good morning. it's tuesday, march 5th, 2013, and "squawk box" starts right now. good morning, everybody. welcome to "squawk box" here on cnbc. i hope this song gets stuck in your head, too. i'm becky quick along with joe kernen. andrew ross sorkin is on assignment today. our focus this morning is the markets. after yesterday's close at the second highest level of all time, you can see this morning the dow futures are indicated up about 39 points. i believe that is exactly how

far away we are from -- yeah. 38 points from the all-time highs. so we'll see. if things were to open right now, you'd bust through that level right about right now. we'll see how things are headed up. the number to watch is 14,164.53. that is the all-time high that was hit back on october 9th, 2007. the s&p 500 nearing records. it is fewer than 50 points away from its record close at 1565. yesterday, by the way, was the s&p's first monday gain of the year. i didn't know that. >> dedication to mondays. i wonder what the intraday high is. if we go through it on the open, obviously, on the close there. it has to close above there to be the new record. but i wonder what the old intraday record is. >> i better peter can find out for us. >> probably. >> as for sentiment, the vix falling near 14 yesterday. wow. the major markets in asia rallying overnight. you can see that the nikkei was up, by only by about 0.25%. it was the shanghai that was the big gainer, up 2.3%.

a positive start to the trading day in europe, as well. you can see the dax is the biggest gainer, up 1.5%. in france, the cac is up by better than 1%. here is warren buffett offering his take on stocks. >> i think they're undervalued relative to other assets. in other words, if i had a lot of money today, i would rather own equities than own fixed dollars, long-term government bonds, junk bonds, farmland, you know, reits. they're not as cheap as they were four years ago, but you get more for your money and that's why we like buying businesses and we like buying stocks. >> our conversation about stocks and opportunities in this market continues this morning. among our guests, we have stanley druckenmiller, kevin warsh, ken langone geoffry

canada. then at 8:00, saumil parikh will be joining us from pimco. i haven't spoken with him before. have you? >> no. yesterday, crude fell below its 200-day moving average and dropped below 90 for the first time since the end of december. crude today is back above 90, but up fractionally. the ten-year note has been, as you've seen it, anywhere between 1.8% and 2% recently. 1.89% where we are this morning. the euro was under 1.30 briefly, but it's back above 1.30. the yen continues to be something to keep an eye on. gold i saw was trading higher this morning. i believe up $9 but still below 1600 at 1581. >> we'll talk about that record

intraday. peter, do you want to see it in my ear? never mind. we'll get to it in a minute. jp penc penny falling this morning. its chairman steve ross sits on the board. investors have been unhappy with the firm's investment in penny which have been struggling to turn around. roth is somebody we talk to here. maybe we'll get some answers on this, as well. meantime, in other market news, the fight between j.c. penny and macy's. the stores are arguing about who has the legal right to sell martha stewart branded products. martha stewart living on the media also struck a deal with jcpenney to sell products and martha stewart kiosks inside

pennec stores. courtney reagan has been at the court following developments of this and she's going to join us with more at 6:30 eastern. it's interesting. this is around technicalities. her argument, they said there was a line in the agreement, in the legal agreement between them that said she can open her own stores and that would be different. so they're arguing that these key omps inside jcpenney stores are stores within stores and it should be excluded. it's kind of weasely. >> it is. >> i can understand why carrie langone is upset with this, especially because he spent so much money promoting the brand. >> it was an exclusive and that's why you needed a really good lawyer to write it initially. >> i guess. or you think you have a handshake deal with somebody -- >> when you say you're in stores, you could think of a stand alone. >> you get to the kiosk, you go

into jcpenney's. maurt hmartha stewart has gone through some troubles before. she was in k-mart before. >> she's gone through some other troubles, too. >> i mean in terms of exclusivity for the brand. >> i know what you meant. johnson & johnson says the fda has denied expansion of its blood thinner zerelto. the company wanted to use the drug to reduce the risk of heart attacks and strokes. the drug was denied approval in june for the same use and at the same time regulators raised concerns about missing trial data in dleeth risks. j&j approved additional data. and facebook is being hit with another ipo-related lawsuit. a shareholder is suing the company aes ceo this time and others over the technology

reopened a lawsuit from last years lastier. and the campaign alleged that that information was selectively shared with the company's ipo underwriters and some key investors but not with them. never seen 38 again since the ipo. and neff been up if you were in the ipo. >> but if you were one of the early investors who was able to sell, that's part of the issue. the the intraday high for the dow, 14,98.1. >> so if we add 37, so then that comes to 64. so what did you say, 64? >> i think the 64 points where if it is right now. >> okay. >> so 36 is the record close. >> to get to 14 -- oh, you mean

36 more. >> 36 more, right. >> 14,198.1 is the intra day high. also, fannie mae and freddie mac will build a new company for securityizing loans. it's a stepping stone towards less government involvement in the mortgage market. the government rescued san franciscony and freddie in 2008 with $100 billion in aid making it the costliest bailout in the financial crisis. earlier during the crisis it was 90% and above that they were actually financing. in global news, venezuela y'allan president hugo chavez's breathing problems have gotten worse. the government official in venezuela calling the 58-year-old socialist leader's condition very delicate. chavez is said to be suffering from a new respiratory infection after undergoing cancer surgery. also, the australian central

bank has left its key rate unchanged at 3%. that decision was expected. as you continue on overseas in china, the premier there is promising to boost consumer sentiment and reduce alliance on trade. wen jiabao announcing a growth target today. but he was mum on what beijing will do about big state companies that reformers warn could handicap future growth. we have chanos coming on thursday to talk about all the issues in china. this next segment is entitled german clown. in europe, clown res now getting involved in political fights. last late week, the german social democratic candidate that is set to challenge chancellor angela merkel in fall elections referred to italian political leaders silvio berlusconi and beppe grillo as clowns, now the head of germany's most famous

circumstance cuss qualified that. she said a circus clown is no fool who can be placed on the same level as berlusconi. being a cloen clown is an honorable, very difficult, sensitive and artistic occupation. >> complaint noted. >> are you kidding? i think he's kind of kidding. >> no, i don't think so. >> berlusconi is the richest guy in italy and he was a government leader for a while. he's got to be kidding. >> maybe he's mad about being compared to grillo, too. >> mrrpt. time for the global markets report. kelly evans is standing by in london. and you wonder why we kind of always look askance at some of the stuff over in europe that you have adopted as yours so quickly. >> it wasn't just the comments from the german minute sdrer

last week. the economists picked up on the theme and did it, as well. so the german clowns are coming back out and trying to fight for their good reputation and not knowsly be sociologied with what you saw there out of italian politics lately. what's interesting is what we're seeing in terms of the last lack of a coalition coming together on italy, the fact that there may be fresh elections called within three or six months time, the fact that beppe grillo is still popular, but he was nobd in terms of leaving and trying to get into his car right now. yet within look athis. despite what that might mean for the troing ka, there's no sign that markets are unnerved by this today. the ftse mib in italy adding 1.75%. if we can flip over to the bond

chart, tights same kind of thing happening. we have seen italy yields backing up certainly from their lowest levels. they were down towards 4% a couple of weeks and months ago. now 4.77%. but they were creeping back up towards that 5% level today. we're seeing investors bid that up and we're seeing some relief for spain, as well. it's not far from falling below the 5% level. so the relief that you're seeing to some extent in european markets is bolstering trade as we turn our attention to the trading session in the u.s. there's also, of course, the dollar effect and some people are suggesting that what we're seeing in oerms of fktly the trading range. over here, the euro/dollar is higher. although it's come off its highest levels of the day. generally speaking, sterling is back up to 1.5152. keep an eye on the behavior of the dollar. that and what we're seeing in europe overnight tells us whether we'll be able to take out those nominal highs today.

we were only about 10 points away base odd that current move. so nothing out of italy. the clowns notwithstanding to upset the apple cart on that one today. back over to you. >> kelly, thank you. when we come back, a powerful winter storm slamming the midwest and heading east. we'll get the details from the weather channel right after this. plus, we'll turn to two money managers to talk about records claiming to highs. the dow has not had a winning streak longer than two sessions in a little more than a month. the blue chips are about 70 points from its intra day record high. stick around.

welcome back, everybody. if we were to open right now, the dow would open above the highest close we've ever seen in the dow. we'll see what happens as we get towards the opening of trading today. in our headlines today, the department of justice is seeking additional details of amr and us airways proposed $11 billion merger. so company eggs say they expect to respond promptly to the second request from the doj and that they continue to expect the deal to be completed in the

third quarter. the second request are said to be quite common in anti-trust reviews. let's get to the national forecast from eric fisher. eric, good morning. >> hey, good morning. let's to talk about today. winter is going out with a bang here. we've got snow falling with our latest storms, anywhere from eastern minnesota including minneapolis and this is heading towards chicago as we head through this morning and into this afternoon. if you're around minneapolis, 3 to 5 inches or more of snow. and higher totals to the east as we go into wisconsin. chicago, this should be the biggest snowstorm of the season. the biggest so far is about 5 inches just last week. we're expecting 8 to 12 with the highest total off to the south side of chicago. north to milwaukee, we'll see a lot less in terms of snow that canceled almost 1,000 flights in and ought of chicago today. air travel is very much disru disrupted there. here is the big picture, that snow sweeping down across minnesota. tonight in northern indiana, 8

to 12 inches of snow and all of this is heavy, wet snow. heart attack snow, if you will. be careful shoveling. heading into tomorrow, the storm deepens. around d.c., we have our eyes on you. this will be a significant event, especially west of town. this area of high pressure will stick around. snow coming down in sheets around west virginia, northern virginia, and into maryland, southern p.a., all in the mix for what could be over a foot of snow, especially for the higher elevations. winter storm warnings posted for a big area. right now, baltimore and d.c., winter storm watch. weather service not quite confident enough yet to upgrait grade that to a warning. here, you're going to go from no snow at all around the chesapeake to around half a foot or snow or more. you'll be able to go from 50 miles and go from zero to 18 inches of snow. an incredible gradient there. and then there's a change in the forecast as we look faurth to the north. this may take a nor northerly

turn as we head into wednesday and thursday. this could bring new york and boston and hartford, providence into snow and coastal flooding. so a lot of folks affected approximated. back to you guys. >> eric looks like a weather man. he likes likes a guy who is trying to find out -- >> roll up the slooeps sleeves a little bit here. i tell reynolds he's a moniker away from the monopoly guy. >> wow, that's true. >> i like the rolled sleeves. that looks good. >> reynolds is gq or something. >> he's a lot more educated high class gentleman than some of us other folks here. >> listen to that. that's tinged with sarcasm.

>> oh, no, no, no. >> he looks good. light colors, dark colors. anyway, so do you, though. anyway, thanks. thank you. >> and i feel like we know a lot about the weather. >> thank you, eric. >> reynolds comes on, he's going to -- anyway. back to the markets as we've been discussing the dow, 36 points from a record close. chief investment strategist at raymond james. and verginie masono. i like just sage virginiaine. my daughter is taking french and everything she says around the house is french and i have no idea what she's saying. >> but you know what -- [ speaking foreign language ]. means, right? >> i have no idea. i'm looking at some of your comments and, wow, they're really global and very interesting. for global equities, you see a lot of positives, obviously, right now. around the world, how about some

challenges. go over some of the positives the. >> well, some of the positive are the wall of money. so you have central banks being very supported and you have an allocation shift from fixed income to equities. you also have a healing happening in europe and the u.s. and china, if you want powering back. although at a slower speed than in the past. that's all very positive. and very attractive. clearly the elections in italy are a little bit of a challenge. and the key for me is to understand how that, the italian vote combined with troubles in france, for example, might create a new sort of, you know, momentum against reform in europe. but we have to be very careful about that. of course, in the u.s., sequestration and the cuts, we have to monitor that very closely. and the longer term i think challenge that we have to monitor is china in's ambition,

is seeing the chinese announcement about build up in military spending. that is still actually very low. multiple times more. but i think that's going to worry the neighbor necessary asia examine clearly china has ambition in the south china sea. so that is going to unfold over the next couple of years and we want to be cognizant of that. >> it's not exclusive to the united states. >> that's right. >> and you're seeing the gap between the poor and the rich at a high in many countries including china. i think this is something we have to watch carefully. one i think i'm doing a lot of work on right now is trying to understand how this global consumer is going to drive this country. for the global economy, the consumer is about 60% of the

gdp. in china, it's below 40%. so understanding how the x generation, the facebook generation is going to have an attitude to savings and spending is very important not only for asset allocation, but middle class consumers. that is something that as a global investor we have to capitalize on and there's a lot of really good stuff out there. >> yeah. if you heard that beautiful -- do you want to even try right now after -- it was like -- you don't have an accent like that. can you phane one? we're stuck with what we have with you, right, jeff? >> absolutely, the southern accent from down here in orlando

where the institutional conference is taking place. we have roughly 350 companies presenting down here. and the mood is pretty upbeat, joe. it's pretty upbeat. >> good. and we look at you for both economics thought and thoughts about the market. jeff, put that into perspective in terms of the see zester. is this something you're talking about down there or are we already past it? i read something some people were talking about delays. there were a couple of delays at newark of all places, which i've never heard of. >> when they talked been she did find a couple of delays at a couple of airports, f airports have happened before. do you see a big deal happening even if we don't handle the sequester in the next couple of months? >> my understanding of the sequester is that the bites don't take place until march 27th when the government runs

out of money. i don't think the sequester between now and then is any big deal. as i understand it, the tsa is paid for bay charge on the airline tickets. so i don't think the cutback in the federal funding is going to be all that impactful. if we go past march 27th with no continuing resolution, then you're going to see a number of government agencies shutdown. >> well, yeah. i thought that they decided we're going to go to september. and i don't know whether they're going to push that or not. well, whatever is happening, the dow has been going up just about every week to, what, very close to an all-time high. i don't know whether that's in spite of the sequester or because of the sequester. i think you could argue either. so what you said about this economic back drop and the corporate back drop explains why the equity markets are going well. >> well, i mean, if you look at the private sector and try and

ignore the noise coming out of the d.c. beltway, where i spent a long time, by the way, the private sector is coming in pretty well. the purchasing manager's index came in fairly well. i think that the under invested money managers are trying to chase performance right here. and it looks to me like the dow is acting like a moth drawn to a lamp. you have these reteller areas and these attracter areas and the all-time high at 14,164 appears to be an attracter area. and if you get a close above that, you're going to get a confirmation by the dow jones industrials at new all-time highs. it will indeed confirm what happened last month with the dow transportation average and we'll give you a renewed dow theory buy signal. we've had four of those since the bottom in march of 2009. >> becky was using move the ball

down the field for kick the can down the road. you just used a moth to a lamp. doesn't the moth get burnt to a crisp and fall to the area where the lamp is or -- are you sure that's the analogy you want to -- the market is a moth going towards a lamp? >> well, it's -- >> stop before it gets there and survive? >> i think the markets will survive. i do think you will have used up a lot of energy. >> you need a new -- i think you need a new met for, jeff. i don't know. it doesn't end well for the moth as they head towards most lamps. >> well, i think the markets are going to end well unless we get a black swan event, the economy looks to me like it's improving. earnings look like they're doing fairly well here. i think the majority of investors are way underinvested. the pension funds, the endowment funds, the international investors here at our conference

from europe are all under invested. so i think it's a big mistake to be that negative on the overall equity markets as well as the u.s. economy. >> do you have an outing planned at harry potter world? don't miss it. >> i didn't know there was a harry potder world down here, quite frankly. >> that's the wrong answer. wrong, wrong, wrong, wrong, wrong. universal studioses, harry potter, great. >> and you can play while you're there, too. >> take all your friends and have some butter beer. thank you, virginie. you know what i'm talking about. >> i've not been there, but you know i know what you're talking about. when we come back, we'll have more of this morning's top stories. plus, courtney reagan will join us live from new york where martha stewart is taking the stand today in a high profile fight between macy's and jcpenney's. first, an exciting day at cnbc.

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good morning. and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick. andrew ross sorkin is on assignment, top secret. assignment. >> he's in a different time zone. you can see that, i think. >> right. but i didn't know where yesterday and so i didn't say. but then i found out later that we're not supposed to say. but now i know where. >> and it's really hard not to say. >> now i may have to say. no, it's not that interesting when i think about it. our top story this morning, the dow with its climb to i said second highest close ever. now just 30 points away from an all-time record. the number is watch is

14,164.53. that's the all-time closing high hit on october 9th, 2007. and the intra day high was maybe 30, 40 points higher than that where it traded. but that is the close and that's what technicians use, not intraday numbers. and equity futures now up about 32 points. what would be just below -- >> right there. >> right there. but we have to see where it closes, anyway. out doesn't matter where it trades during the session. momentum, every day it seems to be like a bobber. do you fish? it goes under and keeps coming up like a beach ball. >> see if you can put the worm on the hook. you have put a worm on a hook? >> yes. i can do that. but i've even take the fish off but i don't like doing it the. >> you have to be careful. >> and i don't want to hurt the fish. you can wear gloves and protect yourself. >> i think fish get hurt a lot. >> no, i don't --

>> it's very painful. >> i usually throw back the stuff i catch. martha stewart is due back in court. she is in the middle of a legal battle between macy's and jcpenney. meantime, jcpenney is selling a chunk of stock. courtney reagan joins us now from new york with the latest twit in this retail drama. this is capturing the retail world like few stories do. >> it really is, becky. it's not just two retailers. it's two big ceos going at it at times between each other with the e-mail exchanges. martha stewart herself right in the middle and today is going to be a big day because we will finally here from the domestic diva when she takes the stand a bit later this morning. so stewart's company is hoping that judge jeffrey owen will allow her company to have these martha stewart branded product collections in certain home categories to be sold in both macy's and is jcpenney. macy's lawyers have presented the evidence showing the

importance of the martha stewart brand to the home collection. stewart's company has pretty strong reasons to maintain its product lines at both. it may be the final week of the drama here in the courtroom, but the drama surrounding jcpenney's transformation seems to take a new turn every day. sources tell cnbc that deutsche bank is offering more realty trust stake in jp penny or a block of 10 million shares at a price of 1640 and 660 per share. this news tumbling after hours and again here in the premarket. steven ross is the chairman of realty trust. he was named jcpenney board member around the same time as bill ackman. last week roth was asked if this compromises independence to exit his stake, he actually answered yes. yesterday we heard from

jcpenney's ceo, it was the judge's tone ma made the biggest headlines. he's getting increasingly frustrated with lawyers on both sides. he said, look, i asked you guys to settle. this is what happens when you don't. what the bigger headline is, too, is when this trial is scheduled to end on friday, the judge will hear oral arguments about how to proceed with a preliminary injunction going forward on these martha products in jcpenney that are nonbranded in the exclusive category. it's possible the judge could say, hey, jcpenney, you have to take all the product off the shelves whether they martha stewart or not before i make my decisions. >> jcpenney is not thrilled about that, as you can see imagine. >> that's the last thing they need. i'm trying to figure out what happens after there's a decision in this case. if the judge rules in jcpenney's favor and allows them to keep selling these products, what does macy's do? i think they've stripped her out

of the a lot of advertising that they run. >> that's exactly right. and a lot of the e-mails between ceo ron john yons and some of his board members suggest it's jcpenney's goal to get macy's to eventually walk away from the contract. now, macy's does have a contract. it appears jcpenney's does, too. the judge will have to read those and i think it's up to the retailers to decide what they want to do with martha stewart and all of those products. macy's, obviously, not excited to have another retailer take credit for all the investment they've spent branding martha stewart as the biggest proponent of their home collection. >> what does martha stewart do in the end, though? if she win sxwes she's able to say, yes, i'm going to be in both jcpenney's and macy witness macy's gets disgusted with it, developly walk was from the contract, then she's. >> jcpenney which is having a heck of a time trying to come back. >> exactly. and she's in a tough position.

jcpenney owns 17% of her company, too. it's sort of the hand that feeds her. so she has to sort of do what they need her to do. but macy's clearly makes a lot of money, which you recalled assume she does, too, off of her product. macy's carrie lungren says i don't know what i'm going to do if i don't have martha stewart branded products. >> courtney, thank you. right now, let's get back to the markets. joe kinnehan joins us from the cme this morning. we've been talking about how the dow is in striking distance of that all-time high. just about 37 points away. how big is that right there? do you guys even pay attention to these things? >> it's interesting i think what the traders down here is you look at it. the s&p 500, what they're looking at on the s&p 500 is right here, also. you know, we close just about 1525 last use it looking at the futures. we'll open a couple dollars higher here. on the cash, we're looking at 1594. let's call it 1531 even.

the belief here is if we can break out of that, we can continue higher and maybe go up 1550 even. if you look at the vix, it's at the lower end of what we've seen recently on the range. but we've seen it down to 12 recently. so many of the traders down here really believe that we can go up and threaten this 1550 level, which would obviously -- >> the sequester aside, people are going to be very concerned about what's happening with the economy and the jobs report is the next big number that we're going to be looking at on that. what is the expectations are relatively low this time around. but how is the market going to be trading around that, joe? >> well, i think today we really don't have any major numbers. so the market, again, looks a little bullish. again, as you said, unemployment will be the number that everybody looks at for the week. but i think that one of the things we've learned with the sequester with the fiscal cliff, etcetera, is that traders aren't paying as much attention to the noise out of washington and the political grand standing. they're trading what they see.

and you said a guest on earlier this morning talking about how how many people are under invested. i think that's one of the main beliefs here. it's almost the path of least resistant talking to people about their physicians. the guys who are short like their position but they lood lose money every day. people who are long are making money, but they're embarrassed by it. yeah, i'm long, but, you know -- >> and what does that tell you? are we getting along in this rally, does that tell you, or is that we're uncomfortable with how long we've been running? >> that actually tells me the object sit. i think we can keep running just because -- because of that. no one wants -- you're long and you don't want to be. and like i said, the shorts are almost to the point where it's like, i hate getting shorter, but i know i can because i'm going to be right at some point. but eventually they're going to run out of gas, too. but i think there's enough we look terrible, we're at the top, there's so much bad news. with all the bad news we've

seen, we continue to go higher. i think you used moving the ball down the field or whatever. >> that signifies progress. they're not really what we're seeing at this point. >> not as bad as the stock market is like a moth. that was in a bug's life. oh, the light, the light, and they fly towards the light and they get zapped and they die. the analogy i was thinking about was the little engine that could. >> i think i can, i think i can, i think i can. >> it's over there and it gets over to the other side -- much better, joe. much better. >> thank you. >> you've heard of harry potter world, too, haven't you? have you ever had butter beer? i can work with you, i think. >> do you want to go and is play a little quidich later, joe? >> guys, have a great day. >> thank you. yesterday, the forbes list came out. and i mentioned a lot of the billionaire.

he's really mad and he should be. >> i thought he was like 27 or something. yeah. but forbes has him listed at 26, i think, at $20 billion when, in fact, he says he's worth $29.6 billion which is 50% more and bloomberg billionaire list puts him at $28 billion. so he has severed ties with forbes. and i would be really unhappy if they got it that wrong, you know? >> if they were off by a third, yeah. and if i like being rich, you know? >> i saw the press release from him yesterday. he was not happy. i mean, i didn't think they gave them anything to work with, anyway. i thought these numbers were things they were trying to figure out on their own. >> he says they were bias against middle eastern investors, forbes. >> saw that. >> so we're going to call it -- >> where would that put him on the list? >> much higher. $29 billion, he would be in the top ten at that point, i think.

anyway, we're going to call him. maybe he'll -- what time is it in audi arabia? >> i think it's about eight hours ahead there. >> my iphone, i don't have it. >> do you know it's different days some places? tomorrow some place. >> on the other side of the international date line? i don't know. it's complicated. i was thinking about that. there are birthday notes and holiday wishes, but business to business greeting cards. our next guest is an american-made story making money from helps businesses communicates. first, a program note, we are thrilled to be launching our new prime timelinup. don't miss the new reality series, "the car chasers" find it, fix it, flip it. jeff and perry get a lead on an iconic ferrari in las vegas with huge potential to make a big profit. that's tonight at 10:00 eastern.

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if you're just waking up, the dow could hit an all-time record today. we're about 37 points away from the all-time closing high -- when was that? >> october 2007. >> october 2007. if you look at the last time we really doubled and tripled, it was back between the '80s and the '90s. we've been watching multiples contract and watching everything else go up and is valuations get better because they were so stretched with the -- remember

the nifty 50 in the late '90s? >> spring loaded. >> yeah. >> and finally, it will be a big day. i may burst into tears when it happens. just remember, relief, finally, joy and happiness. >> six long years. >> for all of us. >> recovery for anybody who has invested in the market. >> and it's an indicator of the rising prosperity, hopefully. and unfortunately that's what people keep pointing out, it's not for everyone. but a lot of people indirectly do have investments that -- >> pension plans. >> pension plans and the wealthy sector. it's good -- you know -- >> it's also because the housing prices are coming back and that's a big wealth indicator that makes a lot of people feel better about their houses even if they don't plan on moving anytime soon. >> well, for people looking at rising stock prices, all you need to do is look at the converse and what a stock market crash or a stock market decline can do with misery for an

entire -- for everyone. >> for anyone. >> they'll look at one side and look at the history and you can see how much better it is when stock prices are headed up rather than down. >> this is true. our american-made company this morning, eric jessie is president of posty cards. this is not a consumer business. this is a business to businesses. >> absolutely. and we -- we primarily sell into the financial markets. and we make all of our products in america, that's why we're here, all of our paper is sourced from the u.s., as well, from the u.s. mills. and we are selling a product to business professionals that believe in building relationships with their clients. and the greeting card is -- continues to be a very powerful way to do that. >> what's different about posty cards than, say, a hallmark greeting card?

so all of our designs are meant to send to clients in volume. and we're selling directly to the end customer. so, we're not selling at a distribution, we're not selling retail. >> is the message on a posty card different than what i get on a hallmark greeting card? >> it's more professional. it's meant for the business client. >> i immediately thought sympathy cards. financial to financial. sorry you got caught up with that libor thing. that's just awful. jpmorgan, whoo -- are they sympathy cards? >> sorry you got caught with shorting the same things you were pushing the client -- >> you know, about the biggest category. >> i would think that would be -- i'd think -- or congratulations. >> that could be it. we could do that. primarily holiday cards. >> holiday cards, and because

we're selling into the financial cuss stri, they know birthdays. so we're -- we sell a lot of birthday cards, as well. >> but the holidays cards, christmas and hanukkah cards? >> christmas, thanksgiving, primarily the biggest sellers. but birthdays are huge, huge category for us, as well. >> how long has the company been around? >> 1948. is when we were founded. >> wow. >> with the idea, again, of the greeting card is a great way to touch the customer, and just build loyalty over time, and -- >> these are -- there's a lot of them that i get now are, i don't -- they're not as good. because i get them here. but they move, and they -- >> yeah, they're snazzy. but you know what? they go away really quick, don't they? >> yeah, i don't even think about it. >> do not send your wife one of those. >> no, she wants a real one. >> that's like giving her a gift card for something. >> here's the thing, too. i mean, you know, there's a lot of buzz about social media and electronic greetings, that kind of thing.

but physical card is -- is very powerful, right? it stays with you. think about it. what's the first thing that you open -- >> do -- when you open them do they sing or do stuff like that? those are my favorite. >> simple greeting cards. >> did you suffer in the downturn? >> you know, you know, most companies out there, we didn't see as much growth. >> right. >> but we're still really bullish about the concept. >> right. we're done, thank you. we appreciate it. >> thank you. >> erick jessee. coming up, stanley druckenmiller, former fed governor ken warsh, ken langone and jeffrey canada will join us on set to talk about investing and keeping america great. [ ma] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air.

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on the cusp of history. the dow less than 40 points from an all-time high. can we break through or will there be another pullback? >> a special one-hour panel with power investors. stanley druckenmiller, ken langone, kevin warsh and jeff canada talk markets, the economy and fixing washington. and it's the mercedes makeover. ♪ daimler's chief joins us for an update on the company's turnaround plan, as the second hour of "squawk box" begins right now. >> good morning. and welcome to "squawk box" on cnbc, i'm joe kernen, along with becky quick. andrew is on assignment. the futures this morning are

indicated higher. we're going to be just below an all-time high, which we've all waited too long for. maybe it will happen today. it's got to be a closing high. it would be disappointed. but seems to be on the bull side. more on the u.s. markets but first your headlines. world markets getting a boost from new spending plans unveiled by china. the country saying it will spend enough this year to meet an economic growth target of 7.5%. analysts say that behind the scenes chinese leaders are actually aiming at even faster growth. and deutsche bank is said to be shopping a 10 million share lock of jcpenney. currently held by vornado. right now they hold about 18.6 million pennies share and 8.5% stake. i figure we could call -- >> that's what i'm wondering. >> and house republican leaders have issued a proposed new spending bill that would avert a potential government shutdown later this month. it leaves most of the so-called

sequester cuts in place, but restores funding to the pentagon, the fbi, and the u.s. border patrol, that will be considered by the house later this week. the dow jones industrial average edging to an all-time high. very near that. right now the index, yesterday, rose up by 34 points as indicated by about that much higher above fair value again this morning. puts you right in range. brushed off a lot of bad news from china and ending with the second highest finish ever. at this point, just 37 points away and that's where the futures are this morning from a record close. yesterday's biggest dow advancers was walmart which climbed more than $1.50. that's a gain of better than 2%. the s&p index gained 7 points to close at about 1520 and the nasdaq gained 12 points to close at 3182. for the next hour we put together a power panel to examine the health of the markets and the economy, tell us what needs to be done in order to fix some of the big problems that are out there, as well. stanley druckenmiller is former chairman and ceo of kane capital

management. ken langone, jeff canada is the president and ceo of harlem children's zone. and kevin warsh is the former federal reserve governor and distinguished visiting fellow at the hoover institution. gentlemen, welcome. we are so pleased to have all of you here this morning. we have a lot of ground to cover. why don't we start with this market at this point, and ken, the question is, is this rally for real? >> i don't know. >> you don't know. why? >> because i think there's too many factors out there that you can blame one way or the other. i don't know. >> you like -- >> i do know low interest rates are driving people into the equity markets for a return. >> you think it's a little bit of a false rally because of -- >> i'm not calling it false. i'm just saying what's driving it, where the energy is coming from is people looking at their returns on bonds, and the high risk in owning bonds because if rates go the other way, and they will, you're going to lose a lot of money if you're in ten-year or 15-year or 20-year bonds. >> was that handkerchief you showed when we're going to show

you, probably, that's when you probably should have put it away. but if it makes you -- does it -- is it made out of old water bottles? >> no. >> it's real, joe. >> it's not absorbent. only cotton is absorbent. go to a restaurant and spill a drink, and try and pick up the water. just pushes it around. >> 28 seconds to tell one of his stocks. >> right. >> you know, druckenmiller might actually know something about whether the market's going up. i don't even -- >> i does. i'm admitting i don't know. >> i'll tell you why i'm confused. when they did qe-1, the game plan was to own stocks until it ended. >> right. >> sure enough market rallied like crazy, ended qe-1, went down, then they announced qe-2. market went up, when they announced qe-2 would end, a lot of news about government fights and got our debt downgraded, but if you look at the timing the

market peaked out exactly when qe-2 did. so now that we have qe-3 forever, i don't know when this thing ends. but is it for real? i don't know what real means. what i do know is $85 billion a month being put into the markets, a lot of people took a lot of money out the last four years for a lot of reasons, tech selling in december, a lot of interesting buyouts in the last month or two. so you've got a great supply and demand situation for stocks right now. but, i'd analogize to the harpster on the wheel. it was easy to know qe-1 and qe-2 were going to end. this thing is probably going to end, even though i think qe is going to go on forever because all the lobsters are about to get into the pot. maybe we're in the seventh or eighth inning but they're going to get boiled at some point. but right now, supply/demand looks great. >> it's been surprising that even with all this talk, with the knowledge that rates are going to change, the knowledge that bonds are not going to --

i've been surprised that you haven't seen more money truly move out of those bond funds. >> well, bonds are being subsidized by the same thing equities are. if you print enough money, everything's subsidized. real estate, bonds, stocks, you know, we all think we're clever, but there's no reason bonds should go down if they're printing -- what is the government buying, 80% of the bonds? >> you look at the last three years or so and the fed's purchases have been about 75% to 80% of all the new issuance coming out of trernry. we used to say the chinese were the largest buyers of treasury debt. now it's the favrederal reserve. >> one of the frustrating things we mention in our piece is those purchases are canceling market signals. the bond market has, and the stoeshl, have provided wonderful signals for many years as to potential problems out there, or potential signals. and when you cancel those signals, whether it be to congress or other people the

markets themselves, you could run into a problem. i mean, i thought we were done with wage and price controls back in the '70s, this is the biggest price control of my lifetime. it's one thing to control short-term interest rates. it's another thing when you're taking 75%, 80% of the bond supply and holding that price down. and we had a lot of, what i would call, malinvestment, dislocations back in the '70s. i think at some point in time we're going to find out, and it may be years, exactly where you had a misallocation of resources here. but this is a big, big gamble to be manipulating the most important price in all free markets. >> by the way, ask a question to you two, where does the fed get the money to pay the federal government to buy the bonds? so the american people, i don't think, understand how simple this is. explain it. >> so the invention of the printing press has something to

do with this. >> that's it. >> i mean ultimately, there is one government. there is one integrated balance sheet. the country's finances, responsibilities might be divides but the finances are really one, and i think becky to your question on the stock market, listen, the stock market might like this, a period of 1.5% or 2% growth, a period of negative real interest rates that go on for as long as the eye can see, that could be good for people that are interested in putting risk to the. but that's not the right miss k. if the economy is growing below trend the economy is not bursting out to the upside of 3% or 3.5%, what we're really staying is standards of living and opportunity for all the kids at harlem children's zone are in a very different place than they otherwise would be and i think jeff's kids need an economy growing faster than it is. >> you three, kevin, jeff, andstonly, you wrote an op-ed together, where independents, democrat and republican, came together to say you have serious

questions about what's happening right now. raise those questions and you brought up because you see the impact at the school and what you can and can't do. >> these issues are often talked about as if they don't have real impact on real people. and the thing that i think we represented, the american dream, the opportunity for people to do their hard work through their ingenuity, through their intellect to make it in this country on a level playing field where the deck is not stacked. now look, these guys are some of the best economists and business people in the world. that is not me. but i've learned one thing in 25 years of knowing stan druckenmiller, every now and then, something so profound is happening to this country. and even geoff canada gets it. i don't get a lot of this stuff. when he talked to me about the tech bubble before it burst more than a year, i got that. i was like how come no one else sees this? mortgage? the mortgage crisis, stan told me about that mortgage crisis 14 months before the rest of america, and it was so clear, and i got it.

here's another issue that is so clear that i get this, and i think it's time for the american people to wake up. my kids, these poor kids in harlem, they are being taken advantage of. because people like ken langone is getting social security. >> who shouldn't get it. >> i don't know why he needs social security. and it's going to rob it from my kids, who really are going to need this. i've been telling these kids, work hard, go to school, this is the american dream, this is the way you make it in america. a bunch of guys my age should not be taking from you -- >> you're over 65? >> way over. >> even the -- even the ryan plan wanted to not touch people 55 and older. >> right. >> and a lot of people are out there saying let's delay this for 10 or 15 years. let me tell you why you should not delay it for 10 or 15 years, and current seniors, we have to act on it now. mr. langone and his wife, what do you get a year? >> $48,000 a year. >> so any economist understands

opportunity costs. $48,000 to ken and elaine, lovely people. my mentor, i love him, okay. is $48,000 in opportunity costs that could go to geoff's kids, and other things. and let me just say one more thing about qe, because i think it pertains to this exact situation. i don't understand why people don't see qe as the biggest well transfer. we're all worried about rich versus poor. this is trickle-down monetary policy. who gets rich from qe? people like me. people in the markets. >> it hurts our seniors -- >> -- in harlem? >> or seniors on fixed incomes, too. >> we're going to take a break. i want to get back, when was the last time you were on when i've never seen you where you tread very lightly, but you talked about this is uncharted territory that the fed had entered. was that when we announced -- that was before even -- there were bigger things that happened after that i think, weren't there? wasn't that just the -- do you

remember? >> you've invited me back more frequently but i wait till becky invites me back to show up. >> you and warren buffett. >> do you remember when it was? >> i was on a few months ago and i would say listen to chairman bernanke's views, i think he would hear all this and i think he'd say, what else do you want me to do? >> right, i know. >> the rest of congress isn't doing it so he's feeling necessary -- >> the rest of the world is doing the same thing so we don't look that bad doing it. >> the rest of the world saw it because we're doing it. we're the reserve currency. we're the big dog and if we're doing it they've got to do it or their currencies are going to go up and they're going to get squeezed. >> we're going to come right back in a second. we are indicated somewhere up near an all-time high. if it were to close there. that is enough to get us to a new high. keep it locked to cnbc for the latest. and then a recent op-ed that we were just talking about, penned by three of the four men on 'tis morning's panel, is what we're talking about. government spending levels are unsustainable. three different political backgrounds. you know, i heard independent

democrat and republican. i don't know who's who. we're going to find that out. it's a huge problem. we're going to tackle that in a couple minutes. everyone's retirement dream is different; how we get there is not. we're americans. we work. we plan. ameriprise advisors can help you like they've helped millions of others. to help you retire your way, with confidence. ♪ that's what ameriprise financial does. that's what they can do with you. let's get to work. ameriprise financial. more within reach.

welcome back, everybody. checking the futures right now. dow futures up by about 36

points above fair value. s&p futures indicated higher, too. here's a story for ken langone. private equity owners are reportedly preparing to take hd supply public. nearly six years after buying the industrial contribution company from home depot for $8.5 billion. bain capital, carlyle group plan to interview investment banks to select underwriters for the proposed initial public offering. hd supply is one of the largest distributors of construction, industrial and maintenance supplies in north america. >> did you pawn that off on -- >> no, listen, you got great guys -- clayton dubois has done a hell of a job. the guy running the company, joe deangelo is superb. he is truly has done a magnificent job, and we're glad they own it. they're doing a great job with it. no, seriously. we're better off being just what we were, we brought it to the dance, frank is doing a phenomenal job. new all-time high in the price of the stock yesterday. not all-time high in value

because we had a billion shares outstanding. but the point is, it's a win-win. we won by getting out of the business. they won by getting into it. i think the public will have a very good investment. >> and more private equity -- not only is deangelo a fabulous manager. what joe did to help us at nyu medical center after the storm was unbelievable. okay? so i'm a big fan of what they're doing. congratulations. they've done a great job with the property and i think it will be a great investment. >> okay. up next we're going to talk about why government spending at current levels is unsustainable. this morning's panel is going to be talking about the threat to future generations. what it might mean. also at the bottom of the hour, daimler's chief executive dieter zech will be joining us. plus tonight is the premiere of the all-new cnbc prime-time featuring the new series the car chasers. jeff allen and terry barnes find, fix and flip cars. in the premiere they're getting a 1981 ferrari ready for auction when a surprise discovery in

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>> sorry. >> let's continue our discussion -- we're on. we're back! >> stan druckenmiller is -- you -- >> i haven't got any. >> -- nobody has hair. >> i need a hair cut. it's starting to show on top. >> ken langone is over, geoff canada and kevin war be. off camera we talk about a lot of things. i think one of the things in the op-ed piece that we're talking about is, we talk a lot about capitalism, and we have said capitalists don't portray well.

they portray well across dream prosperity. but viewing it the way you do, it's a moral issue for generations to come in that they can't be saddled -- they won't have the same opportunities that we have. >> and it's clear what made this country great. it's the ability of folk to believe in the american dream. to believe that the system is really fair, and it's not stacked against them. you can't get a bunch of old guys like me, robbing from the next generation when you've got real -- you've got real issues in this country. we've got a college becoming less affordable. we've got a middle-class that's disappearing. we've got people who have degrees from college who wonder if this whole thing is going, and then i'm telling my young kids that this is the greatest country in the world, that if you play by the rules, that everybody has an equal opportunity. and it's not true when part of the country is literally taking the resources from the rest of the country. what are we going to end up cutting if we don't touch

medicaid, social security, and medicare? we're going to cut education. we're going to cut all of the research and investments that we need to keep our economy booming. this is just not fair. and this has nothing to do with whether or not you're a democrat or a republican. it has everything to do with whether or not you love this country and you believe that we should have an america where every young person has an equal access to make it in this country. >> when you view it that way, you view -- that was very -- when you realize you're getting $48,000. you're on that list that i saw yesterday from forbes. why are we spending the $48 billion giving it to you when you can't spend it on everything. i don't know how to fix education. you run a charter school. we have to reform the way education -- that we're doing it. >> wait a minute, let me tell you what i've learned from this president. did >> you going to argue for your $48,000? >> no, i'm not. take it away. but it isn't going to work if we appeal to old people to be fair. it isn't going to work. the president has proven that if you appeal to people on the

basis of something in it for them, you got 'em. now bush -- romney said a lot of things i don't agree with. but this he said was right. you're not going to get people to vote against you if they're getting something by voting for you. we're not going to solve the problem. as a matter of fact i'm speaking at the university of missouri next month and i'm going to do it for the first time. i think we've got to energize these kids in college to understand that they're being ripped off. and we've got to pull them together, and have them become a political force to say you've got to change this. and as they come into the voting age, that's the ultimate -- >> they are a political force, though. >> and this is -- >> for the last eight years. >> let's not kid ourselves. this is bipartisan. >> absolutely. >> entitlements grew more under nixon, ford and george w. bush than any democratic president. and what's interesting is these young people, everybody says they can't look that far ahead. that's not true. they are fanatical and rightly so about where the environment is going to be in 40 years. so, the thought that the young

people can't envision the world 40 years from now is ridiculous. it's no different than the environment. it's current consumption versus future consumption and if they can get motivated on the environment they really ought to get motivated on this. i'd like to see 40 million of them walking down to washington on this issue. you know, this man has moved heaven and earth, i've been with him about 20 years. >> a little more. >> 100 square blocks in harlem to give -- to level the playing field and give these kids the same chance that we in the room had when we started out. and i have seen him look these kids in the eye, these 3 and 4-year-olds right out of the lottery and tell them, if you work hard, and you do what we say, i'm going to get you through college, and then you'll have a job when you get out. the reason he's going a little nuts right now is for the first time, looking forward, if he fulfills his mission, we're worried that that job may not be

there if they handle their part of the bargain. and we're frustrated. >> that's right. that's exactly right. this is really, i think, about equity and fairness. and the problem isn't -- and this is -- i find that i would never bet money betting against ken langone, all right? but this is one thing. we have let our political leaders off the hook. right? as if we can't trust them to tell the truth. everybody's thrown in the towel. they'll never be honest, right? so we'll have to do this some other way and i think that's wrong. i think that it's time to really say that we've got to get the political leadership to have the courage to say that whether you're a democrat or a republican or the president of the united states, what's happening with these entitlements are robbing from the poorest and most disadvantaged kids, and then we as americans shouldn't allow that to happen. >> there's one -- don't expect courage out of politicians. okay? because all they care about, frankly, for the most part, is getting re-elected. and this is why i think we've got to get on it in a political way. we've got to energize these kids

from colleges to understand that we want to help them. those of us that feel i shouldn't get it but we need to energize these kids to go after the other side. >> we're going to continue this conversation in just a moment. also up next we're going to head to the geneva auto show where daimler-chrysler is showing off the new mercedes. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats.

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welcome back to "squawk box," everyone. in our headlines this morning, the markets aiming at record territory. the dow is just about 37 points away from the record close back in october of 2007, and about 70 points away from its record intraday high. the s&p 500 is about 2.5% from its record close. we have just one economic report out this morning. we will get the latest read on the u.s. services economy at 10:00 eastern time. the ism's nonmanufacturing index expected to come in at 55 for february. slightly lower than the january reading. and heinz chief executive officer bill johnson could be in line for a $56 million pay day. that's how much he'll receive if he's terminated after the company's acquisition by berkshire hathaway and 3g capital. the company says that amount is

reflective of his success during his 15 years as ceo. stan, you said you had some math that you wanted to lay out so people really understand the problem -- >> there's a lot of talk out there about 16 trillion, austerity, and some people saying things are getting a little better. 16 trillion is not the problem. all right. well, it is a problem. but it's not the problem. let me just take you back a little. back in '94, ken and i wrote an ad in "the washington post," when gingrich and clinton was going at it, and we wanted to go after entitlements then. and there were a lot of spending cuts that were actually fruitful but nothing was done on entitlements and i remember arguing at the time we should change the age on this stuff 15 years out. why was i saying 15 years out? because, the demographics of it are very simple. if you're born in 1946, start of the baby boom, in 2011, you turn 65.

so, if 15 years ago you could have put that trigger in then, what we're talking about earlier, the people that are actually ready to collect now, you take care of the problem. so when i say it's not the problem, let me just give you the math. back in 1960, 28% of government outlays went to entitlements. in 1994, when we were having this argument, 50% went to entitlements. right now, that number is 67% going to entitlements. okay, that sounds horrible until i tell you the really bad news. that had nothing to do with demographics. and right now, we're at a point where old people are going to grow twice as fast as young people. >> what was it if it wasn't demographics that got us to those percentages? >> the last chunk was medicare-d. basically what it was is a very strong senior lobby that voted, young people don't vote or didn't care about this particular issue, and they kept driving more and more of the pie.

so the pie is gone, where they're now getting 67% of the pie, except we're about to have twice as many eaters over the next 20 or 30 years than we have now. >> but, just that -- if people who disagree with you will say you were fighting this 20 years ago and we're still paying everybody, so clearly we don't have a problem. >> no, no, it's just the opposite. i said 20 years ago -- it wasn't 20 years ago, it's 1994. i said the problem will start in 2010. i never said there was going to be a problem -- >> what about a much simpler fix. >> to my horror that was when it was 50%. to my horror we've gone to 67% before we ever got to the demographics. let me just give you a real quick demographic thing here. the ever 64 population between now and 2050 and going to grow 120%. the working age population is defined from 18 to 64 is going to 20%.

okay so what's going to happen is right now you have 4.8 million workers -- excuse me 4.8 workers for every one retiree funding this stuff. and as you know that's how you do it. the current guys, it's a bit of a ponzi scheme. that 4.8 goes to 2.8 in 2050. so you're going to have all these benefits, but you're not going to have the working population to pay them out. >> it will be 85% of what we spend will be on entitlements. >> yeah. so the interest rate bomb, i talked about on maria's show, that's a totally separate issue. this is even before you turn the lights on, you got this problem. so the 16 trillion, if you look out at this kind of thing, depending on who you listen to, probably the best generational accounting out there says it's $211 trillion. there's all sorts of numbers out there but it's probably somewhere between $70 trillion, and $211 trillion. what we know is it's a lot more than $16 trillion, because the

demographic storm is just hitting now. >> i'm going to just say, when stan gets these numbers like this, i've seen this movie before. and it's been a disaster for america and no one listens and i don't understand it. >> how do we start convincing liberals, or their elderly people, that it's not -- that it's not a cruel darwinian thing to take -- >> ken's got it. i'm not worried about liberals. this is sheer political power. we've got to get these young people -- >> no one wants you to touch entitlements because if you do and you make it means testing -- >> i bet you there are a bunch of 65 and overs who just heard me who are not aware of this, they're getting about three times what they're grandchildren are going to get. you need to reallocate some of that money. i mean one of the things we said the other day is, look, this is not anti-senior, joe. it's really not. geoff's 3-year-olds are going to be seniors. it's just should the current seniors be getting two to three times much as the future seniors. we're just reallocating here.

we're not taking from seniors. >> you means test it and you don't make it universal then it becomes viewed as welfare and the left worries that the right there try to get -- >> i can't answer that because he's the one getting the welfare. >> i agree with you. i am getting welfare. let me say this to you, these are really exciting numbers in terms of making a case. very exciting. but let's go back to the human implications of those numbers. >> exactly. >> these kids, these kids will not -- geoff tell them the story about the lottery and what the mother said to you when her son didn't get picked from the lottery. >> it is so clear that there are people who understand, that without a real education, they have zero chance of making it in this country. and what we've done to huge numbers of young people, denying them an education, that it's reasonably cost, but yet we'll spend, in new york, 45, 50, 60,000 a year to incarcerate these young kids when we know they never had a chance. so this mother said to me when they didn't get in the lottery, there goes my kid's life.

i have no chance at all for this kid, and she's in tears. and what kind of america is that? we need investments for this generation right now so that they will believe in the american dream and they don't give up. >> she said specifically, this likely means that my child, whose number didn't get picked in this lottery, will likely be in prison when he's 18 years old. think about, now, look, we have a real social issue here in america. we can't long afford what we're doing. if we don't do something about it, trust me, we will have social unrest in america. we have to have it, because people won't be educated. people won't be able to get jobs. home depot won't be able to hire people that can read and write. it's mandatory if you work in our store that you're able to read the instructions on a product to say to the customer, this is how you use it. >> believe or not we've got to go to the geneva auto show. opens today and mercedes is running the gamut for car lovers

from the cla class for under $30,000 to the debut of the amg a-45. phil lebeau joins us now with the man who needs no introduction, dr. z. hey, fill. >> how are you, dieter zetsche the chairman and ceo of daimler joining us from the geneva motor show. dr. z., thank you for joining us this morning. i want to start with the question that's getting a lot of attention, particularly in europe, and that's the extension of your contract for three years and not five years, and a fair amount of speculation that investors for daimler are starting to get a little frustrated that under your tenure, daimler has not performed as well as its european competitors. what do you say to that? >> these are two issues. the first one is that i just got a contract extension which reached four years through the end of '16 from today. i think that's a unanimous vote of confidence to continue leading this company. on the other hand, the investors who are obviously not involved in this discussion or decision,

i was just on the road from frankfurt to london to boston to new york and we got very encouraging feedback from our investors, who do believe that the strategy we're taking is the right one. it's about execution. so we have to deliver on our guidance and that's exactly what we see as our path. >> how do you improve execution in europe? i mean german auto sales for the industry down 10% last month, and a lot of people look at where you're at in europe and they say, we see no bottom. we still do not see a bottom in european auto sales. >> well, one thing obviously is the markets. and admittedly the european market has not started very encouragingly in this year. the last two months. we think, we think that we are at the bottom, and that we can see some upleft in the second half of the year, but of course that's nothing you can put a definitely safe bet on. so that is an assessment at that point of time. we hope it will develop that

way. and yes, things are going well for the autos, same applies to china. so for us it means taking the markets as they are. we can't change it, and create as much demand as possible with great product, great quality, fantastic design. and cost efficiency which supports our bottom line. >> and quickly, dieter, here in the u.s. you've got the cla class that's going to be coming into showrooms later this year at a price point under $30,000. what's been the early reaction you've heard from potential buyers about a mercedes starting under 30? >> well, since the super bowl, we get tremendous reaction at this early point in time, already. especially young buyers, as well, thrilled by this new offering, and the price point seems to be just on point. so i think we have a winner here. of course, we only can confirm that when we started sales, which will be in september of this year. >> dieter zetsche, chairman and ceo of daimler joining us from

the geneva motor show where it's always a big show every year, joe, but this year in particular, a number of interesting models, and coming up next hour, joe, we're going to show you a $3.9 million vehicle that will blow your socks off. wait until you see this thing. that's coming up next hour on "squawk." >> wow. we'll look forward to that, phil. $3.9 million. thanks. checking futures right now, we are indicated, if we were to open where they are right now we'd be just below an all-time closing high. could happen today. could close there today. we don't know at this point. but keep it locked to cnbc for the latest. and tonight the premiere of "treasure detectives." we had curtis on last week. curtis dowling and his team of investigators are out to expose the fakes. they're on a mission to help collectors of art and antiques discover if they're holding trash or treasure. they look at a liechtenstein tonight, it's pretty cool. the convergence of art and science at 9:00 p.m. eastern. and then at 10:00, jeff allen

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we're wrapping up our panel. our distinguished panel. and we're going to talk what to

do here. stan druckenmiller, former chairman and ceo of duquesne capital management. ken langone co-founder of home depot. geoff canada is president and ceo of the harlem children's zone and kevin harsh, former fed fellow. we're out of time after that intro. no. actually, we talk about all these things, and it's -- hopefully policymakers will listen. hopefully, the public will listen to this. but, in the meantime, where we are right now, you've called up friends in the past. you're one of the great investors of all time. i saw you're name. you're like in the top 20 or something on that forbes list. what's an investor to do in macro -- >> joe, didn't you say i was former head of duquesne? you know i retired so i didn't have to answer questions like that. >> but you're so smart. >> one thing i'm not is smart. look, here's my problem. the fed is printing a lot of money. they are forcing people into

markets. you shouldn't be buying securities because you're forced to buy them. by zero rates. you should buy them because you think they're great value. they're great value only relative to zero interest rates. they're not great value on an absolute basis. having said that, the party's going on, money's being pumped in, as i said early, supply and demand is good, so i think this party can continue for awhile. the problem is, i don't know when it's going to end. but my guess is, it's going to end very badly, and it's going to end very badly because, again, when you get the biggest price in the world, interest rates, being manipulated you get a misallocation of resources and this is going to end in one of two ways. with a malinvestment bust which we got in '07-'08. we didn't get inflation. we got a malinvestment bust because of the bubble that was created in housing. or it could end with just monetizing the debt and off we

go in inflation. so that's a very binary outcome. they're both bad. they're both off in the future. i don't know when. the one thing i would say, if you're going to play, and i'm a professional investor without clients, and i am playing in the game, for god's sake play in liquid instruments. i think a lot of people knew by early mid'08 that there was a problem but the reason they were hung, because they were instruments they couldn't get out of. there's plenty of wonderful public securities out there, don't ask me what they are. this man knows them a lot better than me. that's where you should be playing. playing in stuff that if you change your mind, and if the signs come that this game is coming to an end, you can get out. so i don't know the answer to your question. i tried not to. >> did malinvestment -- so it would be a process, if it ends badly, that way. if it's not an inflationary end -- >> a malinvestment end would be, okay, we're pumping all this money in, people are buying more and more credit.

they're buying bonds which yield 5%. i mean, how many elections are you going to have in zambia, how many possible government transfers in the next 20 years before those bonds mature and you get 5%. you're telling me there's no misallocation of resources going on? so, that's -- that's my problem. is, when this thing ends, it could end very badly. however if it ends in a malinvestment way, the money pumping in, it has less and less efficacy, and the economy slows down or goes down to the point that those securities you own are exposed. by a falling economy. let's take the other case. let's say given big inflation, i own a lot of companies out there, because they have a 3% yield. 3% seems pretty good. okay? what if rates go to 6% or 7% or 8%, what do you think those stocks i own with these steady

3% yields are going to go? again i'm not talking about today. you asked me the question. i don't know when it's going to be. but, i just know when you get this kind of rigging in this manipulation that it should end badly. >> kevin you know everyone on the fed. you saw the little -- the scuttle but when a couple of the guys stepped down and said maybe some of the adverse consequences are starting to outweigh the efficacy, and then we came back and we've decided bernanke is the guy and he doesn't think that way and he's the one that controls it. do you have any idea how long -- >> so i don't know. i'm not privy to their discussions. i'll be my two years of parole will be over in april. but i would say markets seem to be confused about who's running the show down there. chairman bernanke is. the minutes continue to put out noise and market participants think that the fed is conspiring to send signs about what the next steps will be. i think the chairman is, for better or worse, calling it the best he can see it, and his judgment out there is that he is going to continue to provide extraordinary monetary

accommodation until these labor markets in his own words are substantially improved. so the trick for central banks is always to figure out when to exit and i think he has told us and told your viewers that he's going to wait until he's darn sure this economy has real legs, and i think what you've heard from these other guests over the course of the last hour is this economy does not appear to any of us here to be showing the kind of extraordinary growth that has marked virtually every recession since the second world war. so we do not see growth that is moving well above trend, and as a result, i think the fed is prepared to keep at this level of combination for a very, very long time. >> can i just comment on that for one second. the thought that you can exit by wherever the balance sheet will be at that time, 4 trillion, wherever it is, in an orderly manner the chairman testified that will give the market plenty of warning, do you know what guys like me are going to do when they sell the first bond out of 4 trillion? and don't think that letting the bonds run off isn't selling.

that debt has to be refinanced. if you do not -- if you just let all the bonds run off that is still 4 trillion in selling. >> and it's not till they actually sell the first one, it's till you get the whiff -- >> what do you think -- what do you think the markets are going to do when they figure out the exit. look what happened in qe-1 and qe-2 ended which is why i don't think this sever going to end. >> that's what buffet told us yesterday, too. that the fomc minutes was something like a very light match, actually see the cigarette of bernanke starting to burn on that everybody's going to run to the excite. >> totally apropos what ken said bear in mind the real unemployment number is not 7.9. it's a hell of a lot higher than that. much higher. >> what would the real bond ten-year yield be? i hear what you're saying. there have been times it's started backing up the yields and either we've had problems in europe or a spring swoon here in the economy and it almost looks like the rates come back down on their own. it doesn't look like it's all

the fed. what do you think the real rate of the ten-year would be if there was no qe? >> i have no idea. >> you sure it would be higher? >> no, no, we might already be in a bust. i have no idea. >> but it's -- all we know is that it's not a real -- it's not a market driven number? >> and we know the longer you keep it there, the greater the misallocation, and the greater the pain. there's been some commentary about '01 and '02. and what happened, and not being fair to workers. i can promise you, had we had a tighter monetary policy than we did in '02 and '03, it's true, we wouldn't have had the boom in '04 and '05 and '06 we had. it's also true that we wouldn't have had half the subprime mortgages written, people thrown out of their homes, so many people unemployed. so you take a little less prosperity in the near-term, or even, god forbid, a minor recession as opposed to just keeping the party going, because when the party ends, we all know

about drinking. the hangover is a lot worse if you drink a lot more. >> how much would simpson-bowles have solved the looming crisis, at all? >> i think it would have helped. >> we need even more than that. and we're nowhere -- we're not even close to doing that. >> all this discussion goes back to the kids. who's really going to be hurt by this happening? >> what can we really expect to do? >> hold it. we've got to figure a way out to energize these kids to understand, they're at the greatest risk of all. look. there isn't a hell of a lot that's going to change in my life or my wife's life until we go. thank god we've done very well. and we live comfortably and we live sensibly. but these poor kids haven't even started yet, and when you think about the implications of frustration of not being able to get a job these kids have graduated in may of this year. they still can't get jobs. okay? so there you go. >> i know. i see all the problems -- >> by the way i want to say one more thing. >> 15 seconds. >> hold it.

i'm bragging on -- hold it -- >> we're -- >> thank you. unbelievably -- >> gentlemen, thank you so much. really, really -- >> don't leave yet. >> when we come back, luxury auto sales in overdrive. we've got some hot cars right outside our studio. that stories coming up. and take a look at the futures. ken? ina, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right.

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markets closing in on an all-time high. will investors push through to record levels? we'll find out where pimco is investing trillions of dollars. plus one more hour with former fed governor kevin warsh. >> what are you doing? >> and "squawk" gets behind the wheel. luxury car sales outperforming other segments of the auto industry. phil lebeau is here and he brought some high performance toys, as the third hour of "squawk box" begins right now. ♪ up and down the freeway >> welcome back to "squawk box" here on cnbc. first in business worldwide. i'm joe kernen, along with becky

quick. andrew ross sorkin is on assignment. our guest host this morning is kevin warsh, former fed governor. he's currently a visiting fellow at stanford's hoover institution. and kevin has learned quickly that's what i do with the ifb. these people, they talk, they try and say things, they're constantly saying -- just take it. take it out. leave it out. it's easier to do the show. they're constantly meddling. blah, blah, blah, we got to get to commercial. all this stuff. it's just a lot easier. >> works much smoother when we just ignore -- >> let's move on and continue. >> yeah. >> i'm the good girl. i keep it in my ear right right now. our top story this morning is stocks. the dow starting the week -- shut up. the dow starting the week with its climb to the second highest close ever. the blue chip index about 37 points shy of an all-time record right now. the number to watch is 14,164. that is the all-time closing high hit back on october 9th, 2007. equity futures are up by about that much.

just over 36 points. so if we were to open right here we'd be at the all-time closing high. question is, of course, if the market closes there, as well. overseas in asia, you did see some world markets getting a boost this morning from new spending plans unveiled by china. the shanghai composite was up by 2.3%. country says that it's going to be spending enough this year to meet an economic growth target of 7.5%. analysts say that behind the scenes chinese leaders are actually aiming at even faster growth. in europe this morning, we've seen some green arrows there, as well. in fact in germany at this point the dax is over by 1.6%. that's a big gainer. the cac in france up 1.3%. martha stewart is due back in court today. she's in the middle of a legal battle between macy's and jcpenney. and one of jcpenney's largest shareholders is selling a chunk of stock. courtney reagan joins us with the latest twist. good morning again. >> good morning to you, becky. that's right. today we will hear from the woman herself, who makes macy's ceo terry lundgren sick to his

stomach. martha stewart will testify today in the new york supreme court, in the case that macy's has brought against both her company and jcpenney. as macy's fights for its exclusive right to sell martha stewart branded products in certain categories. now the court does have to finish up some testimony from the chief administrative officer before we can hear from the domestic diva herself. but we do expect that to happen sometime before the court brakes for lunch. as martha tries to secure product lines at both macy's and 17% stake holder in her company jcpenn jcpenney. the ceo said he believes a wide distribution of martha stewart branded products is quote, a good thing for all parties. lundgren, however, disagrees. macy's ceo testified that when martha called him the night before the jcpenney deal was announced he was shocked. and when she said that she thinks it actually is a good thing for macy's he hung up the phone on his then-friend and has yet to speak to her since.

jcpenney tells cnbc macy's is attempting to gain more rights than it actually has under his written krkt with mslo. they would not have proceeded with the partnership agreement if they thought it would interfere in any way with the macy's and mslo agreement. as you can see martha has herself in a tough spot because, of course, she wants to keep her product lines in both macy's and jcpenney, which does own a stake in her company. and as this drama continues to unfold you mentioned that cnbc has learned deutsche bank is shopping about 10 million shares about to be longed to vornado realive trust in jcpenney. now we know that steven roth who is the chairman of vornado is also a board member at jcpenney. all of this continues to unfold. shares under pressure in the premarket as this courtroom battle is really just at the beginning stages friday could still be a very, very important day when the judge decides what exactly to do with the nonbranded products in the

exclusive categories that jcpenney plans to put on the shelves. there's a possibility he could disallow that from happening which would mean empty shelves on jcpenney's store floors in time for mother's day. becky? >> all right. courtney, thank you very much. >> thanks. >> if i was a lawyer, i mean i -- i have opinions about -- >> i was listen to what -- jcpenney really thought that it wasn't going to interfere with anything at macy's? you believe that? >> no, but from martha i could see how she'd love her relationship with macy's. but it's her job to try -- >> to try to make sure the brand is bigger all over the place. >> and sold everywhere. for terry i could see how it's so important to be exclusive for him at macy's -- >> why bother with a contract if you're not exclusive. if you can go to the biggest competitor -- >> you need a really iron-clad, someone who -- >> you trust -- >> and then ron johnson he's kind of like a gadfly. i see how, you know, with where he is in his you know efforts to turn around jcpenney you'd want

to do this and you play hard ball there, as well. so it is fascinating. >> it is. >> we know who really wins. this is all a side show. >> you think? he's saying it makes him sick to his stomach. >> top store sales where they're chronically outperforming all his peers helps him get through the night. >> terry is probably in a good place. the dow is within striking distance of an all-time high. what does the new normal look like for the fixed income markets? joining us from newport beach pimco's managing director and senior portfolio manager. i don't know how much of the last hour you were able to watch. were you able to see some of the discussion that we've already had? >> yeah, good morning, joe. fascinating segment with stan. and i have to say i agree with most of what he said. >> uh-oh. >> do you -- >> it was, you know, i made the listening and thinking about the dislocation in the what is

arguably the most important piece of paper on the planet, the ten year, let's just it almost stands for the currency of record. i still would rather have a really good idea where it would be if the fed was out completely and i didn't really get that answer because my, my point was that there have been times when it looks like it's actually been moving based on global growth, or global growth prospects, not just the intervention of the fed. where do you think it will be if the fed were out or at least if qe-3 were to end? >> yeah, you know, joe, we've done some of our own studies and the fed actually had published its own estimate of where the ten year treasury yield would be if they were to stop qe and both estimates suggest it would be between 50 and 75 basis points higher in yield. so you know, today at 1.9%, let's say 2.4, 2.6%, would be where it would settle. >> we saw how much a basis point -- saw how much money you

could make in libor with a basis point. you can -- if you consider the entire planet, as doing things with 50 to 75 basis point bias, that -- that would be trillions of dollars, wouldn't it? and around the globe, i mean that is a dislocation, is it not? >> yeah, absolutely. you're talking about roughly a 8% to 10% price subsidy for the entire bond market, not just for the bond market, but for all financial outlets, including equities that write off the bond market. >> that's a huge number. and does it end badly in your opinion, saumil? >> no, joe, we don't think it has to end badly. it certainly can end badly. we've seen prior periods of financial depression in the '50s and '60s that were very similar to this with low interest rates ending badly with high inflation and then higher interest rates. what the fed is trying to do is engineer a bridge. they're trying to bridge a very

level economy with aging demographics, and huge unfunded liabilities, to the next productivity boom. if the fed can be successful in keeping interest rates low, keeping inflation in check, and keeping the nominal rate of the economy growing 4% or 5% a year for the next five to ten years then the probability of the u.s. economy restructuring itself to the next productivity shift is quite high. and so, we don't think it has to end badly. >> if i could jump in here, so you and your colleague and our mutual friend mohamed el-arian coined the term the new normal, and tried to help investors understand that we're going to be in this period of rather moderate growth for a long time. the question for you is, is that inevitable? are we stuck in this period of new normal or if policies were better, we're more long-term, we're more growth oriented, could we break out of the new normal and get back to the old normal which had growth coming out of recessions of 3% and 4%?

>> yeah, ken, i think you've hit upon the exact right point. we're not seeing that this is a perpetual forever type of situation with the new normal. what we are saying is that the economy is dealing with a lot of debt, we've seen this before in the '30s and fourties and at a time when the demographics for the u.s. are not growth friendly looking forward. and so, unless the right structural policies are put in place, for example, things like improving the rate of immigration into this country. improving the basic education. improving access to science and technological changes for the labor force, those are the type of long-term structural changes that the us needs to break out of the slow growth period. >> unfortunately, it's all dependent on policymakers doing some good things, which, in this current environment that we're in, it's hard to see that that will happen. but maybe sooner or later, maybe

this isn't the new normal, either, or at least not forever. i mean sooner or later maybe we that's mohamed always talks about these structural things that we need to address before we get back on track. maybe that becomes clear to policymakers eventually, too. >> yeah, we think it will. we think we are seeing small changes on the horizon. there's a lot of talk about new free trade agreements between the u.s. and asia, with japan participating. between the u.s., and the eurozone, there's a lot of small global coordination improvements that we think collectively can move the u.s. economy to a higher growth blatt toe. as you said it's going to trach time. there was a long period of ignorance with regards to the new normal. but we think slowly, policymakers have come into the realization that they immediate to make long-term changes, not just think about cyclical policy. >> we've got a lot of friends out there where you work, so give everyone our best.

at pimco and we appreciate talking to you today. good addition to have you on. we'll add you to our roster. >> thanks for having me. >> okay. >> when we come back we have more from our guest host, former fed governor kevin warsh. plus strong sales growth in luxury autos this year. phil lebeau is going to bring us a report and a few models to check out at the bottom of the hour. right now as we head to a break take a look at the u.s. equity futures.

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welcome back to "squawk box." futures right now, let's take a quick look, between 30 and 40. now up 46. that would easily put us into all-time high territory. if we were to close up about 46 today. >> right now we have more with our guest host former fed governor kevin warsh. and kevin, we've spoken with you for some time about what the fed's been doing. when you start getting into a position where, wow, you really worry about how you unwind it. we just heard this from stan druckenmiller this morning, how concerned he is. yesterday with warren buffett, he also made the point that

while he is a huge supporter of ben bernanke, he is concerned about how big the balance sheet is at this point and how you unwind that. this is really starting to sound like a more steady drum beat. >> the exit's going to be more difficult, and i guess i'd call the analogy of what we've been talking about on the fiscal side. what the policymakers have been fighting about on the sequester. when there's some suggestion that the sequester, that is one quarter of one percent of gdp might fall away from the economy in the next couple of quarters you have breathless commentary by washington pundits that say oh, my goodness, we can't exit it will be too much. so fast forward to monetary policy and the federal reserve, some years from now. are they not going to hear the same kind of worries, how dare you exit? there's still too many people unemployed. so exit requires not just policy tools, which chairman bernanke thinks he's got, but it requires a lot of courage. it requires a lot of will. and when market participants like stan and ken get wind of it, the idea that some economic model can properly calibrate how

they'll react is going to be a big, big problem. so exit's going to prove very difficult for these guys. moreover, becky, what i'd say is, listen, what are central banker's jobs? their job is to buy time. in a financial crisis and even in normal times the rest of the economy can kick into gear. the rest of the policymakers can do what they need to do on taxes and entitlements. but the federal reserve, and you know i've had great sympathy and great affection for ben bernanke for a long time, he and the fed have been buying time for so long that instead of crowding good policy in, what's the rest of washington doing? preciously little. so at some point, the baton has to be passed from the central bank back to the rest of washington, that says you need to focus on real economic growth, tax reform, entitlement reform, regulatory reform. otherwise the central bank will be the one stop shop trying to do too much for too long. >> bernanke makes that point every time he goes to washington. or every time he goes to the hill to try and impress upon them that it's their turn to pick up their end of things.

it seems to fall on deaf ears every time. you think it's been a massive frustration at the fed? >> i'm sure it has been a frustration. but i would say, to be fair, politici politicians, they don't pay attention to the words. they pay attention to the actions. and so do markets. so while he has -- while chairman bernanke has warned them about these entitlement issues, they keep seeing, they keep seeing that the federal reserve will, in some sense, bail them out. they will go to the next degree of qe. they will get more aggressive in their asset purchases. so the market signals that congress needs to pay attention to are also being blocked. listen, i think chairman bernanke's got all the right intents. i think he's the only game in town, and he feels as though he has to try to compensate. my words, not his. for the consummate failings of policy elsewhere. but at some point the baton needs to be passed and he needs to be, in my view, starker with them. if the economy is not growing 12 months from now stronger than this current level, not the

federal reserve to blame, it's the congress and the politics, and if they feel as though it's their responsibility, i think they're far more likely to act. >> but he's painted into a corner by everything the fed's laid out to this point. we're looking at unemployment, watching what the economy's doing. he doesn't have much of a choice based on everything that he's kind of set up along the way. >> well, i worry that he has let fewer degrees of freedom than he would have a year or two years ago. because, again, the federal reserve does a remarkable job to get economies out of financial panics. that's what the central bank was built to do. but in my view the fed can't do much more to lower the unemployment rate. it can't do much more to take the growth rate from where it is to where it needs to be. but there is so much that can be done, and if we don't do it, then what we're talking about in the earlier segment to geoff's kids, geoff's kids are not going to find jobs and the good work he's been doing on them for 18 years will all be for nothing. >> let's say that policymakers and i'm i we talk policymakers, and i'm going to focus on the president himself because that

is where the leadership is really has i don't see congress leading in terms of of growing the economy. he's going to have to lead it. now that we've gotten this sequester's done, maybe they do something woor we don't have the resolution we get through that to september or whatever if the president were to focus on immigration, and gun -- the gun bill, and climate change, or other things, is it possible that he does that and doesn't focus on jobs and. economy? i mean, do you expect us to just sort of, now that we've gotten this out of the way, it's on the back burner? or is this going to take an activist role in terms of leadership to get these things done? >> the country only has one leader and it the president of the united states. congress can play an important role here, but congress isn't going to do entitlement reform unless the president leads. congress isn't going to do tax reform unless the president leads. congress isn't going to be able to take on these big issues unless the president spends political capital and says, you

know what? we've been too focused on trying to make gdp a little higher next quarter. we've been trying to make the economy a little better by the next election. but you know what? we need to play the long game. and the long game says we need the economy to be growing five years from now. that kind of leadership has to start at the white house and if it doesn't start there and we get to 2016, then this cadre of workers that are both entering the workforce, and that have been here, they will have lost the skills, and our productivity will be less. >> i saw something, i don't know where i saw it yesterday, and it was -- intimating that the goal was going to be to take back the house, and to do a lot of the things that his base wants him to do at this point. do you think the chances are good that we focus on unemployment and gdp? >> so i don't see a lot of good reason for optimism in the near term. this preoccupation about the sequestration reveals two things. one, it says that washington is incredibly worried about a fragile economy. otherwise they wouldn't be so

worried about a quarter of one percent of gdp. the other thing that the sequestration debate really worries me, is that we're now running trillion dollar deficits and what's their answer to get the economy to grow from 2% to 3%? it's have the government spend a whole lot more money. in economics we don't know many things but what we do know is above a certain level of government spending the higher the spending is from government, the lower the expected growth rate is from the real economy. so we got to stop doing our gdp arithmetic and trying to fool the american people into thinking the economy is strong. third quarter last year we had a 3% gdp quarter. and again, under the theory of the case, that would say that the american people, the real side of the economy would say well this is great, we're off to the races. american people have been through this. they've seen the volatility in the economy. they haven't seen leadership from washington that says, we need an economy that's going to be great three or four years from now, and so they're continuing to pull back. the economy, joe, has been growing at around 1.5% or 2%

over the course of the last 3, 3 1/2 years. i know models at the federal reserve and the congressional budget office say well next year we'll be growing higher. but it may be with this mix of short-term policies, 1.5% or 2% growth is about all we can expect. and this could be good for the stock market. it's enough growth so that companies can drive productivity. can drive profits. but it's not enough that in the eyes of the markets we'd call the federal reserve to pull back. so if you got a lot of wealth like the previous panel does, and you can participate in these liquid risky markets, it's great news. but if you don't, and if you are living pay check to pay check, and you've seen your after-tax incomes be on decline for the last 10 or 15 years this rise in the stock market is not doing very much if ultimately it's income statements not balance sheets that matter and income statements are still under tremendous pressure. >> we're going to continue this conversation in just a little bit. kevin warsh is our guest host today. >> coming up, times of trouble

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a technology minister in china is accusing google of discrime naturing against local firms in the smartphone sector. the minister published a white paper say that google has too much control over china's smartphone industry through its android operating system.

complaints include delays and sharing of code. and google's strict control over the poor technology of the android system. analysts said the white paper could be a sign that regulations against android are on the horizon. when we come back, much more from our guest host today. former fed governor kevin warsh. also luxury autos have been on a roll with bentley sales, get this, up 50% this year. ferrari sales up nearly 35%. phil lebeau will join us with more. [ man ] i've been out there most of my life. you name it...i've hooked it. but there's one... one that's always eluded me. thought i had it in the blizzard of '93. ha! never even came close. sometimes, i actually think it's mocking me. [ engine revs ] what?! quattro!!!!! ♪

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welcome back to "squawk box," everyone. let's take a look at a few of the stocks on the move this morning. qualcomm has announced a 40% dividend increase to 35 cents a share from 25 cents. the company also announcing a $5 billion stock repurchase program. >> this could be a bearish sign for vivus after initial sales of the weight loss treatment fell below what some analysts were expecting. and we're watching shares of gardner denver reportedly close to a deal to be bought by kkr. the private equity firm offered $75 a share back in february but reuters reports that the final price is expected to be higher. that stock already up about 3.6%

today to 73.236. >> more now from our guest host former fed governor kevin warsh. did we decide whether bernanke is leaving or staying? >> so i'm not privy to that, i don't know if you could tell, joe, but i'm not intimate of president obama and his white house officials. >> you probably want him to stay, i would think. >> listen, the strategy that the fed has was architected, crafted, and described by ben bernanke. if anyone can tulle this off ben bernanke can. >> you mean exiting it? >> yeah. if you believe that these policies are the best that can be done under bad circumstances, if you believe that congress will never do anything to help economic growth, that the president will not lead on tax reform, and you say this is the best we've got, this is what a great nation is going to do to continue to be great, i'd say you say ben bernanke has a better shot of succeeding than anyone, in part, i would say, he built an incredible reservoir of credibility during the financial

crisis. on the darkest days he was calm and steady and i think he was every bit as aggressive as was necessary at that moment. now i might disagree with him and say we're not in a panic anymore. that that kind of aggressiveness is no longer due. but if that's your strategy you've got to believe it, you've got to execute upon it, and you've got to maintain market's credibility you can pull it off. i can't think of a better guy than ben bernanke to do it. but whether or not he'd be the president's selection and whether he not he wants to extend his term of public service would be very hard for me to judge. >> conventional wisdom and reporting to this point has been that he does not want to stick around. that he's had some long time there, obviously, real long days for a really long time there. can you foresee a circumstance and obviously you haven't talked to him about this but would you be described to hear him say if called to stay in office would you be skriesed to see him take another term? >> i don't know. as his friend i would tell him to get out of there, get back to

princeton, start writing a book and bring some calm and semblance of order to his life. he didn't anticipate signing up for this. but the ben bernanke i know is an incredible public servant. in the depths of the crisis he delivered. and if the president were to put his arms on his shoulder and say your country needs you can't speculate whether the president would do it or what ben's answer would be. but, he -- he's a noble guy with very good intentions, and if the president were to ask, i don't know how he'd respond. >> what is it, 11 months left on a six-year term? >> yeah, so the term is up next january. historically, i have a very limited experience, but historically, when presidents take their august break, they have a big decision to make as to who to make the next chairman of the fed. markets will be clamoring to understand who's leading that organization in the fall. i suspect that the white house will be under pressure to make their decision one way or

another just after labor day at some point in september because the markets are going to want to understand that trangz igs. as say they, personnel is policy. so i suspect it's a decision that's made kind of september early october not much later than that. >> you ever heard of the every central bank in history when it's extended its balance sheet has never exited never reversed? always stayed? >> well, this is -- this is a version of the new normal. which is do we get used to central banks. >> is it possible that they never exit? >> well, i wouldn't say never about any of these things. i'd say exit is hard. before the financial crisis the -- in the u.s., we had a central bank's balance sheet that was around $800 billion or so. that was thought to be a steady state. what's the new steady state for a balance sheet? is it 2 trillion or 3 trillion? >> where are we now? >> we're over 3 trillion and growing at this pace, we're adding about $1 trillion of assets to that balance sheet every year, and again if you pay attention to what vice chairman yellen said earlier this week

and what the chairman said his humphrey hawkins testimony, i didn't get a sense that they were anywhere near pulling back. so you look like a trillion dollar increase in the size of the balance sheet for quite some time. >> well, exiting would mean stopping. >> yeah. i mean, listen, this -- >> are we ever going back to 00? >> i think it would be a long time. i think it could be a long time. >> does that mean no? >> i don't know. i don't know. >> how -- >> doesn't everything go up, and we go to new -- we never go back to some level, could you, could you actually foresee us ever actually going down to $800 billion for the size of the balance sheet? >> if the federal reserve balance sheet in five years from now or even ten years from now is back to 800 billion i would tell you that is great news because that means this economy is growing fast and furiously. productivity is growing. the unemployment rate is back. so that would be excellent news. if you look at the world's balance sheets, big central banks, they're only going in one direction. they're taking a larger and larger percentage of gdp they're

figuring out what assets to buy and at least for the foreseeable future it appears those central banks will have an outsized influence in financial markets. >> if you were a conspiracy theorist or a worry worth or an end of, you know, end of days or central banks in a concerted fashion exponentially growing the balance sheets could be seen as a huge problem. >> at some point. so i'm not a conspiracy theorist because i don't think the government's good enough to pull off these grand conspiracies. and i'm not an end of the world person because i'm incredibly optimistic. in spite of government policy that's been this disrupt i6 for growth for the last three years, since the financial crisis was clearly over, the american people have said you know what? in spite of all of you guys, changing regulations, and sending me coupons in the mail to buy a house, or do a cash for clunker to hire a worker, i mean i'll take advantage of it, but in spite of all that the economy is still growing in the u.s. at

1.5% or 2% relative to our big trading partners around the world, it's not so bad. that's not due to government. that's due because this culture of capitalism and the ingenuity of our workers is as strong as ever. so i'm optimistic that we're going to figure it out but we need our government to give the american people a chance to get this economy back to trend. >> i'm scared. more from -- we got trillion a year. from 800 to 3 or 4 and we're going to trillion a year like it's -- so okay. big number. sooner or later that's going to add up to something. >> it sure does. it sure does. when large -- >> hopefully we don't need the think after trillion. >> that's right. >> because i'm ready. >> is that a zillion? >> quadrillion. >> this depends on markets' willingness to continue to trust in the federal reserve's prudence and judgment and ability to execute and ben bernanke's built a reservoir of

it but no one said the exit was going to be easy. you thought it was courageous in 2007 think about the courage that's going to be required some years from now when we say we're getting out of this and what's the tool to get out of it? what they describe as interest on excess reserves. we're going to pay banks those same banks that were bailed out, we're going to pay them not to lend money to the real economy. can you imagine the fury? >> all right. more a little bit more from kevin warsh still ahead. >> whoo. up next, though, auto sales in the united states are at the highest level since 2007 with ultraluxury models performing exceptionally well. phil lebeau joins us with more and he's got the real deal there. >> becky we're talking about the rarefied air of ultraluxury cars. you know the kind of cars that joe kernen likes to drive like this porsche 911 here or maybe he likes the new bentley. we'll talk about why ultraluxury car sales are red hot right now when "squawk box" returns. ♪

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welcome back, everybody. auto sales are off to a good start this year. but it's the up from luxury automakers that are really kicking it into high gear. phil lebeau has the story and some beautiful cars. >> eye candy, as they say. my producer megan said we need some eye candy so we've got some of the ultraluxury cars that are

red hot right now. people are saying what's going on with ultraluxury cars, why are they on fire? take a look at the sales so far. you start with bentley up 50%. sales of ferrari up 34%. porsha up 31%. lamborghini 33%. compare that with the industry where sales are up just 8%. we'll take that in this economy. but that shows you the demand that's out there, and look at this, guys, a 3.9 million dollar wow out of the geneva motor show. this is the new lamborghini ven. its cost is approximately $4 million. $220-mile-per-hour top speed. they're only making three of these, guys. three of them. two are going to be sold to people here in the united states. one to a gentleman in saudi arabia. here's the ceo of lamborghini talking about why this car is so special. >> it's a one-off. we call it one-off even, it's a

very limited edition. this is giving us a higher degree in design freedom. you can test new materials and technology. you have a positive cascade effect on the rest of the product lineup, and it's fulfilling dreams, at least for some people. >> talking about veneno. only three of them. two are coming here to the u.s. i want to find out who those two people are who are buying them. >> you're not italian? >> no. >> but i -- >> you do that. >> i do that the wrong way sometime then i get other signals. >> and you called me eye candy. >> no, did not call you eye candy. >> i called the cars eye candy. >> you know. >> close. >> all right. so what do we got? that's a -- >> you got the new bentley. >> that's the one i saw when i pulled in this morning. >> what's the 12 stand for? >> 12 cylinders. which stefan winkleman was saying we sold more 12 cylinder

lamborghinis worldwide last year than they've ever sold. that is what the ultraluxury buyer is seeking. everybody says well, what about fuel economy. they don't care about that! you're spending as much as you're spending on these cars, you want the ultimate in performance. and that's why 12 cylinder is really the selling -- i think joe wants to buy the porsche. >> i like the body style. i have one this color. i think i don't know an 11 or 12 and it's that color. i like the interior on that. that looks like a seven speed or six speed. i like that interior phil. but this is just a standard f-is, is it not? >> yeah, it is. >> that's 100 grand, probably. >> i think it's $225,000. >> then that's different. >> so it's a little bit pricier version here. but the bottom line is -- >> why? >> when you look at all of these, joe, there is no shortage of buyers out there in the rket now. no shortage at all. and you talk with the people who are in the ultraluxury market and they will tell you that it's not the person who is buying

maybe just one of these. they're buying multiples. >> what? >> they want to have several of these. so this market is perhaps the best we've seen for the -- >> they come along and say, i want one of each? >> well, you could say you want one of each. we always hear that from people saying well can i save up and i can only buy one, becky? the bottom line is that you will find people generally speaking are going to have several cars in their collection. joe, you going to take it for a drive? >> i could. >> that's got wapner. >> wapner is running inside real quick. that's not what he wants to see. somebody revving up the porsche. >> oh, my gosh. look out. step aside. >> he's going to pop the clutch and stall right here on tv. >> that's the emergency brake is on. there it's off. >> whoa! holy cow. >> there you go. >> we got you going, joe. >> that's nice. >> he made his way out. >> see? >> that's how we're going --

>> we did tell these guys -- >> megan has her eyes closed. >> i smell the tires. you told them we weren't driving it? yeah, well we lied. >> just you and i. >> why don't you come back in with me? wow, seriously. phil, thank you very much. we should mention to everybody, i think he's gone. i think i may need you to come back in with me. as we mentioned before, we are thrilled to be launching our new prime-time lineup tonight. don't miss "the car chasers" find it, fix it, flip it. in the premiere episode jeff and terry get a lead on a ferrari in las vegas with huge potential to make a lot of profit. joe's coming back i think. right here tonight. >> got a little kenny chisny. >> tomorrow on "squawk box," our guest host will be famed

investor leon cooperman. we'll ask him about the economy, market milestones, and his best investing ideas. plus, an early read on friday's jobs report. mark zandi will bring us the adp private payroll numbers. "squawk box" starts tomorrow at 6:00 a.m. eastern. carfirmation.

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. . . welcome back to "squawk box," everyone. futures picked up even more. dow up about 60 points above fair value. we're keeping an eye on shares of sears holding. right now, let's get down to the new york stock exchange. jim cramer is standing by. we've been watching a lot of retail stories today, including what's happening with jcpenney. and macy's, and martha stewart. where do you come down on this whole thing? >> this sale after the bell, part and parcel of the whole problem with jcpenney, is the martha stewart line is very important. there's a lot on the line today. i think martha will testify today. she's caught in the middle.

fernado is the smartest evaluator from alexander. i am very worried about jcpenney. very worried. >> yeah. i said, jim, and you don't have a law degree? >> yes, i do. >> you do have a law degree. i could take either case, i think. i could see how both sides want so badly to prevail. and that contract better be written in a way that settles this, i would think. >> martha stewart makes a very compelling case. >> if i were terry lundgren, and that brings people into the store, even though it's not the most glamorous stuff, i would want that just in my -- i can see both sides. i can see ron johnson wanting it, too. >> i met terry lundgren through martha stewart. they were very good friends.

it was an important line for macy's. it is really the guts of their houseware. i think that they could make a very strong case. i just keep thinking, wow, if fernado is bailing from $10 million jcpenney, what's going to save ron johnson. what. >> maybe -- >> i mean, this is the guy who -- they're in the malls. >> the little pins, jim. they're really cool. you get a discount. remember those? >> yes, i do. >> we should have known something -- maybe that was -- >> but look, we have qualcomm doing better. i listened to stan druckenmiller. in the interim, if you were out of this market you would be missing some good opportunities. >> i know. >> so it is a balance. it's a very big balance, a tight rope that you have to walk. >> i think ken was going to talk

about stan, and how much money he gives to that school. even to you this would be serious money. >> you bet it is. >> it gets up close to, starting with something other than an "m." >> the great givers are coming in. the other way to look at who's coming on your show. including tomorrow, lee cooperman. they don't want to talk about it, because they know to talk about it makes them sound egomaniacal. so i'll talk about it. >> that's one of the good things about doing well, what you're able to give back. and you don't need the government to do anything about it. that school's all funded. our guest host has been former fed governor kevin warsh. we'll give him the last word when "squawk" returns. the launch of our new primetime lineup. don't miss the new reality

series "treasury detectives." a team of investigators are out to expose fakes and forgeries in the world of art and antiques, tonight at 9:00 p.m. eastern. here's a sneak preview of "treasure detectives." i have the negative. >> marvelous. >> i had andy make a negative transparency. this should give us the answer we're looking for. >> i need to be 100% convinced this hasn't been produced by a master forger. what i need to do now is compare the wood grain fingerprint from our lictenstein with one that we know to be genuine.

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[ engine revs ] ♪ welcome back to "squawk box," everyone. kevin warsh has the last word. we talked about the policies of the central bank. the u.s. has exported central bank policy as well. what does that mean down the road? >> you betd it has. the fed policies are now in effect the policies of the world's central banks. it's not just that we have the world's reserve currency, so what the fed does matters, it's that ben bernanke has, i would say, described