston. and the packer, that was the first -- only the falcons are still unbeaten. a field got lifted the falcons to the win over oakland. the falcons are the only unbeaten team left in the nfl. and seattle beat new england. that's weird. with just more than a minute left on the clock. russell wilson connected with sydney rod on a 46 yard touchdown pass to beat the patriots 24-23. the giant as intercepted alex smith three times in a rout over san francisco.s intercepted ale smith three times in a rout over san francisco. they were doing pretty well before that. eli manning threw for 193 yards and a score. bradshaw rushed for 116 yards and a touchdown jets looked like

a powerhouse. happy for woody. in college sports news, first bcs rankings are out. alabama is still on top. she look tough. crimson tide followed by florida, oregon at number three, kansas city and notre dame at four and five. you but you got florida and south carolina in there, too. and of interest to becky, number 20 rutgers beat syracuse 23-15. i think cincinnati also won and are ranked now. p. >> of course you also had notre dame. >> we'll talk to the guy from the endowment at notre dame. this is the first time i'm not old enough to know what google is talking about. have you ever heard of this guy,

sl nemo and slumberland? like early 1900s when he put together a comic strip which was a prelude to walt disney. just because of high quality cartoon strip. and you have to be really old to have seen this. but google devoted a lot of time to it. let's get to the national weather forecast. danielle banks joins us from the weather channel. >> good morning. hope you're having a great monday. if you're feeling like a sleepy head and finding it's harder to beat that alarm clock, here's why. the rain always makes me tired and you can see who getting clobbered by it. it's shifted over to western north and south carolina and still even our weather channel studios here in atlanta, we can hear the thunder rumbling just a couple of hours ago. so a slow moving thing. some of you having to deal with

it on the way into the office. we also zero in on a few showers up into northern michigan, a little bit of wet snow out there. and then a few spotty showers across the northeast and also over into the northwest, another spot where we could see some travel delays before the day is out. back to you. >> thank you. appreciate it. coming up, we have the great grandson of president taft, his take on the barons story and whether stocks are toward soar.

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where did you get that sweater vest? your ford dealer. there's a cover story that suggests the dow could soar past

all time highs and stocks are healthier today based on profit and cash levels. joining us is john taft, rbc wealth management. he manages over $225 billion and he is the great grandson of president taft and the author of steward ship, lessons learned from the lost culture of wall street. john, thank you for joining us. we've been talking about stocks and i know that you've been of the opinion for a while that maybe investors were too overall low indicated when it came to cash and bonds. and there are risks in those arenas, too. >> the problem the private investor has had is the clouds of uncertainty over the market. coming into the 2012 season, we talked about europe, the pace of growth and china. and those are been replaced by

domestic concerns, election and fiscal cliff and deficit. in althougl there are more he w vantds in the room than they were earlier in the rear. and the problem for the individual investor is when do you feel confidence enough about how the market is going to change your allocations. most have been overall low indicated to cash and bonds and underallocated to equities. we've been encouraging our clients to get back to at least a benchmark waiting. weighting which is 55% equities. warren buffett likes to talk about waiting for the fast pitch. is this the time to take a couple of pitches or should investors having missed the rally we've had this year maybe move back to benchmark weighting? that's the dilemma for the

private client. why don't we let some uncertainty play out and if you miss some points, that's fine for most private investors. >> what do you is the biggest issue, maybe the biggest elephant that needs to be resolved before you would say go ahead and weigh back in? because if some of the issues start to get resolution, there are a lot of people who think the market could take off rather quickly. >> and i'm someone who does believe that. i don't think there's any question that the u.s. fiscal deficit problem and related to the debt ceiling issue congress will have to deal with right after the first of of the year is the single biggest issue weighing on the markets right now. there are any number of plans out there that would address the problem constructively. the one you hear about most often is simpson bowles or bowles bowles-simpson. i believe if the congress were

to pass something that resembled simpson-bowles, you would see the market take off and move thousands of points in a relatively short period of time. >> to solve the fiscal cliff, if romney got elected, wouldn't they just extend the bush tax cuts and then work on a couple other things? the reason that it won't be solved right now is because we kc can't get a tax deal done because the democrats are insisting they expire for over 250,000. i mean, why wouldn't -- if you want to solve the fiscal cliff, if you elected romney, you'll solve the fiscal cliff because the house will probably still be republicans. so he passes it, they sign it and the fiscal cliff is finished. p there is no fiscal cliff. >> you're trying to get me to invoke my republican heritage here? >> i know, i'm taking a big -- sticking my neck out trying to get a taft to say, yeah, that might work. but i was thinking about that this morning. the fiscal cliff, the reason that at least the tax part of

it, that's one of the reasons, right? be a man. step up to the plate. >> here's the issue. it doesn't matter all that much whether obama or romney is elected president. what matters is how whoever is president engages with congress to address that issue and others facing the country. we've done this -- >> congress has got a bunch of tea party guys in the house and they'll continue to have a republican majority most likely in the house. so dealing with the house would be easier if you're in the same party, wouldn't it? >> those are the same people, joe, that refuse to address revenue increases as part of a solution to the long term public financing -- >> they were sent to congress for a reason. their constituents send them there with that in mind. if you're at 25% government

spending, there could be something to be said for let's work on spending. i don't disparage them because they're doing what they were elected to do. do you? >> i don't disparage them either, but there is no solution to the fiscal problems the united states of america is facing without at least some contribution from increased revenues. the math doesn't work. so you have to have compromising for forward and that's what we need to see. >> under the current tax system, we had 18% and 19% revenue in 2006 and 2007 under the current tax structure. >> okay. what's the point? >> so you don't necessarily need to raise taxes to get back to that revenue level. reason we're at 15% is because of the recession. >> joe, there is no way to balance -- >> are you living in minnesota now and all this is seeping in to your -- >> what was that, will there is no way for to what? >> there is no way to close the

gap purely with spending cuts. you have to address entitlements and you have to raise revenues. and that's what we need congress to do. the problem is that nobody's doing it. i've been going around the country talking about my book which by the way is about steward ship, which means manning up and taking responsibility for fixing today's problems for the sake of future generations. we haven't done that. >> if both cutting spending and raising taxes are both a negative for the economy and we're in a 1% growth economy, and you have to pick and choose between what you're going to do first instead of a double wlam any of austerity where you raise taxes and cut spending, if you're at 25% of gdp in terms of spending, why wouldn't you just focus on spending first and then try to figure out the other side later? >> all right. the worst thing you can do in this fragile economy, and you've had plenty of guests talk about this, is to cut spending in the near term and hang on to an

economy that's probably going to grow less than 2% next year. >> you you want to do both. you want to cut spending and raise taxes. >> it's a matter of timing. you have to cut spending from entitlements, you cut it down the road. yes, you extend the tax cuts. but eventually, joe, i'm sorry, i'm a good republican, but the math dictates a mix of spending and revenue increases. >> if i was at 25%, i'd work on that first. >> i've disappointed you, i can tell. you expected a more robust republican response. >> it just seems obvious to me. i always hear balance. as long as you compromise, it's balanced. but if i was at 25% of government spending, i'd work on that before i decided to -- >> you can did both at the same time. that's what bowles-simpson says,

too. >> it's the water up there in minnesota. you need to get ba down r. to o. although i'm worried about ohio, too. >> what the market wants to see is a plan. you pass a credible plan and u8 s you will see a bull market in u.s. geti iequities. >> john, i'm with you. thank you even for joining us. >> comments or questions, e-mail us. coming up, we're ready to hand out a blue chip book award. today's recipient nominated himself, but then he deserved one. he sent me a handwritten note. we welcome robert samuelson and invite him to join the exclusive "squawk box" book club. so -- tell me again what happened.

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time to present another "squawk box" book award. it goes to the great inflation and its aftermath. the back outlines the greatest peace time inflationary spike in our history. following some of the greatest prosperity that we've seen. and the outcomes continue to affect our economy. bob sam auelson, welcome.

>> thanks for having me. >> something led up to the inflationary spiral that was hard to tame. that ushered in a 20 year period of prosperity where the stock market went in 700 or 800 up to maybe we'll get to 14,000 again. unfortunately that complacency put us in our current situation. >> yeah, i think when you look back, and the reason i wrote this book, i think people have really forgotten the significance of inflation. we went from 1% to 2%, essentially no inflation in 1960, and by the early '80s, we're in double digits. 13%, 14%. and we had the same sort of attitude, people had the same sort of attitude then as they have now about the future. they're completely tdemoralized the government could not make

difficult choices and inflation was out of control and nobody could bring it back under control. v volcker and reagan essentially put an end to that by putting the economy through a ringer. that the point it was the worst recession since world war ii. unemployme unemployment peaked at 10.8% and people did not imagine that was possible just as today we didn't imagine the financial crisis was possible or the great recession was possible. >> and people don't remember when inflation gets that high, you think, wow, the economy must really be growing. but it's hand-in-hand with no growth in the economy. and stagflation is one of the worse things, probably worse than what we're feeling right now. >> you would get to inflation, it would be unacceptable, so the fed would put on the brakes and the unemployment rate would go up and then he would panic about

the unemployment rate go up and then they would ease up and you would get the inflation their spiral getting worse. we went through it for about 10 or 15 years before they stamped on the brakes and the message was we are not going to allow this to happen again. and inflation expectations changed. and that was what was critical. >> we talk about how the fed has a dual mandate, they're supposed to look at inflation and what's been happening in terms of -- i'm sorry, unemployment and inflation with the dual mandate. we've talked to greenspan and he says if you keep your eye on what's happening with inflation, the rest of if takes care of itself. >> i think in the long run, meaning four or five, six, ten years, what greenspan says is true. in the short run, there are tradeoffs between higher inflation and unemployment. and the proof of the truth of this is that in the 1970s when

we had higher inflation in the 60s, we also had higher unemployment. and if we had continued on the same path, that would have been true, higher unemployment in the 1980s than we had in the 1970s even though we had higher inflation. so in the long run, if you don't keep inflation down, you'll suffer high unemployment. >> leading up to the '70s, i don't remember the fed -- i wasn't paying attention obviously. i was there for the malaise that you're talking about and for the mourning that came afterwards. and i remember it well. how quickly it switched was beyond belief. and i use the hostages getting out almost at a metaphor. it happened on january 20th. it was bizarre. but the fed wasn't as provely gat leading up to the '70s and '80s. it seems like we'd be setting up a much worse situation given how much easing there's been this

time around. >> the money is out there, but it's not being used. and the question becomes if the economy begins to revive more quickly than people expect, whether we get inflation. i think as he was telling camer unappreciated danger is that a lot of capacity has been retired in the last four or five different industries so if the economy begins to grow faster, we may hit the inflationary bottlenecks sooner than people expect. >> in the 20 years after the great bourque that they did for a while we weren't taking it for granted. when did we become complacent setting up this next cycle, in the mid '90s? >> i think it was a gradual process. after volcker and reagan suppressed inflation it was skepticism if this would last. we'd been through the cycles for 15 years and the downturns had

never worked to suppress inflation but as the economy continues to expand, as you got these huge asset run-ups in stocks and housing and we had moderate and infrequent recessions, remember the great moderation. people began to assume the world was less risky than it had been. >> when did it turn to rewarded for what volcker did versus living beyond our means. >> people assumed it was less risky they started becoming more risky so you had the perverse paradox the more people believed the world was less risky, the riskier behavior they engaged in and the culmination was the financial crisis. >> so you're still going to have to write the sequel, we don't know yet, do we? >> no, we don't. >> are you worried? >> i'm always worried. >> here is this is your first book award, first one is going

to be the most special probably. >> thank you very much. >> the second one hopefully will still be, you know, a little forward to buy your book. might take a wheelbarrow full of money to buy your second book. >> my wife more or less says we shouldn't write any more books so i'm not sure there will be a sequel. >> thank you, very appreciate it. still to come, david faber will join us with a deal to start the week, softbank and sprint. and we'll talk about why florida says it's becoming home to more and more tech companies. later, what's working now continues with pimco's head of global equities, will talk to us about three stocks he is buying today, don't this neel kashkari at 8:15 eastern time. stick around. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

between listening to the numbers... ...and listening to your instinct duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

welcome back, everybody. blackrock's ceo larry fink is making comments saying investors should brace for three or four months of jittering markets, citing uncertainty in spain and looming fiscal cliff in the united states threatening our economy. he is still bullish on u.s. equities but warns the stock market could lose 5% to 10% of correction in the final months of the year, adding credence to your october concerns in. >> no, this time bernanke has

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it's a merger monday alert. [ bell ringing ] the latest breaking details on the biggest ever overseas deal and what it means for your investments. on the must be oney in the e state, florida governor rick scott is our guest host, talking about how his swing state could hold the key to the election outcome. the second hour of "squawk box" starts right now. ♪ >> good monday morning, everybody. welcome back to "squawk box" here on cnbc.

i'm becky quick along with joe kernen. andrew ross sorkin is on assignment today. in the squawk green room getting ready for his guest host appearance is governor rick scott of florida. he'll join us in about 15 minutes. at 7:30 eastern time a first on cnbc interview with the incoming president of the national association for business economics, he'll be speaking to "squawk" about the group's latest quarterly economic survey. at 7:40 eastern time could the sunshine state become the next silicon state? the president of the university of florida joins us about the efforts to move tech companies to florida and 8:40 we quick off our weekly series, university of notre dame's scott malpass will join us to tell us what it takes to keep the fighting irish fighting. the s&p 500 futures up by 4.7 points, this is coming after the markets turned in their worst performance in four months last

week but again grown arrow this is morning. some of our other stories making headline this is morning, fed chairman ben bernanke defending the fed's latest round of quantitative easing. in a tokyo speech he fended off criticism from foreign leaders that it is hurting emerging economies. and microsoft is announcing a new perk for buyers for its new tablet computer offering a free on demand music service calls xbox music which lets users stream music for free as long as they listen to an advertisement every 15 minutes. that service is available on other microsoft devices but it is only free on the tablet. and the official figures won't be announced until tomorrow but it appears that social security recipients will get a 1% to 2% raise in 2013, that amounts to an average raise between $12 and $24 a month. the dow futures up by about 33 points. time for an update on the

overseas markets. kelly evans joins us from london. i don't know where voss but "60 minutes" was all about 007. >> you know where ross was? he was at spy camp over the weekend, it was this sort of trip where he went and saw or did something related to the james bond movie but he was very much involved. he's really excited. >> was he teaching or was he a student? >> no, i think he was a student, because he was a little, i think it wore him down a little bit today. i need to get the details, but people are pretty excited over here. >> i thought he might have been conducting the classes. >> he probably could he knows more about the movies and after this weekend probably more about the stunts involve, maybe even daniel craig himself. >> they did cop to it last night, they were worried, took

them two years to convince daniel craig to take it because it would change him. >> why? that's the best role. >> i've seen the guy in person and this is what they worried about, like 58. 007 is not 5'8". >> they used to make the sets smaller. >> but sean connery, they didn't think he was going to be good. sorry kelly, but we digress. >> no problem. what's happening in markets, what i'm focused on is the nobel prize in economics is going to be awarded any second. let me get this done and you guys can move on. the euro stoxx is up 0.6%. we've seen strong trading in europe. the ibex 35 in spain, up 0.3%, we were up closer to 1% earlier this morning so spain is giving up some of its gains. the cac 1.3%, xetra dax 0.77%.

better same-store sales a month ago they reported weaker sales that put a whole series of strength of the retail sector. in the bond space it's interesting, the ten-year in greece among those rallying today amid reports there's going to be some extension of its talks, 17.4%, that's actually one of the lowest yields we've seen since its restructuring. in greece everything is relative. ten-year in portugal has seen yield move up a little bit. 8.1%, portugal is unveiling what's been called an extremely harsh budget because of the tax hikes, that equate for middle income earners, two to three months worth of pay. there have been protests, expect more of that to come. italy 4.95%, rallying below the

5% level and the bund in germany just for comparison sake is below 1.5%. that's it. i'll send it back over to you guys. i'm waiting to see who wins the nobel prize in science. probably not the eurozone. >> we have it and once again liesman not, did not win. again, which is -- >> not fair. >> who are these people? alfred roth and lloyd shapely? we're just getting the first headlines on this. >> we'll get more details on that. liesman probably should have won the last six. >> sorry, alvin roth and lloyd

shapely. >> soft bank's billionaire founder and sprint's founder announcing a deal. the japanese mobile operator will buy up to 70% of the third largest u.s. carrier, it will cost it about $20.1 billion. softbank will get access to a market that's still growing, unlike japan's, which is stagnating. meantime sprint will get the cash and some fire power to build out its 4g network and maybe buy some competitors and david faber will join us in just a minute to discuss all of that. still to come we have more as joe just mentioned on the deal of the morning, softbank buying a stake in sprint. and governor rick scott of florida from the economy to the health care to the election we'll touch on all of it with the man who runs the sunshine state. governor, good morning. comments? questions?

send them to @squawkcnbc on twitter. follow the show, and look for updates from andrew, becky, joe and the "squawk" staff. "squawk box" on cnbc and on twitter.

let's welcome our guest hosts who state may hold the key

to the 2012 presidential election. governor florida rick scott joins us for the hour. governor, good to see you. let's start with some of the polls we've seen in florida. i've seen some weird things from some pollsters. i saw one of the local polls by one of the papers down there. >> "the herald times." >> was that an outlier, seven points, eight points for romney? >> that was seven points up for romney. this election is going to be just like 2010, all about jobs. whoever the floridians believe is going to get the economy going that's who they're voting for. that's how i won. i think romney right now, as you could see in the debate. >> is he leading in florida? >> yes. >> by? >> i'd be shocked if it's -- >> less than seven but more than one. >> it's going to be just like my race. people, they either want a job or they want to get it, they need a job or want to keep their job. look, we've done really well,

the biggest drop in unemployment, consumer confidence up five-year high, unemployment has dropped, the number of people in unemployment dropped 40%, tourism is up, 90 million people come in tourism, exports are up, home prices are up, construction is up, so we're headed in the right direction but it's still about jobs. >> isn't that a reason for people to feel good about how things are going thinking okay we'll stick with what's going to this point and granted florida may be in a different position than the rest of the country. >> i think partially it is. i talked about it, ran a few ads. seven steps to 7,000 jobs. it's all about the economy. people can see the difference between what the federal government is doing. we cut property taxes, business taxes, with he cut 2,000 regulations. the federal government highest group of tax rates, more regulation. they're not frustrated with florida's regulations. they're frustrated with the federal government. that's what they see. >> in ohio, you're the florida

governor but the jobs picture in ohio is better, too, but some of that is because of the auto bailout at least that's what they're saying. >> and oil, they got helped with new oil, too. >> you would think maybe that's why if romney is still down which most of the polls say in ohio it's gotten closer, but that's what becky is alluding to, things might be going better there, so that's detrimental to the challengers' effort. >> they have a republican governor and -- >> he's doing some tough stuff, too. >> he's doing the right things. republican governors the states with republican governors they've done better than states without republican governors as far as unemployment's drop, job growth. august, texas beat us, we're number two in job growth, 28,000 private sector jobs that's big, 28,000 jobs in one month. >> if you could let's say that david axelrod calls you and says i wish we had more jobs so that

we could have an easier time with this election. give me three things that we should have done in the federal government that florida did. what would those be? >> at the federal level, cut taxes. >> we just got a race, that we need more balance. we need more revenue. >> first we cut property taxes, hit the business tax for two-thirds companies paid with a business tax. i watched in with a deficit, balanced the budget and for the first time for two straight years we'll pay down budget. you do what you do in the business sector, you say how can i get more efficient? no one says, gosh, i want government to spend more money all the time. >> there's people that say that. >> they want to get more efficient. what we've done i got us way more efficient. we buy together now. we got rid of employees that weren't as productive. >> what do you mean by together? >> we have a $69 billion budget.

we still didn't do enough, we're doing more, of buying our products together. in business do you that. it's no fun. >> bulk discounts that way? >> yeah and pick one company over another one, nobody likes doing that. you have to do it in business because your customer is not willing to pay more. so the federal government cut corporate taxes. you got to downsize the size of government, balance the budget, quit scaring people their taxes will have to go up, streamline the permitting process. today in florida it takes i think 46 days to get an environmental permit. it takes two days to get a business permit to go into business. so we have, we are doing -- >> how long was it before? >> oh, gosh, i mean there were permits that took 20 years in the environmental permits. >> how many did you give us, okay, you did that, what else the three things? >> taxes, regulation, permitting process. let people get into business. >> is it hard to get permits in the federal government right

now? >> have you tried to drill lately? >> no, not teeth. >> yeah, it takes a while. what people complain about the federal government is there's nobody to talk to, and there's no positive attitude about business and in our state, you can call me. it's 850-488-5603. call me. i want your business in florida. 850-488-5603, come to florida. >> people say wow, companies with record profits, stock market is almost doubled, it's just there might have been some negative rhetoric but a lot of the business people deserve the negative rhetoric after what they did during the financial crisis. you're saying rhetoric matters? >> oh, yeah. >> really? >> maybe they shouldn't have made fannie mae and freddie mac so easy to get loans. the government had something to do with that. i call on businesspeople, i promote business. you got to do the right things, follow the laws and follow the

rules and all those things but i want you in florida. we've done six trade delegations, i've done panama for the canal because we've got 15 seaports, that's a big opportunity for us. i've done brazil our biggest trading partner, canada, another big trading partner, england, did the air show. we're the second biggest aviation aerospace in the country. >> you can criticize there haven't been a lot of significant substantial trade deals federally. >> look how long it took to get the free trade agreements with south korea and colombia. i'm going to colombia in december, our second biggest trading partner. >> i thought about you on this kevin warrish piece with scott davis about the retreat of globalization. >> and my thing with the natural gas. >> with the pipeline itself, but you know it seems like a good idea sometimes.

>> i hate defending it. >> keeping jobs here and not it -- there's times when i wish we could expect everyone else to be free traders and that we could keep a lot of our stuff here. i wish they'd have to do what we say, not what we do and we can't do that, can we? >> think about it, when you go to shop you don't say i'm going to pay more for an american product because our taxes are higher, we have more cost of regulation and permitting, more cost of litigation so we're pushing our consumers saying i'm going to buy on price so if other countries have lower taxes, regulation, permitting process, litigation, guess who is going to win? >> you could, if we get rid of some of that stuff, you could pay labor here a little bit -- we're never going to compete with labor with some of the countries in asia, obviously but if you got rid of some of the other stuff then you could afford to keep jobs here, and if you lowered the tax rate you could still pay guys here and

make it up the other way. >> our corporate tax issue we shouldn't tax on the profits of companies overseas. >> no one else does. >> you have $7.1 trillion sitting overseas. you the it back in our country. >> people would like us not to look at the labor competitive issue, just keep it here but our companies can't compete globally and lose in the global marketplace to foreign companies. >> it's not just labor. it's transportation cost. people like our rule of law. people want to do business in america. >> any rule of law is good. >> they like -- and they like in florida we have one of the l lowest crime rates in the country. >> they like butter beer. >> and they like all of our real estate. >> harry potter is there. >> you need to come to disney world and universal. >> you don't know how many ways i can get to an nbc plug. watch me.

butter beer at universal, $14 a glass. >> it's a lot of fun to go. >> harry potter is unbelievable. it's like going into the movie. >> i haven't been but i am a huge fan of the movie. >> we'll invite you down. >> you should come when i go. >> bring the kids. >> my kids, i've got a grandson and my daughter is using that as an excuse to go back. >> so you got married like a florida person, too. you don't look like a grandfather. >> i got married when i was 19. >> i probably shouldn't have said that. someone from the south, how's that? grandfather at 38. anyway, thanks, governor, we'll be back with you in a sec. . let's check on the markets, you see green arrows. last week was the market's worst performance in a few months but this morning the s&p up 4.7, dow futures up by 30 points. in europe there are green arrows as well, germany's dax is up by

55 points, the cac by 1.25% and ftse 0.5%. in asia overnight green arrows for the hang seng and nikkei up, and oil prices are still above $91 at $91.67, down 19 cents. the dollar this morning is a little stronger, at least against the yen. it is down against the euro and the swiss franc right now. the euro trading at $1.2972 and gold prices at $1,748.60 an ounce. come up, softbank and sprint. and where are the latest jobs? we'll get results from nabe's incoming president. bob...

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. now save 50% on banners.

welcome back to "squawk box." the green bay packers are sending a message they're still for real. aaron rodgers setting a career high and tying a franchise record with six touchdown passes. the packers rolling the texans

4 -24. texans had been undefeated until that point >> yes, so now only one left. the falcons. the neighboring state, the great state of georgia. >> our college teams are doing well. florida is number two in the bcs poll. >> florida and south carolina 3:30 on saturday. felix baumgartner became the first person to break the speed of sound in freefall. do you hear it in. >> no, you didn't see it. >> is there a sonic book. >> when you're the guy? >> when anything breaks the speed of sound. >> there are with jets. he's probably not big enough for that. >> no, but there's something he heard probably. he jumped from a special balloon 129,000 feet in the air and lived to talk about it, otherwise it wouldn't have been that significant if he just jumped. he fell 88.3 miles per hour --

no, 883 miles per hour. look at that. he fell -- oh -- >> it's wrong. >> he fell 883 miles an hour or mach 1.24. >> you have to break 690 for the speed of sound. >> it would have been pointless, we did point out he lived but it would have been pointless if he lived. anybody could do that. you don't even need the suit. you don't need the parachute. >> we're glad he's okay. we were watching closely. >> that's always an important detail. >> it was. >> that he is alive. >> and got up and celebrated at the end. up next, david faber has the latest details on the softbank/sprint/nextel deal. sprint stock is up on the incoming news and the group's

quarterly economic survey a first on cnbc interview. later citi earnings released at the top of the hour. we'll talk about the big banks and future of the financials with our guest jim reynolds of loop capital markets. the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. 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. one is for a clean, wedomestic energy future

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a little paul krugman. we're talking about nobel prizes. it says the nobel prize in economics was created in 1968, it is not like the other five and it says it's not technically a nobel prize because unlike the five others -- >> it's not formed in the same way. but that college of experts gets together and decides who has the best ideas that were out there. >> he didn't think it was real. he was right. he didn't think it was real. it's a merger monday. >> 15 days before halloween joe and i are arguing about nobel

prize. >> i was mad you were passed over again. >> i appreciate that. softbank is buying a stake in sprint/nextel for $20 billion. the japanese firm is designed to carve a lucrative opening in the u.s. for softbank. i think that alfred nobel's memory there should be a merger and acquisition reporting nobel prize which you would have won way before sorkin years ago. >> could i have won it twice? >> as far as i'm concerned you should have won for mci. >> 1986, yes. >> and what was your other big one? >> i've had a few. dow jones was big, fraud at worldcom. >> fraud at worldcom. so it's your body of work. >> thank you, joe. >> what about today? this is even more, adding to your body of work. >> we reported it yesterday and luckily got almost all of the

important details correct in fact all of the important details but we did get the announcement overnight, softbank investing $20 billion to take a 70% stake in sprint effectively take control of the third largest wireless provider in this country. it would be the largest single investment ever by a japanese company in a u.s. company. can't say acquisition because they're not acquiring all of it. if you're a current sprint shareholder you will have the opportunity to tender for $37 a share. you'll end up with some ownership of new sprint as well. the deal is complex. $12 billion is being used to buy those shares from current shareholders as i said at $7.30 a share. the company also, softbank is also going to be buying $8 billion in stock directly from sprint at $5.25 a share.

$about $3 billion will take place in a conversable bond offering at $5.25 a share but bringing $3 billion into sprint's coffers almost immediately, to roll out wireless services and dealing with various maturities and debt maturities and as i reported a number of times, its approach to clearwire which it owns 48% of. so a lot of money going into sprint. lot of money going to sprint sha shareholders. and it will require shareholder vote by the way, that was something one of the little betail b details would not require a shareholder vote. but of course the bigger question is, i mean this is almost a bet the company kind of deal for softbank. it is a large company but it is borrowing huge sums to get this done, and saying okay, we're going to plunk down $20 billion of our money because we believe the u.s. wireless market is growing faster than japan and we can take a lot of lessons learned in japan where we've

rolled out lte successfully and moved them to the u.s. market but you're still dealing with that duopoly of verizon and at&t. one would have to say it is a big bet for sure. usually rational people are the only ones who have access to that kind of capital so i'll assume the guy who runs softbank is a rational person >> they didn't let t-mobile happen because they wanted a certain amount. is three enough? why not sprint and t-mobile or something? is three enough? >> that's a really good question, joe. i don't know the answer, it's not t-mobile and at&t, we know that. as i reported last week, when these talks began originally, t-mobile was a part of them, and the hope on softbank's part at least was that in fact you could woo get a t-mobile/sprint/softbank deal and softbank would control because they need more heft to compete in the u.s. market. there is the possibility.

t-mobile pulled out because it was scared by the at&t deal, didn't feel like it could get trust approval but it would not be surprising to see this new co. which will have a publicly traded currency try to do deals down the road. it still trails at&t and verizon by a big margin. >> you're old enough but not everybody is old enough to remember why if someone puts you on old making a long distance call you were like, whoa! because it was like $40. i do not think of -- >> i remember my father used to yell all the time. >> i think of phone service as i need protection from, from anti-trust people. i just wish we had 99% coverage where you never had a dropped call and could you do as much as you wanted to do and the spectrum was opened up. i think that they're misguided. no? or i don't know. >> this is all about mobile, what they call mobile internet and the press release i thought that was interesting. they're not talking about phone calls as you know, joe. they're talking about all the

different things you're going to be able to do on your smartphone. >> that you need spectrum for, too. >> you do. >> that's why it stinks when you're on your phone a call is dropped on the west side highway. >> there's a broadcast spectrum that will come up at some point. the company would seem to be in a position to bid for that as well. >> okay, all right, faber, thank you. >> you're welcome. >> see you at 9:00 or beforehand. >> or before, whenever wau nyou, i'm here. i got here early. >> he was there for about a half hour before we could get the lights going. faber was there. this was a lights issue. economists foresee only tepid growth for the coming year with unemployment back over 8%, that's if they stop cooking the books. the first half of 2013 according to the latest nabe. i hope issa subpoenas you, senior economics reporter still no nobel prize, steve liesman. >> i have a couple other prizes.

>> do you. >> it's not like i need this one. >> do tell, do tell. >> was it tracy on "30 rock" won the egat, the emmy, the grammy, the oscar and the tony. >> you know who has done that, rita moreno from "sesame street." >> the great thing is there are possibilities in front of me. you come to work every day -- >> you may win an emmy for the thing did you last week. what would you win to are that in. >> i don't know if you win anything. you win pats on the bank from deficit hawks and you win razzes from people who don't think the deficit's that big a problem. >> we got to decide one of these days whether it is or isn't. >> i get great e-mails from warren mosley who says, who'd you have on? he says samuelsson is dead wrong. if the deficit was such a big -- let me look at the forecast from

nabe, it is really down, tepid joe used the term. looking 2.4, down from 2.8%. unemployment 8%. housing starts come back, fed funds ridiculously low. let's bring in kevin simonson from the international association for business economics, he'll help us understand the results. ken, i don't see any good news in this forecast here. >> you're right, this is definitely a weaker projection than the forecasters who participated in this survey made in may the last time we put forward the collective information from 44 nabe members who do forecasting. for instance the gdp forecast has been lowered by about half a percent for both 2012 and 2013. >> let's take a look at the issues of the fiscal cliff here. we'll get back to gdp and unemployment quick in a second. let's look at what you were

saying about the fiscal cliff and whether or not they go over it. 55% are saying they believe tax cuts will be extended for all, but 36% believe taxes will be extended for low income folks. talk about what they believe is going to happen as a group next year. >> well, they're divided, as i think you see congress is, and most of the pundits, that we have a huge amount of uncertainty, and that in itself is probably contributed to the lowering of these forecasts for 2013 and even 2012, we are eight getting plenty of signals from business executives that they've clawed back what they plan to do because of the fiscal cliff uncertainty. >> and is it the belief that we go over it and is the belief that the effects of the fiscal cliff happened in january or do they play out over time? >> i think most economists in this survey and else where say we're not going to go over the

cliff but we'll go darned close to it and nobody knows if we'll have the soft landing that we've seen from the guy jumping from 125,000 feet up or we're just going to plummet right into earth, and so that's a real worry, and that hasn't yet translated into a drop in consumer spending, in fact that seems to be the one reasonably strong part of the economy, but business has it to invest. >> what happens to capital spending over the next year, according to the forecast and to corporate profits? >> well, the capital spending picture is actually one that is a little brighter, especially for my industry. i'm the chief economist for the associated general contractors, the construction trade association, and these forecasters have raised their outlook for nonresidential structure investment this year, frankly up to the level that i've been expecting all year long, partly that's an anomaly in the numbers that the

structures investment does include wells and mines, so all of that shale gail has helped on structures but on equipment and software, it's not looking so hot. >> ken, we're looking at a chart of the quarterly forecasts for nabe. we see unemployment is going to come down, folks, that's the left-hand bar there, towards 7.8%. gdp does ratchet up towards 3%. it's not the worst story of all. it eventsulely gets better but it takes some time. >> i thought we were already at 7.8. i don't understand this. >> are these real numbers? >> no, these are forecasts. >> oh, okay, but you still have us above eight so these are the real numbers. >> so these are forecast and gathered before we got the figure for september. >> ken, what role to the nabe economists play in the cooking of the books? >> still, why do you still -- what do you mean you're forecasting 7.8 when we're at

7.8? >> i think the statistical agencies play it straight. i don't see a cooking of the books. >> call him an enabler probably like you. >> i'll be a defender if you want to call that an enabler, fine. i think bls has huge integrity, and what they say is the best estimate you can get right now. obviously when firms report late, the next month's figures do change. sometimes up, sometimes down. >> what's your guess for the next number we get in a few weeks. do you think that was a one-off and it comes back to a higher level? >> i'm gutsy about some things but not about predicting any one month's numbers. so i don't have a forecast on that one. >> my guess, ken, you gathered these numbers before the latest decline. >> we did. that's right. these were done in mid to late september. >> i think you're closer. >> it's gotten clearly better on the employment figures for july and august. >> to only further prove the conspiracy toconspiricists.

up next, turning the sunshine state into the silicon state, we'll talk to governor scott about the state's plan to attract technology companies. and more reaction to the deal between softbank and nextel and loop capital jim reynolds will join us and 8:15 a.m., neel kashkari tells us what is making money in the market with three stock picks. 8:40, "squawk endowment" with note retame's cio scott malpass. stick around. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level.

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welcome back, everybody. florida best been known for tourism and agricultural. now governor rick scott is trying to turn the sunshine state into the silicon state. joining us to talk about this is someone who is helping the governor with this effort. bernie machen is the president of the university of florida. thank you for joining thus morning. >> thanks very much. >> we're lucky enough to have you and governor scott on set and governor scott, maybe you can kind of lay things out for us, explain to us what you're trying to do. >> well, when i ran for governor

i had seven steps to 700,000 jobs over seven years. one of the steps we'll make sure our universities team up with the private sector. they have all of these patents and research, there are a lot of companies that come out of universities. we weren't doing it enough so i've been talking to the universities, president machen and the university of florida has a great research program, they have a lot of companies they've brought to market already and ratcheted up in the last two years and doing really well. >> president machen, you have 600 patents, started 120 companies. >> thatright. >> that's impressive. >> the last three years on focusing and recruiting high tech companies into the state of florida. usually they like to cluster around university settings so we think we have, we'd love to be called the silicon valley of the east coast but we have a cluster of people either starting companies or moving companies

into the university area. >> what high tech companies have you been wooing and where have you been successful? >> one is mindtree, an info tech company who is an indian company, but their u.s. headquarters is new jersey and they're opening up a development center in gainesville, it's going to bring 400 high-tech jobs within the next year. >> here is how it happened. they put out on rfp saying what talent they needed. professor at the university of florida followed up and told him all the talent there was in gainesville, and so 30 days later, we worked with them with the university, and they announced 400 jobs. if we do well there will be more than that. it's a fast growing company. there are a lot of examples like that especially the university of florida where they teamed up with companies and people have come in and taken the research they've done, you have more venture capitalists in gainesville now. >> that's the big change since the governor came, as we now

have venture capital in the state, we used to have to go to california or boston to find the bc monday but now we have two companies headquarters on our campus and they're looking at florida plus the florida growth fund takes 1.5% of our retirement fund and invests it in florida technologies. >> do you need to bring academic talent to florida to bolster the school's predenials? i just figure if you're in florida you ought to be able to, there's a lifestyle you ought to be able to bring academicians in the leading field and improving the university of florida and it starts feeding on itself but you can sell the florida story to anyone i would think. >> we have no trouble recruiting to florida, place to live, fantastic, the economic setup in florida is great. we're now using that same approach to try to bring companies to florida. >> there are state schools that have the great pr, michigan, or

even some of the california schools. is florida thought of that way yet and can you -- >> there's a thing called the aau, the 61 top research universities in the country. there are is the only southeastern school that's in that cohort. one of the problems is, people forget about what's going on in florida. >> and you just raised $1.7 billion, so the president has raised money, we have the money there in florida, and if you look at a lot of rankings, they're doing really well comparing yourself to michigan, stanford, some of the others. >> and the economic development side we track closely with michigan in terms of licenses, patents and things like that. so we're right in the mix, but we don't get the exposure that the other places get. >> what are some of the other big companies you would hope to woo? >> we're under confidential so we can't. we're talking to two more technology companies right now about moving to florida within the next year but i asked if i could talk and they told me i

couldn't. >> intel and exxon, they recruit more out of florida, the university of florida than anyplace else in the country. those companies long-term will move where the talent is and i believe as long as we put our money into science technology, engineering and math, which is what we're going to do, we'll have more and more companies coming to florida. people want to live there, no personal income tax, right-to-work state. people want to be in florida. >> and florida, florida state a great rivalry, but i've heard the thing that florida state students and florida students, they all applied to florida. have you heard that? >> that's a rumor. >> you never heard that. bernie, thank you. >> thank you very much. >> thank you, president. when we come back the animal orchestra is two for two, details after the break. and the top of the hour we welcome jim reynolds of loop capital markets. [ horn honks ]

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♪ yet another reason to watch "squawk box," the a.o., animal orchestra 2 for 2 in college football picks. we're going to play it, the oklahoma fight song. >> we did call it. >> on the road over texas but it was the way they won 63-21, crushing the longhornis. the animal orchestra plays their fight song, picks a team on

friday and they are now two for two. >> florida will win. >> can you get us the fight song? >> i'll get you the fight song. florida state already beat clemson, nikki haley sent me some barbecue. >> she did? >> she payed up. perry sent me something for the florida/texas a&m game. >> you're confident against spurrier? >> yes. >> you're overconfident. like me. >> maybe, you never know. >> governor, before you leave us, if you are taking a look at the economy you an you've got any predictions about what happens next year, what happens for the rest of the nation, where do you see, from your int perspective sitting at the state house? >> florida is going to do as compared to the rest of the country because our taxes are lower, people want to live there, all those things but if we want to get our economy going, at the federal level, we've got to cut taxes. remember, we can't regulate every, dictate everything for

our country. we've got to get people economic freed freedom. i'm optimistic. i think everybody realizes we've got to cut taxes like we've done in florida. >> is it a situation where taxes are cut or not raised. if we restructure the federal plan because at this point mitt romney backed away and say you may not be paying less in taxes. wealthy people might not be paying less. >> government has to get smaller. in florida we're making government smaller, paying down our debt and jobs are coming back faster than other places. texas and florida are the two fastest growing states. unemployment in florida dropped faster than any other state. whoever wins, cut taxes, cut the size of government, balance the budget, stop having deficits, reduce regulation. streamline the permitting process, that's what works. >> dpmpb we thank you for your time today. >> nice to be here. >> thanks, governor. coming up, citi earnings plus softbank connecting with

sprint nextel, what it means for the telecom center in two minutes. plus we welcome the chairman and ceo of loop capital markets jim reynolds. grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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looping you in on deals in municipal debt. our guest host is jim reynolds, chairman and ceo of loop capital. plus global stock pixz from a squawk market master with pimco's neel kashkari. >> "squawk" goes back to school. >> say it, say it! >> the teacher, he really seems to care. >> we're kicking off "squawk" endowment week, the portfolio managers responsible for fund willing some of the biggest and best universities. first up notre dame. >> all right, go get 'em, kid. >> go, rudy! >> scott malpass will tell us how much he's invested for the fighting irish as the third hour of "squawk box" begins right now.

welcome back to "squawk box." citigroup is reporting citi right out of the gate here and the stock initially trading higher on the news because the numbers on both the adjusted earnings per share and revenue number are both above wall street expectations. let's start with the gap numbers. 15 cents a share on $13.9 billion in revenue. there are items there, if you back out the items the company earned $1.06 a share versus expectations of 96 cents, the revenue number is $19.4 billion and wall street was looking for about $18.7 billion. so now you can see stock at about 35.19. the numbers are somewhat difficult to work through for the revenue number, for example, you always get these cva and dva

revaluations on derivatives, hedges, et cetera. that hurt revenue by $776 million. you've also got a $4.7 billion pre-tax loss on the sale of citi's 14% interest in morgan stanley smith barney and that totalled about as i said $4.7 billion. you add both of those back in to the revenue and go from $13.9 in revenue to $19.4. there was a tax benefit which is, of about in the third quarter of 2012 related to the resolution a certain tax audit items and that was $582 million, which needs to be taken out. so you take the other stuff in, take the other stuff out and get net income goes from 468 reported to 3.26 billion and you get the $1.06 a share, which is ten cents above expectations. >> and we heard from jpmorgan

last week about what an uncertain environment it is, same sort of comments we're hearing from vicrum bandit, we're managing risk carefully so we can continue to grow our businesses safely and soundly. you heard it with wells fargo and more of the big banks last week including bank of america. >> we'll talk to a banking analyst in a couple of minutes about the details, expenses and things that helped income, whether it was equity or bonds or trading or whatever. equity futures at this hour probably up 40 points or so, and this isn't going to hurt. we had jpmorgan which helped sentiment last week, wells fargo didn't help as much but citigroup, i don't think of them as beating every quarter, but in this indicates, top and bottom line are better. softbank's billionaire founder and sprint ceo dan hessa

announcing a deal in tokyo. the mobile operator will buy up 0% of the third largest u.s. carrier for about $20.1 billion. softbank will get access to a u.s. market that's still growing, as you know japan's market is stagnating like so many things over in japan, for demographic reasons. sprint will get the fire power to perhaps buy some competitors, and to build out its 4g network. and two americans are winning the nobel economics prize, the committee awarded the prize to alvin roth and lloyd shapely for their theory of stable allocations and the practice of market design, one is a harvard gentleman, the other ucla. steve liesman passed over again, you look at the politicization of the way the nobel peace prize is handed out. >> there were questions last week after that was given to the

european union. >> it was like a mirror on the cover of "time," you are the person of the -- once everybody's the person of the year, does it mean anything after that? and if they give it to the eu, who gets it, is cuba getting it next year? it doesn't seem -- >> although they could use the money. >> exactly. steve liesman has breaking comments from new york fed president william dudley. steve? >> thanks, becky. bill dudley president of the new york fed really coming down and explaining some of the recent fed policy moves and suggesting that they will be around for a while, saying the main reason for economic underperformance is lack of demand. the u.s. recovery he says is weak in part because of a weak global recovery, also talking about negative feedback loops, once things get bad, they stay bad and he's saying they could be stronger than we believed as well as demographics playing a role in restraining the economic recovery. on fiscal policy, he says the fed may have overestimated the ability of fiscal policy to help in part because once things either improve or come out of

the worst situation fiscal policy becomes bound by political budgetary limits and it's a drag rather than a support to growth. he's saying monetary policy may not have been accommodative at the beginning and the effective monetary policy is reduced over time, he talks about the attenuation effect but since this attenuation effect is a reason for keeping their foot on the accelerator, it really ends up in an optimistic way saying the long-term prospect for the u.s. economy are excellent and it's possible the u.s. recovery could turn out stronger than expected. joe i don't consider myself up for the prize so i can't lose what i'm not in. >> you don't know whether you're nominated or not. >> that's true but it's not the same thing as a peace prize. separate college of economists, you know, they make -- these guys are really interesting in that they've done some work on putting together like transplant donors and recipients, some of the algorithms they've used, it's interesting real world

application for economics. >> in terms of motivation? >> in terms of algorithm -- i'm starting to put it together, figuring out how buyers and sellers come together. >> honestly i'd set my sights on the peace prize although the arguments you have with santelli -- >> i don't think i'd qualify for the peace prize. >> it's a much lower bar to win that. >> so you're saying something better about the economics prize. >> yes. >> i've trapped you into that, compared to the peace prize. >> yes. >> okay, so we'll be doing this for ten years, maybe another ten years from now i'll get you to the point with it's a real science, joe. >> the "squawk box" book award is above both of those, so anyway, thank you, steve liesman. >> my pleasure, joe. >> our guest this next hour is jim reynolds, ceo of loop investments in chicago, one of the top underwriters of

municipal debt in the to have y. haven't seen new a while. >> it's been a while, good to see you joe and becky. >> have you heard of meredith's name? >> heard it once in the business. >> kind of right, kind of wrong. >> i don't know where she was kind of right. >> there's been a lot of stress on local state budgets and local budgets and if your default, something is restructure or maturities extended it's kind of like a default -- >> no, that's totally wrong. let me -- joe i need to begin by doing one thing that's very important. >> okay. >> i have to give a shout out to lsu. i was at the lsu/south carolina -- >> i thought south carolina was going to win so lsu won. but you lost to florida. >> we did win. lost to florida a week before. my son is a basketball player doing an unofficial visit to lsu and they hosted us and the

basketball staff of terry jones is incredible, and thank you so much for treating myself and my son to a fantastic weekend. it was wonderful. >> you kind of ruined this big game coming up this weekend though, because now south carolina is not undefeated. >> they're going to be hungry and come back blazing. that game was tough. you saw in the end they really, really made an effort but lsu jumped all over them and played very well. the defense is the lsu is just tremendous. >> the next one we're going to pick, i don't know. you're right i don't know. >> florida. >> we should pick florida. >> no, south carolina. south carolina. they're going to be hungry, south carolina is going to be hungry. >> we have to pick from two two-and you mentioned both. >> i'll pick south carolina because they really wanted it. the issue of the municipal net in that prediction is far off from what really happened. i think what we've seen and what we've seen since then has been a very strong resurgent municipal bond market, volumes up some 50%

or so this year, credit a.t. remains strong, spreads continue to come in. states and local governments are truly getting their act together and i think one probably one really good thing that came out of that prediction was a sense of urgency for states and municipal and local governments to really address some of the issues that needed to be addressed. it's not that we would have had or could have conceivably had a couple of hundreds of billion dollars of defaults. the math never made sense, never added up. the other thing you notice about the call and the discussion that it elicited was there was no real true municipal professionals involved in that discussion. they were pretty much folks that were outside of munis that took a look at munis and thought they saw something. when you actually interviewed folks that either bought munis or you interviewed few that underwrote munis or traded or

structured munis, i think there was a consensus that there was nothing that -- >> but we have some more defaults than we've seen in decades and decades especially in california when you look around at the areas. granted it is not near the number she had predicted but it does raise the question whether it's changed. is it less of a stigma to declare bankruptcy at some point? does that change the equation? >> we've seen some chapter nine activities specifically in california, stockman, san bernardino, but remember these are very small cities, and typically you could trace these activities, these defaults, which are very small, city of 200,000 or 300,000, half a million people, to one of a few things. one is just mismanagement of the fiscal affairs of that locale, two is property taxes in california, you saw property go way up and adjustments with them coming down it was pretty hard, three in the case of harrisburg

you see an ill fated project that never should have gun guaranteed by the city. >> were you watching in the green room, did you see governor scott? >> some of it. >> you got a governor like him and then kasich in ohio, and scott walker in wisconsin. aren't you in illinois? >> yes. >> do you have a feeling as a muni professional about who is on the right track? the governor in illinois, did you endorse his efforts in the way he decided to close the budget with higher taxes versus the way some of these other guys are doing it? do you have a feeling for that? >> i do and joe, you raise a really good point. >> really? >> yes, you actually did. and in municipals, it's sort of an ancillary issue but what those three republican governors have in common is that they really didn't have union support. one of the toughest issues with the democratic governors and democratic legislators is the

union support and the fact that at the core of the big issues that they have to deal with is pension reform and what we call opeb, other post employment benefits, and what the unions have negotiated versus what they have to take away. kasich addressed it, scott walk ear dressed it and probably went further than just addressing the fiscal issues in wisconsin. he went after collective bargaining but he got what he wanted in the fiscal issues, and scott, rick scott, governor scott is addressing what is not a significant an issue down there in florida. if you look at what's going on with state governments, since 2009, over 40 of the governments have had some sort of pension reform. the democratic governors tend to be in a tougher spot and unless -- the unions don't generally support the republicans anyway but unless the unions begin to come to the

table in a rational and meaningful manner and deal with, you know, making more and fairer contributions to either their pension plans or their health benefits or a look at adjustments of c.o.l.a. there's three things you can do, cut down on cost of living adjustments, two, retirement age, kick it out a couple of years. >> and contributions. >> and contributions and you need the unions to come to the table. >> the democratic governors, it's a double-edged sword if you live by the sword, they get all the money from the unions, so you don't, nobody gives governors -- you pay to get into a dance. once you get there the girl better not say no, that she's even going to dance with you once you get there. you pay to get into the dance, the democratic governor's got to dance and that ties their hands in being able to manage their state. >> is that a factor in how you invest? >> i'll bet you it is. >> whether the governor is a

democrat or not? i don't think so. >> sounds like a -- >> what does stock don and san bernardino all have in common, they're all in california with governor moonby. >> he's trying, he's trying. >> jim will be with us for the rest of the program. >> walk a fine line. >> i try to. >> we're continuing our "what's working" series with the portfolio picks from a squawk market master, neel kashkari from pimco. we'll kick off our squawk endowment week, first up is scott malpass, chief investment officer responsible for managing over $7 billion for the university of notre dame. ♪

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we are counting our "what's working "series with neel kashkari from pimco, he joins us now some picks for his p portfolio. what do you want to do for me to start out, neel?

you owe me big, i guess. >> we do but we're also delaying the inevitable. one win for the browns, i love it every time the browns win, are we changing the outcome? are we really going to not have a new coach and new president a year from now and get to start over yet again? every year is a startover for cleveland unfortunately. >> i immediately thought of you, though, 0-5, but i figure go ahead, we'll make you feel better. what is working now? it seems like when you're on we never get enough of your actual picks so you'll look everywhere for performance, give us some that are here because this is, we're doing better than anyone else in this country really and then give us some picks where there might be opportunity because it's not going so well. >> sure, let's start here at home, start with john deere, the world class american agricultural equipment manufacturer, trading around ten times earnings, has a 2.2% dividend yield. john deere stock tends to do better in the fall and winter

months but we think it's a great long-term holding. corn prices are obviously high, there's a lot of capital to investment in the ag sector and if you look globally ag markets are in desperate need of modernization and john deere is well positioned to do that. john deere is not only a great premium brand in america, it's a great premium brand in agricultural markets around the world, that's a long-term holding for us we think will play out very well over the next few years. >> why shouldn't we worry about after what caterpillar said and cummins engine, why shouldn't that make us hesitant? >> we should be mindful of it. cat. has a stronger direct exposure to china than deere has. deere is more of an american play with the upside of the emerging markets. we have to watch the ag markets around the world but we think deere is better positioned than cat. to capitalize on growth in the near term.

logitech makes keyboards, mice, computers but as people move away from tablets they need to buy the peripherals to round out their offering. 10% free cash flow yet, net cash on the balance sheet and it's the leader, the premium brand in its segment. not an exciting business but with good margins and good long-term growth potential. >> give me some international flavor. >> let's go abroad, aia, this is the pan-asian life insurance company, formerly a spinout of aig. aia is capitalizing on middle class in asia that are getting wealthier. they want more financial security, they want more sophisticated insurance products and aia is the market leader. aia has about $4 billion of excess capital today from which it can fund its expansion into new products and new markets so this is another one is the market leader we've owned it for

a while, we think it's a great long-term holding. >> what else? >> keep looking abroad or look here at home, microsoft, we've talked about it before with you, we continue to think microsoft is a very strong story, very strong cash generation, again as people move away from pcs towards tablets, that may be bad for pc manufacturers like hp, but we think microsoft can continue to do well just because the form factor has changed doesn't mean microsoft is out of the game. >> we'll get some insight into that tomorrow with intel and how things are going. all right, i want a few more international. you got anything in europe? >> ensco, ultradeepwater offshore driller headquartered in europe it's a play on the oil market globally, we think it's a better way of playing some of the oil sector dynamics. lot of european stocks are getting pushed down because of the european debt crisis but if you drill into them and look at them on a name by name basis you're able to find some companies with more exposure

abroad rather than in the core europe. >> mohammed must have been ecstatic with the jets. did he throw his lot in with the cardinals. >> every time the jets win he's on cloud nine and likes to remind me the browns were 0-5, now we're 1-5. >> you can thank me for that. neel, say hi to all of our friends with you. coming up, retail sales numbers for september at 8:30 and we'll kick off our endowment week with scott malpass from the university of notre dame. [ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear.

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welcome back to "squawk box" everyone. in our headlines today, kindle owners could receive refunds on past ebook purchases and see ebook prices drop as well, if a judge approves legal settlements with publishers accused of fixing prices. consumers could receive a refund of somewhere between 30 cents and $1.32 for ebooks they bought between april of 2010 and may of 2012. those books have to have been published by one of three publishers who agreed to settle a lawsuit that accused them of inflating ebook prices.

harper collins, simon and shuster and hischett. good luck figuring out if you bought some of their books. stick around, "squawk" will be right back 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. he loves risk. but whether he's climbing everest, scuba diving the great barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees. so he can worry about other things,

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welcome back to "squawk box." we are a few seconds away from retail sales data. i believe 0.8% is what economists are looking for. rick santelli is standing by at the cme in chicago. take it away for us. >> all right. well let's start out with the october empire index is down 6.16, worse than expected, but better than last month's unrevised minus 10.4. we look at september retail sales up 1.1, headline being over at 1%, better than we were looking for last month's just under 1% was ramped up 0.3% to 1.2. let's take out autos, up 1.1, take out autos, take out gas, we're still up 0.9, twice the expectations. so this is one of those rare occasions where the retail sales

number is pretty good around the horn, as you strip out various sectors, it continues to look solid, that's a good thing. interest rates are reflecting that to some extent. you're up a basis point, you're become to where you were, preopening equities up about a little light of 50, now they're up about 60 and that's futures of course so it's a bit better than anticipated, when you factor in what you believe the rate of inflation is, of course, you start to get comparisons as to how the market will continue to monitor this along with personal income, sales, some of the data that we've already had and of course as we move through the week, this is a big data week, we'll be getting cousin of ppi we had last week in the form of cpi. back to you. >> rick, thank you very much. steve, why don't you weigh in. what do you think of the numbers, first of all retail sales and down 6.16 for empire state, that's pretty good deal. >> that's pretty weak but the

retail sales numbers are significant to the third quarter gdp forecast. going into this number, if we had hit the numbers we thought we had, we were looking at 1.5% consumer spending number. my guess is that has to come up. maybe the third quarter is hard to know, somewhere between a quarter point to a half a point better than we thought. not off the charts but a bit stronger in the third quarter. also significantly here, we had that swoon in may, june and july, and now we've come up pretty significantly in august and september. when i look at the particular categories that have done better, i'm not all that happy about it. you see gas prices and energy prices really taking a big chunk of total consumer spending and that's going to be significant. i'm looking at for example gasoline station sales up 2.5% in september, 6.1% in august. >> not a good way to get to the high -- >> but it's not all the increases we have. look for example a standout the

past couple months has been building and garden equipment, we think that's from the better real estate market, that we've been seeing recently, food and beverage up, health, clothing accessories up, sporting goods up, so some of the discretionary items are doing better. what's not done particularly well are department stores, zero and minus two. we use a core number that feeds into gdp, we take out autos and take out a bunch of stuff because the government gets that from other areas. what does feed into gdp is this core number and that was revised from a negative 0.1 to a positive 0.1 for august and it's plus 0.9 for september so what i expect to see is some of the tracking forecasts that we see from economists, probably boosted for the third quarter, with i think the key being the outlook for employment and capital spending being those things that will tell us more about where we are finally when the third quarter out of the fourth quarter here. >> steve, thank you very much. our guest host for this hour is jim reynolds. you got some things to get off

your chest in terms of investment banking and the trends, right? >> yes, thank you, joe. one of the things that i know we talked a little bit about was what's happening with investment banks and investment banking, coming out of 2008, and it's been just a remarkable last few years, in terms of what's gone on with the global investment banks. clearly in 2008, you know, survival was their number one goal of these guys, and coming out of that they've managed to do that, with some help, but they've managed to turn the ship around and ride ght it in a substantial direction. we've seen new management at all of the investment banks, goldman sachs may be an example with the ceo but we've seen new management, more focused management. i think management is now approaching the investment banking more as a business, more in the manner of ceo running a corporation as opposed to an investment bank. they're addressing things

specifically like risk, balance sheet, they're shrinking the balance sheet to a manner that's absolutely probably 20% of where they were at the peak, we're seeing personnel and compensation adjustments, in a manner that we have not seen he heretofore. >> none of this is bad. >> everything is great. probably the only bad thing we're seeing might be what you expect to get in r.o.e. from a better, more streamlined focused business because the leverage is down. you look at leverage back then, '06, '07, '08, 30, 35 times for some of the investment banks and you look at an environment now in the 6 to 12 range. you look at r.o.e.s back then, north of 20, 30 in many instances, r.o.e. now, i think morgan stanley's last quoted was 3.2, goldman's was 5 or 6, jp's was 9 and change, so it's a new environment there. but what's happening on the

other side of what's going on with the investment banks, as their business has gotten much more focused, much more strategic, is the ascendancy of the boutiques. i know you've seen and i've seen cantor fitzgerald ceo howard lutnik discussing it, how he's growing his business, you look at the raymond james, the jeffries, the loop capital. >> is that why you wanted to talk about this? >> well you brought it up, joe. i wasn't really going to talk about it. those investment banks are now finding clear lanes to do and grow business because the global investment banks are not bleeding over into every aspect of every business. when they launch -- >> the crumbs are pretty big. some of the things they decided they can't be everything to everyone so this opened up huge opportunities for boutiques. >> that's exactly right. that's exactly right. and i don't think it's something that's going to last for a short period of time. i think the way that the big

firms are being managed now is going to be the way they're managed for a very long time. >> so there's a perception, i don't know whether it's true or not that there's certain provisions in dodd-frank that favored big banks and hurt small banks and this is part of the explanation for some sectors of the economy, not being able to get the credit they need to expand. that's not something that you see? >> well my focus in dodd-frank is really more focused on the capital markets aspect of what that did, and that pretty much always brings me to the volcker rule. >> that's good? >> that's been good for the boutiques because the boutiques are not subject to it, but the large investment banks absolutely are subject to it, but we haven't seen anything yet. we haven't seen dodd-frank pass. we've seen banks preparing for what may be a dodd-frank environment but depending upon who wins the presidency, there may not, dodd-frank could be

dead. and so we still don't know. the effect of it has been to get the investment banks, the large ones, smaller. >> which opened up more room for loop capital basically. >> yeah, loop -- thank you, joe, for leading into that. i appreciate you doing that. >> if you need, you know, a boutique investment firm. >> loop capital is the one. actually, florida, rick scott is a client of ours. he brought me breakfast out there, i'll see him in tallahassee. >> he's your client. you should have bought him breakfast. >> you can't n municipals, you can do it in corporates. >> pay for play. >> even a $2 breakfast is a big deal. coming up we're kicking a week long series on university endowments, talking to portfolio managers responsible for funding educational institutions. scott malpass joins us from notre dame, he'll join us next. e numbers...

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oh, yeah, this is before, oh, gosh. welcome back to "squawk box," up 38 points on the futures so far this morning. check out the shares of citigro citigroup, $1.06, ten cents ahead of estimates, revenue topping the street. this week we are featuring endowment managers who the colleges depend on to fund their

operations, they are responsible for generating dependable returns year over year to make sure they can meet school's operating budgets and we are kicking things off with notary dame. lot of you might have seen notre da dame's overtime win against stanford this weekend. ♪ the university is also winning in the management of its $.2 billion endowment. scott malpass is vice president and chief investment officer of the notre dame endowment. >> thank you for having me back. >> one thing i don't know we can point out enough a lot of endowments stumbled, hit hard times, places like harvard. notre dame has not gone through the hardships many other endowments have? what is your secret. >> we have a conservative financial management approach, you look back the last 40, 50 years. we have a construction funding policy that requires all the money for a capital project to be identified and 75% in hand before we'll even begin a project so during the crisis, all investors took a pretty

significant hit during the crisis but we had projects under way and we were able to continue. as i was telling jim in the back room we had a consevrvative deb approach, half our peers were aaa rated, which is higher than the u.s. government of course so we're just more conservative. so when you enter into a crisis period you have more flexibility. even our endowment spending period was lower, because we had done well leading up to that. we were able to float that up without cutting spending. >> scott you were being too to modest when you talk about something that's been there for 40 or 50 years. jimmy dunne reported when you took over august 13th of 1988 the endowment had assets of $443 million, and now $7.1 billion. you're responsible for massive returns. you're conservative but at the same time not giving up gains. >> we had good fund-raising, low

inflation, high returns in the late '80s so we had a good tailwind for many years. the last decade has not been that and this is where we earned our stripes if you will, the organization we built, my investment team, the long-term horizon, the access to the best managers, that really started to come to fruition and that showed in the last decade where we've earned returns around 10% and the market's been, the s&p has been 3% or 4%. that's hard to do if we could do that again in the next ten years i'd be happy with that. >> does it help when the football team is back in a big way for endowment? does it help for fund raising? >> everybody has pride in their schools, right? there hasn't been a correlation between our major gifts and football success. >> is it 5-0 now? >> 6-0. >> so i don't remember the last time you were 6-0. >> it's been about ten years. >> so who is coaching that team? >> ty willingham, started off

8-0. >> let's not talk about it. you don't want to talk about it. he didn't want to talk about football and i said you don't want to talk about football -- >> wasn't that a great defensive stand, one of the best ever. >> that was before the weekend when you didn't want to talk about it. >> joe, like last time. >> i know, i know. so harvard lost $1 billion in the fiscal year ended june 30th, nobody likes to lose money, and then that billion dollars is more than the entire endowment of 90% of the colleges. what's the difference? >> well, it was a tough fiscal year for investors. most investors ended up between negative 1% and 1%. >> those that had high exposure to alternatives? >> yes, and you had a lot of emerging markets, the emerging markets got whacked last year. my understanding is harvard has a lot of emerging markets like we do, but they use maybe a little more pass, etf approach is what i understand.

we have active managers. our composite emerging markets return for all of our emerging markets manager for the fiscal year was down 1% and the index down 17. we had a lot of alpha and private equity did well. >> how much thinking about global macro issues do you do versus just having access to really good people, really good managers because you're notre da dame? >> we have been forced to think more about the macro like all investors. historically we're fundamentally driven thinking about the best managers who have real skill, a real definable edge that we can pinpoint but because of the global crisis and the excessive debt the public sector's taken on, we have had to think more about the macro environment. we're certainly not economists but we spend a lot of time -- >> did you say i want to buy a lot of apple? >> no. >> you don't pick stocks? >> our managers decide the individual stock selections and sectors and the geographic focus

for the foundation. >> you don't pick helmets, do you? did you like the helmet with the leprechaun on a black -- is that going to come back? are we going to see that game? >> we won so it's good luck. the helmet is supposed to represent the golden dome so i'm in more of the camp we shouldn't put anything on the helmet but the players love it. >> they like the black helmet? >> every now and then for the kids why not. >> are we talking about football again? i was talking about stocks for a second and i don't know what gets into me once in a while. >> scott i can ask you a quick one? there's a lot of discussion amongst investors like yourselves and their ability to negotiate fees. and that 2 and 20 applies to a lot of investors but not to some of you guys. what's been your discussion with your managers? >> it's a great question and because of the crisis investors had more leverage than they had before. for example, we're 30% hedge funds. we don't pay 2 and 20 in any of our hedge funds. >> what do you pay?

>> ranging from 0.5% to 1.5%. 20% is incentive but that's a hurdle whether it's an index or equity hurdle. sometimes the incentives is paid every three years which makes much more sense. in private equity you're only paying the incentive on realized gains. in hedge funds you're paying it annually and unrealized gains. to me an annual incentive doesn't make a lot of sense. we still pay it, top managers but we've been able to negotiate two and three-year incentive payments which makes more sense. >> when you look around emerging markets even though they've had a rough time you see some opportunities right now? >> no, we do. because they did get hit so hard last year, we've been rebalancing into the emerging markets, added fresh capital in the last six months and new geographies like sub-saharan africa. mark was on earlier, i agreed with everything he said.

very cheap, some great companies, young populations, more democracy than ever, rising middle class, even though the standard of living is still very poor, there are a lot more consumers and a lot larger companies there, that are available to investors than i think people realize. it's very small but you're supposed to buy cheap so trying to buy them when they're down. >> honestly who has more juice at the school at this point, you or callahan? >> brian for sure. >> $7.5 billion. >> he still has more juice? you win a couple of games and you're more -- >> i think the deans have more juice than anybody. >> honestly? >> oh, yeah. >> i think it's you. if i ever want one of my kids to go there, i want them to go to you. always the guy with the purse strings. good to see you. when is the next big game? >> at oklahoma in two weeks. we're looking forward to that. >> sure you are.

>> by the way, our endowment series is going to continue all week, tomorrow we have the portfolio manager behind northwestern university's endowment, rounding out the week we have the university of texas, the university of michigan and stanford university, to come. >> coming up, jim cramer getting fired up at the new york stock exchange. we'll get his take on citigroup's earnings. next. marketing analysis. with the ability to improve roi through seo all by cob. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. i'm going b-i-g. [ male announcer ] good choice business pro. good choice. go national. go like a pro.

let's get down to the new york stock exchange, jim cramer joining us now. harvard ought to talk to you. we just had scott malpass on. you probably want -- haven't they, jim? can't you do -- they lost a billion dollars. can't you help? >> no, because malpass has a much better stable of managers. boy, do i want to do my job from notre dame. everything they do is right and the business school is fabulous. >> it is, right. i was gist kidding myselves. you get to pray, too. godless atheists in cambridge, why should they have decent returns? >> how about how notre dame raise the its academic standards and moved up in the polls. every other school that tried that failed. >> that's true and you probably watch. something about it. i don't know whether dallas was

america's team or the braves were, but notre dame for 80 years, people everywhere watch. i'm not really sure why. >> i never miss a game. i watch every saturday game because they are so exciting and play with heart like you wouldn't believe. >> happen to be on nbc -- what did you make of citigroup? >> no flies. no this is a quarter i've been dreaming of. almost an as ter rick, down below 10%. international conventisumer ban. on page 13, is the story because there is is just a tremendous international consumer credit trend. congratulations. this is a great quarter. >> i didn't see, you know, didn't see any flaws. see -- what should we be listening for as we talk about it during the day? dividends, what should we be listening for? >> how it's not an american bank anymore. it's a cigarette bagrowth bank

excellence. one of the best. i've got to tell you the net credit number is so good you have to start thinking of citi ago a worldwide bank with business in america that's just okay. >> wow, it's interesting. jim, thank you. see you in about five minutes, exactly five minutes as of right now. >> when we come back we'll get the last word from our guest host today, chairman and ceo jim reynolds. between listening to the numbers... ...and listening to your instinct. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. oh, hey alex.

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>> tax reform. i think washington has to approach it very judiciously because they have to think about whatever they do with the tax exemption, capping the amount of interest you could deduct or you can have tax-free from municipalities can have some significantly adverse affects on the funding for state and local government. >> charity, think about charity. mortgage deduction, think about munis, seemed like such a great idea. rich people, let's not have their muni tax-free. >> not that simple and the states and local governments couldn't take an additional burden of increased funding costs. >> >>er especially more that's coming back to them. >> they're having to pay more and what they've gotten, everything they got from the stimulus is gone. those expenses are being washed out. medicaid expenses continue to go up.