good morning. stocks continue on a winning streak. the markets still call fear gauge now falling to its lowest level in more than three years. asian equities coming off the highs on property stocks. meanwhile, a slow start in europe this morning. in washington, paul ryan will be unveiling his party's budget proposal today. it's tuesday, march 12th been 2013. "squawk box" starts right now. good morning, everybody. i'm becky quick along with andrew ross sorkin and scott wapner in for joe today. the dow and the s&p closing

higher yesterday, up for the seventh session in a row. this is the blue chip index's first winning streak like this in a year. it's worth noting the index is not into the first quarter with a double digit percentage gains since 1998. u.s. equity futures at this hour, at this point you're looking at a very slight decline, down by about 8 points yesterday although it's worth noting we saw everything in the red in this hour and all those indexes turned around and did close the day higher. major asian markets, you could see slate gains in japan with the nikkei. kind of waiting for something to happen this morning. paul ryan's budget cuts the

deficit by nearly $5 trillion through changes of entitlements and repeal of obama care. it balances the budget in tense years without raises taxes. it was says under that proposal, they'll spend $41 billion. under our proposal, it will increase by 3.4% because the u.s. economy will grow faster than spending, the budget will balance by 2023. and debt held by the public will drop to over half the size of the economy. it does that by repealing obama care and that is going to have a very difficult time, especially with the administration and also in the senate. we're going to talk more about budget debate in a few minutes. then at 8:00 eastern time, we'll be joined by tom price. he is one of a handful of republicans who prose part of the van pollen.

and then 8:120 eastern time. first, snow, scott wapner is here with some of the morning's other headlines. >> nice to say you. at&t is going to begin consumer and corporate presales of the blackberry's e-10 today. meantime, samsung is set to release its latest smartphone. yum brands reporting an unexpected 2% rise in profits. take a look at shares of yum. there you see the spike about 5.3% there in after hours trade

postponing. >> meantime, costco is reporting better shan expected earnings on sales and membership fees and shares are down slyly 0.%. and we've got a story about another judge, i want to hear what this judge thinks about this. if you live in new york city this morning, you can still buy a large soda. a judge struck down michael bloomberg's than. as for the impact on business, here is the mayor's response to a reporter's question. >> i don't think it will hurt your bottom line, but even if it did, we're talking about lives versus profit. and a dominimus change in profit. nobody can make the case that serving 16 ounce cups versus 32

ounce cups wouldn't have to problem you that. >> wee we do what e to. >> cnbc's jackie deangelis is spending the morning in reactions, businesses, to promise what he'll designed now. mern americans now drink an average of 77 billion sodas per year. the average amount of water people drink to about 58 gallons a year now. bottled water is leading that

growth with consumption rooizing to 121 gallons a year. and remember we had the guy on yesterday who talked about the mechanics cab battler. >> 43 gallons? >> 43 gallons a year on average. which means somebody is drinking about 80 2k3w58ones. that tells you something that we drink that much water. okay. >> drinking right anyhow. >> water, by the way. >> what do we think about the overturn of the soda drink? >> i think it makes sense. i think the judge was right that it's overreaching and it's difficult to try and enforce the idea that you're going to go out -- >> the judge was saying it would be difficult to forgs on a niert dive offer.

>> maybe you did discuss that. how else are you going to tackle an enormous problem without taking some bold and overreaching steps? i think it's fine to do that in a school system where you're dealing with children. i think it's fine to ban the sales of soda in school altogether. will how do you feel about subsidy sizing corn, for example? >> i'd be fine with not subsidizing corn. >> i thought high fructose corn syrup wasn't bad for you. >> the high fructose corn organization came after me the last time i raised the question. >> but, you see, rather than ban it, takes away 2 -- there's many larger you can do

to make them popular. >> the other thing you can do is make people weigh in on their own health care more, so they're saying more control of that. >> everyone will have a hire deductible sooner or later. even if it does hurt the bottom line, so what, right? at some point, you have to take some kind of measure, in his opinion. and he really, i thought, took it -- and people are dying. >> he's calling this an epidemic. >> but is it soda or other things? >> that's the problem. i think it's the amount you work out, too. joe's point through this, if you want to lose weig-- kids aren't

actively involved outside because parents are afraid to let their kids play outside as much. i think that's part of the problem. >> i'm surprised that he suggested this isn't causing the businesses. did you thinkin doughnut had made dimes for customers to help them know was going on. there's have been lots of thing going into this and may be back into effect lairlt. >> in problposition that says under -- blah, blah, blah, when i went in for that, there was a sign -- >> that's random watching. >> there was a sign that said, under prop blah, blah, blah, coffee would be one of the things that we need to tell you is bad for the you and that can cause all kinds of birth defects

and everything else that goes along with it. you can see this happening on both the coasts. we'll see writ all plays out. >> by the way, the soda has has everywhere. so this is going to buy this done. >> futures have been indicated slightly lower. wapner is having a hard time adjusting to these early hours. >> didn't they have a soda called jolt? >> they did. but you have to be careful. you would run around the desk and then crawl under it and fall asleep. >> we talked about caffeinated gum last week. >> my children and i played super mario brothers a little

later than i wanted to. >> my children just say, daddy, it's still light outside. >> and taunt you as you head to bed. futures are lower this morning. the dow hasn't ended the first this is a dow transport, the russell 2,000. they all closed at historic highs once again. the s&p 500 is at a five-year high and the nasdaq closed at another 12-year high. and you'll see right now, at least, that oil is down by about 26 cents to 91.80. the ten-year note this morning is looking like it's yielding just above 2% at 2708%. the dollar thrng po, and, again, all of the stock has been talking about what's happening with the yen. there have been some stories out there suggesting is that the new bank of japan governor, when he comes in, would actually do things to try and really ease

the currency before he waits for the april meeting. we'll see what happens. the yen is up against the dollar. gold prices up about 3.60, $1,581.60 an ounce. time for the global markets report. kelly evans is standing by in london with that. kelly, good afternoon to you. >> hi, scott. it's not quite the afternoon here, especially with the time change. because of that, you only get one hour for "worldwide exchange" in the next three weeks. we have to sort this out. here is what's happening across europe. a broadly weaker session in asia. the ftse is trying to stay in the green. there was weak industrial data that has hit the market and hit the pound. the ftse mib is pretty much worrying about new government

being formed and rush, as well. >> i want to show you the reaction of bank shares, and tessa is expected to show a fourth quarter loss. bankosanpalo, lasted night came out and report seven times bigger loss than 2012 was expected. shares initially down 5% on that news. then people started to go well, maybe they're throwing all the bad stuff in here and maybe it will get better from there. the euro/dollar is weaker down about 0.3% there. trading volume has been heavier in the australian dollar and the euro.

finally, sterling. i mentioned this, now down 0.5%. ike industrial figures for january were down. you can see the reaction, the 1.4841. i don't know about you guys, i was here in britain, what was it, seven or eight years ago when it was $2 to the pound. so it's extraordinary to see uk to some degree on sale. we'll see if it means any interest for american visitors or american companies the. >> that was such a deal. it's only 1.50. play the trip now. >> believe me, it still hurts, believe me. >> she paid in dollars. she has to were about these issues. >> if you want to take a summer break, much better deal. let's talk about a number of

different stories in washington today. the budgets worth watching this morning. the senate banking hearing will be holding a nomination on richard cord ray. and marriage jo whit will he will be joining us. >> this is effectively a synopsis of the proposal. when becky keyed it up earlier in the broadcast, she said it is dead on arrival. do you agree? >> yes. in terms of the literal elements of the plan. when you talk about assuming the repeal of obama care, no, that's not going to happen. when you talk about premium support, a proposal that would affect people under 55 going forward for medicare, that's the voucher plan obama ran against in 2012. not going to happen.

but he work r i think the process has vowel because paul ryan considered a contill history he can do of the weengend. there are things we can do that don't offend the principals or democrats or republicans. so the process is what i'm looking for, not the details of this budget. >> what are you -- let's talk about some of these hearings today. mary jo has a storied legacy in terms of what she's done as a prosecutor, but has spent the past decade if not longer representing the big banks. what do you expect to see? >> oh, i expect her to get hazed a little bit by senators, maybe of both parties. but oath of these nominees will

be ultimately confirmed. mary jo white, there are surface conflict issues related by her legal work, but i think she has a strong reputation for integri integrity, for having been an effective prosecutor, and she is in my view likely to clear the banking committee. >> one of the things i think about, for the next two years, she's going to have to effectively recuse herself from anything rmted to name your bank, credit suisse, ubs, the list goes on. how do you separate if you're the head of the s.e.c. and yet you can't touch on some of the biggest institution that's you're supposed to regulate? >> well, that's a challenge and they'll have to figure out what ethics officers in the government and working with her colleagues. she's not going to be the only one at the agency. i think she can be on the job and provide direction and leadership without, you know,

violating conflict laws. >> john, whether you hear about all the hoopla over the sugar ban in new york city, how does washington view this? >> you know, i think that's the kind of thing that nobody wants to get to close to at this moment. i mean, you do have a push by the administration through michelle obama to try to work on issues related to health and the consumption pattern that's people have and the exercise patterns that people have. but i think this -- there's such a visceral reaction to a specific prescription like this that bloomberg has pursued that we now see the court reacting against that. i don't think you're going to see democrats venturing into that territory and certainly you won't see republicans. >> so even liberal democrats in washington look at this and say, oh, my gosh, we're not going to venture towards this because they view it as a potential overreach? >> yeah. i think they're sympathetic to it. i think they're kind of happy

that bloomberg did it, but i would not expect them to try to minute im that of nanny stayed, trps to use government government to pin their shift to other people's. it will be in state and local governments if it does -- if it makes headway at all. >> john, thank you. >> you bet. >> all right. andrew, thank you. coming up, a live report from the big apple where consumers are still able to order that large coffee with extra sugar and milk this morning. but first, check out these live pictures from the vatican. a special mass is being hell at st. peter's basilica. they will then head to the vatican to elect a new pope. people will be watching for a

while smoke to signal a new pontiff has been chosen.

welcome back to "squawk box" this morning. s&p off about 1.5, nasdaq off by 6 points and the dow jones off

about 16 points right now. the u.s. government has sold another chunk of its take in general motors. it sold $490 million of gm common stock last month. the price per share will be revealed later. the government has recovered about $29.8 billion of its $49.5 billion bailout of the automaker. now, a judge striking down new york mayor michael bloomberg's ban on large sugary drinks. jackiedeanglis joins us with more on this. what is the reaction this morning sfp. >> commuters are really happy that they are going to be able to get their large sugary drinks this morning, to put sugar in their coffee, as well, as you head out to work. the judge striking down the city's proposed ban of these things drink calling it arbitrary and ka prieshus. you would have had two stores

affected differently. one is a store that wouldn't have been able to and the other is a 7-eleven that is able to. there's two aspects to this. you have the large national chains that might have been able to absorb the costs. but you have a lot of mom and pop stores saying not only the procedure costs of buying new glassware and cups to serve the drinks would be difficult, but they are concerned because they would lose business right next door to the 7-eleven. the national restaurant association came out and said this is a victory for restaurant operators and industry suppliers serving new york city who would have experienced financial hardships had been ban been enacted. he also began a media blitz speaking on letterman last

night. turns out the mayor has his own guilty pleasure. >> as long as you don't ban cheez-its. cheez-its are okay. that is my addiction. >> so sugary drinks cause obesity, but cheez-its you don't have to worry. >> you were talking a couple weeks ago about how you couldn't get the soda.. >> there was a pizza play on the upper eastside, i won't name them, but they decided they wouldn't -- >> they had gotten on board with the pan. we had about i think eight children in our house. and so there was a pizza party going on and so we needed soda. >> i went down to the bodega two blocks away and got the soda

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morning. welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick and scott wapner, sitting in for the vacationing joe kernen this morning. scott. where is he by the way, do you know? >> he's skiing in an undisclosed location in the great state of colorado. i think that's as far as we can take it. >> he sent some pictures yesterday. >> did he? i haven't seen them. >> they're out there, the whole family is out there on their snowmobiles. >> let's check on the market this morning. we've been on this run, as you know, the dow has been up for seven straight days. if we were to open right now, it looks like it's going to away negative open. the s&p, dow and nasdaq all with a negative implied open or at least a lower implied open. there is a look at the european markets. they're mixed. mostly muted action there. the ftse over in london is getting a slight gain. take a look at asia, as well.

see how the asian markets did. they were down across the board. the shanghai was down 1%, hang seng and over in japan, not quite down as much. look at the commodity index right now or the read there. crude oil is lower today. both wti and brent or bob gasoline we've seen a bit of a break on gas prices. there's the ten-year yield right now, still over 2%. 2.05% is where that stands. take a look at the dollar also this morning. dollar/yen remains a considerable story this morning. yen at a the 3 1/2 low versus the dollar. look at gold get ago slight gain this morning, 1581. >> joining us right now is kent croft, chief investment officer at croft funds, also barbara funds.

i want to get your brought thoughts on the market. kent, i know you're looking at this and you think there's up side based on what you see just in the fundamentals? >> sure. we think even though we've hit new highs, since we are very much long-term holders, we expect new highs over time. this is nothing new. we tend to hold through. the fundamentals of the market, the valuation, the pe is less than historically and certainly less than, you know, other recent peaks in the market. at the same time, you have companies with the best balance sheets, really, i can remember that give these the ability to credit buybacks. the underpinnings are good for the market and there's not a lot of optimistic expectations that we might have in the market. so i think if things break good, they can break nicely. >> barbara, you look at it and you say rite now we're setting ourselves up for peak earnings. what does that mean?

>> i don't think there is a tremendous value in the market right now. you look at a market multiple of maybe 14, 14.5 on what i think are peak earnings. we've achieved record profits over the last few years. look at this two ways. either you can take a look at that 14, 14 1/2 year multiple. part of that multiple is a result of having low bond yields. companies have refinanced maybe 25%, 30% of earnings growth, plus companies have had so much catch they've had tremendous buybacks and that has fueled earnings growth. look at it that way and say with expected earnings growth of a few perts over the next one or two years, we're at peak earnings and a 1% or 15% multiple is not a cheap multiple. the other way you can look at it is say let's look at the average cyclical market. that's about 23. you have i think mediocre

valuation in the market. i agree for the long-term we can't time it. there was an article in the "wall street journal" last week on stocks through thick and thin. the first thing it said is think big and cheap. i think there is good value in the number of those holdings. >> even though you're concerned about where things are headed, you have some specific areas that you really do like and you see some opportunities. i know the opportunities you're looking at tt opportunities in the growth sector. >> the shale gas that we found in this country has given us an enormous competitive advantage that will last for a number of years. and i think there's some companies there that you can get into it a buy into it at regional valuatiovaluations. >> what are some of those companies? >> certainly the biggest bang for your buck might be southwest

energy, ultra petroleum. there are other companies like williams is a pipeline company that will generally benefit from gas being used more often. the company like quanta services that builds out transmission but builds out pipelines as we use more of it. so we think there are ample opportunities there. >> and i know when you look through things, barbara, you have a very specific set of guidelines for stocks. part of them is still dividend. but talk through some of the others. >> sure. you know, if i could get three or four or five cycles, companies that are strong cash generators and then companies that pay a dividend because i think that's management's way of saying we have tremendous consideration into this going forward. companies that can grow their cash and earnings over time. companies are managing their

shareholder. either buybacks or dividends and finally companies trading at a good valuation. then i think you have a good buy and you can make money longer term. >> what do you think of the fact that we've seen this big pick up into flows into equity funds? do you worry it's late money at this point? >> the stock market is such an interesting combination of value. now that it's risen back to peaks, it catches attention. lts a contactic of the market. >> you probably could speak to this, too. do you think there's a lot of people trying to take the money off the table or they think there's so much money coming in, they have to rise away? >> right.

it never happens? >> sure. and i think that tends to pull money in. >> kent, do you have a theory on this? >> yeah. i agree. it's human nature. you have to feel more comfortable to be in the market when, really, investing in the market, you should be investing when things look the worst. you saw outflows, tremendous outflows in the market while the market went up. so the opportunity calls have been im members. immense. so now you're starting to see some newer flows as we're back to the highs. it seems to happen every time. >> barbara, what are some of the names that you fit into that, companies like a pfizer? yes. pfizer has done a tremendous job. it rently went off its annual

business. so pfizer has done a tremendous job. e&p companies, a couple of goose companies and i would add conco philips to ta at a 4 had.5% yield as we wait for higher gas prices, it will increase production. international paper has done a tremendous job of feeding growth by making acquisition from investing in paper mills in bra zell, in china, in india. at the same time, it was bought a year and a half ago and it's integrated that and is growing earnings and increasing its dividend with its cash. blackrock i think is a good buy. all of these companies are selling inexpensively and with chances to grow their dividend earnings over time, not just yield plays. >> barbara, thank you very much for coming in. kep, it's good to talk to you, too. >> thank you. >> the u.s. off was

investigating hp's claim that it was duped. the advisory firms have been critical of the board citing oversight problems and leadership differences and deficiencies there, as well. in a letter to shareholders ahead of the companies' march 20th meeting, hp toutd improvements in its financial results and says it has laid the foundation for a turn around. here is the background of the story glass lewis supports lane's re-election, but it agrees shareholders should vote against thompson. it argues that oergs should lose their seats and this is all coming to a head as we hear more about what's happening in the uk. we did get a statement from hp

last night that looked at a different issue that was brought up on this. basically, they also talked about the say on pay, hp. hp says it's pleased that isf has changed its recommendation to investors and is now supporting the say on pay proposal. >> the conundrum, though, is while this board has been covered its from lori in any y way, if you did remove people now and you broek up the board again, the they can't afford turmoil. >> it is a conundrum. however, there are still people out there who say that the board is still in need of big change, that they've had a bit of a shake-up, but you do hear a lot of criticism that it's still a bad board, that the type of people that need to be there are not there at the given time to fully implement the kind of turn around that needs to happen at that company. >> you've got meg whitman, a new

ceo who is in and part of it is you need to see where things ride out. barbara, do you have any thoughts on hp? >> the never ending lieu lit of it? >> i think hewlett packard under invested in the last ten years and has missed changes in the market. so while there are some good, strong areas of that company, in general, it's not competitive and i don't want to invest in it just because it's cheap. especially when apple is expensive. >> i was going to ask you if that is a dividend growth stock. >> absolutely. it is tradesing cheaper than telecommunications companies and utilities. >> are you saying you look at this now because it's coming down frdz 700? >> well, yes, although $700 was

a 12 multiple with a little bit of a yield. now maybe even less than that if you take the cash out. an eight multiple with about a 275% yield in tremendous products. it's actually a -- a little bit of a mystery. >> do you own it or are you looking at it? >> i do. you have some of it and i would buy more here. >> how different would the hp conversation be related to the board if there is this shareholder thing that comes up. the stock has been a tremendous performer, a rebounder, year-to-date. it's been one of the best stories. the story is different from today versus six months ago. >> that's a great point. >> okay. coming up, the early read in the futures pits on the trading day ahead. but first, on this day in history -- and you don't have to go back too far -- in 2009, beenny madoff pleaded guilty to 11 criminal charges, including fraud.

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welcome back, everybody. as you can see, there are red arrows when it comes to the futures this morning. these are modest declines, though. right now, dow futures are down by over 8 point. the s&p futures are down by less than a point. in las vegas, police say they are investigating the posting of private online records of several celebrities. a website posted what appeared to be credit reports, social security numbers .other private details on the police chief, fbi

director robert muller and stars includes jay-z and mel gibson. the star did not say why those people were targeted. >> what is so strange about that is a lot of the data is so available, social security numbers, credit reports, all of that stuff. you go to a bank and just about everybody, you can go off and get it. i'm sprite you. now to the trading pits in chicago. kevin ferry is standing by. good morning, kevin. >> good morning, appeared rue. a lot is going on. >> the train has left the station, is leaving the station. wa do you see that is so big? >> early in the is session last night, they started to beat up the yen again. that trade started to dissipate.

one of the largest trades out there is the short yen trade. focus quickly shifted to the table, which has been getting beat up behind it and continues to this morning. so i think that the big message i would have is that they're starting to see signs as the session wore on last might when people are exiting positions that they've had. i think that's the real catalyst. when these peoples change, then the market is going to react. >> kevin, what has been the inflexion point, though? really things that as you stand up in the market it could be juiced down one more time. i think you should be interested to keep an eye on it. the perception in one of the biggest positions is short treasuries right now. yesterday, the ten-year note and can repo was 3.75. that's below the amount that it

trades for penalties. so the big perception is there's too much data out there. you can't even borrow illustrate. so you have to watch that. >> is there appear im my clagsz for secretaries. these are just positions moving around, much most of the macro scene, that's not going to change much. but when price starts to change, people start changing their minds. so i think these are trends that i think as long as the s&p futures are up 1541, then the big story there stays intact. but, you know -- >> that's decent because that's a 14-point range that they could drop before you start to worry about things. >> yeah. i think you have to expand a little bit. we like to say that the monetary regime, right, the relationship between the economy and the s&p

is more elastic. and i think people have resisted that few more a long time. weir in a 2% mragz, 2% inflat n inflation, and casey. all i'm saying is if you started to see these other trades unwind for a variety of reasons, black smoke over the vatican, who knows, then watch out, that's when things start to move around. >> kevin ferry at the cme, thank you for your perspective this morning. >> thank you. >> we'll see how it all plays out today. still to come on stock, adam parker. the state of small business courtesy of where are fib's bill bunkerberg. but squawk is next.

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welcome back, everybody, we're in the chairs this morning talking about things that have caught our attention. while we have been talking for some time about marisa myer, it is the lead store any why "usa

today." who really makes out when you telecommute. both sides can say that there is a benefit to these things. the commutee says i don't have to spend the time or money, and the boss can say we don't have to pay the overhead to house you. there are massive numbers of people who do it. it's 25% of the people, and in the service industry, it's 16%. and in sales it's 15%, and education, legal, community service, arts and media, it's 13%. now people are worried if they will still have the benefits. >> i think think who yahoo thing is overdone, it's their mess, their horrible culture, and it makes sense for one company -- >> when you see a big company like yahoo doing it, depending

on how it works out, there are certain people watching very closely to say you know, i'm not sure i'm getting the most of my team. >> one last note, at yahoo, there were literally peel on the payroll who had consulting relationships and were starting companies from their house that had nothing to do with yahoo. >> they said it may be poorly planned and announced. they're allowing telecommuting for people -- >> amazing that it's touched off this national conversation. >> i surprise todd see it as a lead story in "usa today." >> i still am trying to figure out how to telecommute this job. >> i was taking notes this

morning, zombies are coming back in fashion. >> the walking dead is huge. >> people are greating up in parks or whatever, according to this professors research, zombie fads peak when society is not happen. >> you have to throw on the thriller -- >> you've done -- >> when i leave you, you'll be surprised what happens. after halftime is over -- >> we pry have to go, read the financial times front page today. john paul thinking about moving to puerto rico to save tax money. ♪

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equity logging their second day of gains, the s&p a handful appoints away from the 2007 high. how high can it climb? an ek pert panel getting ready to tell you how to play it. >> how they'll feeling about the state of the economy. >> and the stock getting a seven-handle yesterday, and sitle at all all-time high. what's working for this reit. >> the 7:00 hour of "squawk box"

begins right now. ♪ good morning and welcome to "squawk box" see how the market is setting etitself up. let's get you through some of the morning headlines. the federal budget battle set to reignite today. the committee chairman paul ryan will be releasing his fiscal blue print. he says he will balance the budget in ten years. he plans to repeal the reform. larry will be visiting with him

tonight. and costco's results were helped by higher sales an an increase in revenue from membership fees. italy continuing to see fall out for the rating score. it was the first italian debt sale this morning. >> will fundamental sport an additional gain here? rich bernstein. gentleman, welcome to all of you, we start to watch what's been happening here, and we have come an awfully long way in an awfully short period of time, and you say relax a little? >> yeah, people are looking at the last eight or nine weeks, and they're forgetting this

started four weeks ago. and i think you look at it in that perspective in four years, and it's not that fast. i think this is reasonably normal. i think it's more normal than most think. there's a lot more normality than i think most people think. >> but you say when you look around, you start to sense some nervousness from retail investor that's are in this for awhile but see what's happening? >> there's no question if you look at growth or rates, it's not supportive of the market level. i think what's maybe not that level is the unconventional policy. we're creating trillions of dollars on a computer. that par is not normal. on terms on the returns, that probably can fit into any historical context.

i think what's more interesting than the market level is the kind of stocks that are working, right? higher quality, larger cap, health care the best performing sector. it's risk on and risk off when you look at the stocks that are working. >> your thought is the market has been up, and you're pointing to the fed as the reasony, the jobs report was looking better. >> you know whether that's because we have had reasonable monetary policy, our we're just getting very much farther into that seven lean years, it's all of that kind of stuff. and those things are coming together. i don't think the fed describes everything. the fundamentals are getting better.

the economy is recuperating. the economy is getting better, and you know the nice thing is everything it in the stock market. >> markets move on better or worse not just absolutes of good or bad. people are caught up that the economy is not strong in an absolute basis, but things have improved. adam said that more defensive sectors are outperforming. february was kind of a risk off monk, but even in this month, the last seven trading days or whatever, we're back to those early sector tykeles again and i think that's very healthy. >> i'm pretty good at explaining what's going to happen, we have

models that look at high cap, break down the market in different buckets. consumers have done well, health care and staps have been two of the best sectors. even with the biggest stocks decline, it has been more of a mixed defensive pickture in my mind. high in dividend, outperforming, so i think it's really hard to argue that what's already happened has been a offensive mic microstructure. and i think -- i disagree that qe has not driven a lot of it. the changes are very correlated to the market. i don't think the debate is whether or not the companies are in great shape, they are. how do you slow down the qe, and what impact will that have on the markets? >> adam, is it -- >> adam, is it a bigger deliver

than the fed would normally have been? if you look at policy, it's clearly going to have a big impact on the stock market, is this bigger than the normal cycle? people are saying the reaction is abnormal? is it really relative to abnormal monetary policy. >> it's hard to back test, right? i don't think i would be fighting the fed if it was conventional policy, right? you can move up and down -- i think what's different is the fed balance sheet expansion, the magnitude of it, i think it's different this time -- >> but the instruments -- adam i would say i'm with rich on this. i would say the instruments are different, but the thrust of policy in 1993, you had a long way to take interest rates down to get to what we get to in the

3%, or 2001 and 2002 getting them down to what were then record lows. we had that instrument available, but man that was aggressive policy at the time, and it began to work through the economy. i think it's aggressive policy -- it's these unconventional instruments that makes all a little nervous. >> the hard part is forecasting the marketing rates. it's hard to forecast the market multiple, right? we all try and we know it's if you have, so if i told you that the real earnings growth would be zero, the ten year would be the lowest. we'll have essentially zero gdp, and obama would be the president of the united states. i don't think you could have given me a logical reason that they would expand 20%. >> forget logic for a second.

let's talk about the market multiple. how high can did. >> terry: go in this environment -- >> i'm not telling investors to short the market. what i'm basically saying is we have portfolio data of one, and the themes that look to me in place are high enstable, higher end quality equities. if i had to guess, the market multiple will continue tom, because what makes it contract is fear of an earnings drop off. i don't see how that will happen when they're not hiring a lot. so, my guess is, but i can't

prove it with logic, is it will go up, they will do less qe, that's a different signal to the market. >> isn't that true, rich? when they give the signal they're going to start to unwind, the market will show upset, which will prove that it's undeniable, right? >> i'm not sure people -- you have to remember the tenure already backed up about 70 basis points and the economy is still existing. why is it going up? because the economy is getting stronger. in every ikele there's a point where they reverse monetary policy. it's not when the fed starts to fighten, it's when they tighten too much. >> you really think the market

is not going to react negatively that first time there's a comment? >> of course. >> i'm not talking a day or two. >> a month ago -- >> there is every time. >> but it rebounded immediately. >> look what happened. the fed minutes came out and said guess what, we're talking about how to get out of this thing sometime in the future. what would we want them to talk about? but interestingly enough, the rally, with the ten year note rally says there's not enough strength there, and rates don't rally, that's a sense that the economy has traction. the market will not like it, it's trying to figure out how disruptive it will be, but it's a positive thing. what we're all watching for in equities and in the credit

markets. >> i think the tough part is how much confidence do you have in a real environment -- people believe the policy will help make the economy better. there is some point where the level gets so extreme it's symbolic that the world is a risky place. >> amend, thank you for joins us, we'll have more from jerry and richard throughout the show. >> big changes coming to frequent flier programs and we'll have the details next. and the state of small business. the latest nfib report how business owners are planning for their future. comments, questions?

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good morning, let's look at the futures right now and see how we're shaping up on wall street. the dow has been up for seven days in a row. it would be down off the open this morning, not by all that much, but the implied open is negative across the board. also, if you live in new york city, you can still buy that large soda today. that ban on large surgery drinks has been shot down. the ruling was called totally in error. here is the mayor's response to a reporter's question. >> i don't think it will hurt your bottom line, but even if it did, we're talking lives instead of profits. no one can make the case that 16 ounce verse 32 ounce cups would cost any amount of money. we all have an obligation to try

to do what we can do try to help each other. >> jackie is spending the morning in new york city in coffee shops and other dining places getting reactions from consumers and businesses and will join us in the next hour. beverage digest says that soda is no longer the nation's choice. americans now drink 44 million gallons of soda a year. the amount of water people drink increated to about 58 gallons a year. bottled water leading that growth. now we're going to talk about what happens to be one of my favorite topics. frequent flier miles. they may be the next frontier for airlines looking to bring more money out of fewer seats in

the sky. fill joins us with the story. >> andrew, you may not be happy, but the airlines are happy with the change in the industry. i was just looking at my frequent flier cards, and realized it's going to be tougher for me and you and everybody to book a seat in the future. this all comes down to supply and demand, and the supply of seats able is more restrictive. it's tougher to get a upgrade. it's going to cost you more miles in the future if you want to get a frequent flier seat. it's tighter capacity. small ore planes. a lot have been stripped down, more regional jets. no first class, so the merger partnerships is also increasing the number of frequent fliers. you have programs like u.s. air and america, and they'll have nearly 100 frequent fliers in their program. this is why it will be tougher

for you to redeem miles in the future. >> there's a lot more competition because frankly there's more members of the program. 31 years later and they're growing that 10-11% a year. today you're competing for benefits with frequent buyers, and that makes it really, really difficult for anyone to be called an airlines best customer. >> if you want to be the best customer, get ready to see some changes. here is the current program. it's based on how many miles you fly. 25,000 you get the first level, silver, you see the levels of status here there. come 2014, it's not how many miles you fly, but also how much one you spend. this is the net ticket price. it's the net ticket price. so you have to spend, not only 25,000, but you also have to

spend another $2500 in that year just to get to the base silver status. so they're transitioning to the new world of how far you fly plus how much money you spend. southwest does it, and look at the move by delta over the last sixth mon six months. delta up 76%. >> they turned off or microphones because we were booing. >> this is bad news for the consume rs consumers, bill? >> do you remember when they were losing billions of dollars? why would you give away seats if you could sell them? now they have the opportunity to sell them. >> so, phil, there is an article

in today's "new york times" talking about how one of the other issues is people go to the lounges, right? and now that everybody is a member, everybody is a member and it's overcrowded. so now american express and others are ceir own lounges? >> yeah, you're going to see the price of admission to these lounges will go up. andrew, i know you travel as much as i do, you go to certain airports, even you're like there's nothing i want to sdo t be stuck in that terminal, you inspect that lounge, so now american express and others will say we'll have a more exclusive card. >> you have to have the black card to get? >> yeah, i don't have the black card either, but if you're

traveling a lot, you want that. >> another bad day for road warriors everywhere, phil labeau, thank you, sort of. >> this is what you get when you get a healthier airline. >> the stocks have been amazing, right? enough that i think for the first time in the history of the show, jim cramer recommended airline stocks for the first time ever. >> that's just a perfect hedge, it's not a great investment, but if it's turning around db or we'll figure out how to do things with virtual reality and we'll travel less. >> phil, thank you again. >> when we come back, our healthy returns head for the

ventas. they specialize in private housing for seniors, it's stock is close to an all-time high. >> if you look at the futures today after seven days of gains in a row, these are modest declines. they turned around deficits larger than this yesterday. [ man ] i've been out there most of my life.

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welcome back, it has been than five months since super storm sandy sit, and today, crews cleaning the bay came across this, a mercedes benz. looking at the company responsible for much of the bp clean up won a contract last month to remove debris from the pay. there's no official estimates

how many cars remain down there. five months later and they're still pulling up things like this -- >> if you have comments or questions about anything that you have seen here on squawk, send us a tweet, or send us a message on facebook. how the economy is doing through the eyes of business owners. the latest survey is out and we have the details. check out shares of ventas, sitting near an all time high. the company ceo will be joins us to talk success and the future of health care.

it is that time again, the judge is in the house, welcome back to "squawk box" the treasury says is sold nearly $490 million in gm shares. the transaction means the treasury has received a large

part of the money. hp took an $8.8 charge last year after saying it was duped. >> and the cruise industry begins a three-day annual conference in florida today, and it may get more than the usual amount of attention. industry executives spending a great deal of time addressing the costa concordia incident, and also the more recent accident that left passengers without electricity for many days. >> it hasn's the business optim. it's the third monthly rise in a row. it only gets back us to september and october. job creation was up, capital spending up, increased inventor

up, expectations for higher tales all up. but you see on the left, all of those levels are low. and that's really the story. joining us is bill, a chief economist at the national federation of independent business. he tries to smile and look optimistic, but he isn't. not a month goes by that i don't regret bringing this data on on a monthly basis, bill, give me something hear, you're a smart guy and a great economist. steve, i do my best all the time, but i think we have been doing it a little longer than five years. so you're right, the optimism index went up almost two points, the average index now for the 44 months in the expansion and recovery period is 90.7, and

we're at 90.8. we really haven't gone anywhere, we just can't move forward, and it shows up in the gdp numbers, right? half of the economy is small business. and so you average the zero plus the 4%, you get 2% growth, and we're experiencing the economy. we're not going to grow very much. >> let's look at a couple starting here bill that you gave us, it ticked back up to that dashed line there, what does it representative? >> i put the dashed line in the charts through the most current reading. you can see that's minus 28. >> forget it, let's move on from that. bad time to expand due to political climate, that ticked down a little. people think it's a better time to expand relative to the

political situation out there. >> yes, proved a few points but but we're still running at 40 year highs -- >> nothing good to say about that, plans capital outlays -- >> that one is probably the best of the worst, right? >> exactly, they're starting to spend more and plan to, that's a good sign. >> i don't know if they had the the other chart i made this morning, let me know if you have it in the back. i put your employment index, the small businesses that plan to create jobs. you don't have it? okay, that's my fault, against overall job creation, and you see a significant gap. what would job creation be like in this country right now if small business was creating jobs at the clip that it normally

would be? >> you would see 300,000 to 350,000 jobs coming in a month. you would see a lot more jobs and the unemployment rate would be coming down noticeably quarter by quarter. that's what we need to see and haven't been able to get. >> so it's worth 100,000 to 150,000 jobs a month is what you're saying? >> yes. >> why has it lagged so much? >> the expectations for the economy, as you pointed out, they're not very optimistic about where the economy will be six months out. very few expect their real sales volumes to go up. we still have more firms saying it's headed down than up. so there is no reason to hire. >> weak sales expectations. >> this is obviously pretunhapp

data -- >> and notice he is wearing yellow to try and make is sunny. >> why do you think smaller and mid-cap stocks have outperformed larger stocks. even if grow down to very small banks and industrial companies performing very well despite this backcrop, do you have a guess why this might be? >> well,s if it's a publicly traded company, it's not small. the six million firms out there that are publicly traded would look bad because our profit trends are horrible. to the small and mid cap companies are really pretty big, and they're more wired to what's going on with the bigger

companies. they're making a lot of money overseas. we're totally locked into the domestic market, and if you look at consumer spending, it's been very, very poor and that's been the key right there. >> one of the things i always heard about, i don't know if it's factual or not, is that there is a very big -- i don't know if it's bias or skew among the construction industry, at least up until recently, there's been reason for the firm and your organization to be more pessimistic than maybe other firms. we keep hearing about small industrial firms that are exporting, so is there a overrepresentation of construction, if so, could this be changing in. >> you're quite right, we have

got g gotten that question over the last few years. and of course the story has been that the numbers are the same. so it really hasn't mattered. we got that question again a couple months ago. so they're more optimistic now, construction is coming back, and they all have the same views, we can't find any different for all of them, not just part of them. >> we hammered him on this. he took the construction off out, and it didn't make any difference. bill, thank you for being such a support on this, and one of these days it has to turn. >> keep wearing that yellow shirt, bill. >> thank you, steve. >> thank you. stocks sitting near an all-time high, what's working for the company and how you can profit from this investment trust. and squawk market master mo had

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welcome back, as you see a little rain in times square this morning and rain for the futures as well. the dow down nine points. yesterday we saw red arrows but we saw them turn it around. also, keeping an eye on oil prices this morning, just over $92. the ten year note is just over 10%. the colorful, at this point at least is up against the euro, and gold prices have been moving this morning. you can see at this point, gold prices up by just over $14.

$1592.17 is the last tick. >> joining us now is debra cafaro who is the head of ventas, great to have you here. >> you're the largest owner of senior living facilities in the united states, and your stock is up like 680% in the the last decade with you the steward, so congratulations on that. >> thank you. >> that's a performance that anybody should be proud of. why has this happened? is it a supply and demand issue? we're an anyoning population? >> well, we built a company that went from $200 million to over $2 billion equity cap. we're one of the most essential characteristics of a successful

story. we had constrained supply over the last decade, but the demographic demand is continuing. over 85 is the fastest growing segment of the u.s. population. and it's a need-based business. this is not a discretionary product. this is really for mom and grandma when they can't live alone any more and they need care 24 hours a day. it's a private pay and customer focused model. >> you're a diversified business as well, which some people maybe overlook. but that's a big part of your story. >> yes, most of it, happen of it is senior living, 17% is medical office buildings which benefit from their own separate drivers and trends, baby boomer focused, and some skilled nursing assets and hospitals that we do not operate. we're a landlord to those businesses. >> so the medical office space

is capitalizing on the baby boomers, and more so than the senior living facilities now -- >> the medical office building is a great business, it has the baby boomers, and when you lock at reform, you see more people coming in in a regular and lower cost way. policy is favoring utilization. we want people treated in the lowest cost most appropriate setting, which is not the er. >> so you're in favor of the affordable care act, or no? >> as a patter of policy, i think universal access is the right way to go.

we have structural reforms to make, but we made a good first start. >> the ryan budget introduced today is obviously still playing on the hopes that it will be repeal repealed. >> yes, i believe as a country we can afford and we should provide ju provide june -- universal access. if people are not going to the emergency room, and we're taking care of health care conditions, we'll lower costs overtime. >> so what extent are you part of the cost curve problem? >> we're part of the solution. most of the assets are either private pay, or in my case, the

children's pocket, but in addition, again, we focus on low-cost settings, and that's what it's all about in the future. skilled nursing is lower cost for some seniors, or a medical office building,out patient procedures, that is significantly lower cost. and overtime, policy like a water fall, getting patients and residents to these lower cost settings. >> are you against increasing the age eligibility for medicare and medicaid. >> i'm personally in favor of it, and i believe the best way is to make them solvent, and that could be pushing back ages overtime. >> so you're a mix, you're in favor of some of the democrat and some of the republican solutions. >> we, i'm in favor of a

balanced solution. >> more specific to, i guess the financial performance of your company, a lot of people are sort of looking at your stock, the performance in consideration of whether or not to make the swap, you have core principals that you run your business by, can you talk about that? >> absolutely, we have a very simple set of principals we run the company on and always have. real estate is a great asset class, but we depend on the capital markets because we're dividend paying and that's an important part of the story. we want to keep a strong balance sheet, financial strength and flexibility, so when a financial crisis hits, we can power through strong. so when times are good, when we

can access the markets as historically low rates, we're going to build strength, and we came out of the final crisis strong, we acquired $14 billion in assets since 2010, and building on that strength. and we continue to keep a strong balance sheet, focus on liquidity, and continue to diversify our business. and the dividend is very important. we're focused on growing cash thr flows so every year we can increase the dividends, and keep your cash flow. those are the kinds of things we have done to really focus on driving shareholder returns. >> and it's working. >> jim cramer just said you were

money in the the bank. >> when we come back, the market on a seven-day winning streak. our guest will tell you where to watch and where to put your money to work. and tom price at the top of the hour, will talk about the ryan budget. can this plan help balance the federal budget? up next, don't start your day without knowing the name that's will make you money, your stocks to watch.

court is back in session, but it must be night court. let's look at the stocks to watch this mourning. shares rising sharply in the afterhours. blackberry jumped after consumer and corporate z sales of the

blackberry 10 today. yum brands on the rise. they were boosted by the chinese new year, and easy worries about a food scare. >> that went away faster than anyone expected. >> that's interesting, the stock move will be one to watch for sure. today jeffreys is cutting their price target to $420. >> waiting for lunch -- >> isn't that how it always it, every up grades it -- >> there is a key technical

level that everyone is watching. they could announce a special dividend. last year, i guess it was a couple weeks after the shareholder meeting where they made that announcement. >> yesterday, late in the session, the stocks spiked on high volume because of the rumor mill, so some people watching it closely today. the firm's analyst sees a later iphone 5 s launch. finally in a smaller market cap story, diamond foods, missed wall street estimates, they were hurt by a decline in sales of it's nut brands.

>> airlines don't give out any more. now it's pretzels. >> if you get a upgrade, it's three almonds. >> coming up, we're going to talk to tom price. and later, pimco's mohammed el-erian.

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♪ a squawk market master on the rally in stocks. the employment recovery and the fed's exist strategy. >> paul ryan set to unveil the gop budget plan. >> i'm going to go to the store. >> we'll talk fiscal responsibility with the republican vice chair and the democratic ranking member of the house democratic committee. >> where is the booze? >> i got robbed by a sweet old lady on a motorized card.

>> the ban on large sugary drinks was shut down. ♪ >> welcome back to "squawk box," everybody, this is cnbc. joe is on vacation, he is out skiing out west. our guest host this morning is richard bernstein, and jerry webman who is a chief economist. we're going to have more from them. >> thanks, the dow and s&p rising higher for a seventh straight session. the do you now up 10% in 2013. u.s. equity futures right now.

the major asian markets overnight, take a look, all to the downside. how about over in europe? the lixed bag, the ftse getting a little lift. we'll be watching shares of blackberry today, at&t are going to begin sales of the z 10 smart phone. tr was take overspeculatiover s. >> and the ban of large sugary drinks was brought down yesterday. bloomberg called it totally in error. for the impact on business, here is the mayor's response to that question. >> i don't think it will hurt your bottom line, but oeceven ie

did, we're talking lives over profits. nobody can make the case that 16 ounce cups over 32 ounce cups cost any appreciable amount of money. i think we all have an obligation to try to do what we can to help each other. >> jackie is spending the morning in new york city getting reactions from consumers and businesses and she will join us with more in a few minutes. >> and paul ryan unveiling his budget proposal today. it would cut the deficit nearly $5 billion. we have tom price, and one of several members who worked on the budget plan with chairman ryan. good morning to you. >> good morning. >> this plan for better or worse has been described as dead on

arrival. so many of the pieces of this plan have been prevented in other forms before, why no adjustments in terms of how it's been approached? >> there are significant adjustments, we do exactly what american families and american businesses have to do, and that's bring it into balance. why a budget that balances in a ten-year period of time would be dead on arrival is simply beyond me. we're in a spending driven debt crisis. the american people understand that. we're going to present a budget today, i'm proud to do so with chairman ryan and the other members that will balance in a ten year period of time, that's something to celebrate. >> one of the other elements is changing the tax code to there are only two brackets, how does that raise enough revenue? >> it charges the ways and means

committee. and as you described, the proposal has been a 10% and a 25% rate. the proposal is to back into the revenue so it's revenue neutral, and it raises the exact same amount of money, but it brings about progrowth policies and we can get the economy going again and getting jobs created. the american people understand that folks are out of work and they need jobs, they want jobs, and the big challenge is that washington policies currently are getting in the way of creating jobs, so we believe pro -- growth tax policy will get this economy and policy created again. >> you responded to the question that we have seen it before, but really, it appears as though the republicans are doubling down on a rejected policy, right? the voters had their say in november, largely on this issue, and now you're doubling down on

it again, why? >> i would suggest that the voters had their say, and what they want is washington to bring about the appropriate priorit s priorities, that is not spending more than we take in one house republicans prevailed in this argument in the fall, and the american people understand that washington has a spending problem, and that we can't continue to tax more to spend more here in washington. that has been the proposal from the folks on the other side of the isaisle, the american peopl reject that, and we need to get washington spending under control and get the economy rolling again. >> so we all want to balance the budget and reduce the debt -- >> i don't know about that. >> there are some people that may not want to do it tomorrow, where is there a meeting in the mid snl where can we start to have a conversation between democrats and republicans where there is some agreement. i have to tell you having read it, i'm not sure there is a lot

there to go with. >> the proposals that we put in the last few years are to contrast with the other side. >> hold on, you're trying to contrast with the other side as opposed to trying to find a place to begin a conversation? just so everyone understands what the deal is? >> this is the place to begin the conversation. senate democrats put their proposal forward. the fact of the mat sere they haven't done a budget in four years. we're welcoming them to the table, we look forward to sitting down with them and coming to that common ground. it's not going to be all exactly what we want, but we're excited that the senate democrats will do a budget this year. >> i understand that, but when something is characterized by a lot of folks as a nonstarter, i'm sure there are some people on the other side of the aisle that think it's a nonstarter,

can't we get beyond that and bring both sides of the aisle together? >> absolutely, and the way do you that is through a regular order. the budget passes it, the senate does the same, we hope the senate democrats will be able to pass their budget. when that happens, we come together and find the common ground and commonality and go forward. >> that's a great point. can you give me an idea of what you something might look like, the budget for the next year, and if you get to the conference stage. >> the big question is if the senate democrats will be able to pass a budget -- >> let's assume they do. >> i think there is positive commonality on the goal of making certain that we save, strengthen, and secure medicare,

it will be bankrupt by 2024. the specifics are different on each side of the aisle, but we know we need pro-growth tax policy. energy policy is another area where we have growth, and we need to get this economy rolling again and being responsive to the american people. >> we had a guest yesterday who was laying out some of his thoughts on this. he was telling us, and i read this in other places recently to, that we have done an awful lot at this point. if we get to the point where we can't cut more, it will be okay because as the economy recovers, there will be more money that comes in. >> the amount of reduction in spending we have is a more controlled spending. we control it by an average of 3.8%. the other side increases it by 4.1%. we're not that far off. the question is whether or not

we're going to be able to come together and if we get the spending curve, washington has been spending so much more money than it's been taking in, and it's on an unsustainable course right now. so that's the goal to make sure we get this economy rolling by balancing the budget and allowing the economy to create jobs. >> the guest was mark zandy, and he said it would be great to get to a grand plan, and he thinks the economy is recovering and he will start to see better footing, and that washington has do done it's job in terms of a lot of cuts over the years. and in the last 18 months or so, he thinks it put us on better ground. >> the spending reductions are responsible, but we could not find a common ground with the other side. we can't continue to have trillion dollar or near trillion

dollar deficits and expect the economy will grow. that's why it's imperative that we get washington spending under control. >> congressman, if we could, can we get to just a couple specifics about the tax code? i understand your point about encouraging growth with lower rates. i recently heard from reagan's head of council of economic advisors, talk about the money we spend by not taxing with and reducing tax expenditures. can you give us a general idea, most of us who think about economics think these are extremely distortionary, can you talk about what we could get rid of? >> all of the credits and deductions distort the tax code. we think they should all be onle table so we can decrease,

minimize, or end many of the tax spendtures so we can lower rates. we think it's important to lower rates for small businesses, the pass-through entities, and c-corporations. we have the largest and highest business tax rate in the industrialized world. we urge them to join us in wanting to reduce that tax rate of the highest tax rate in the industrialized world. >> congressman tom price, we're going to leave it there. don't miss paul ryan on the kudlow report tonight. still to come, hearing from the other side of the aisle, chris van hollen is going to be

joining us, more from mohammed el-erian. the cardinals will head to the sis teen chapel for the selection of the new pope.

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welcome back, everyone. the futures are lower this morning, but just barely. the s&p futures off by 1.5, and this comes after seven days of gains by the s&p and dow. a judge striking down new york mayor michael bloomberg's pan on large drinks. he has a 17 inch -- not 17 inch -- that's not where i was going it.

>> good morning, plenty of commuters relieved this morning that the judge struck down the ban on surgery drinks over 16 ounces. a couple people telling me they thought it was good public policy and they agreed with the mayor. the ban would have gone into effect today, of course. many businesses were preparing for this ban as well. the clerk told me they received extra cups and that was in anticipation of a shift we would have seen. some businesses would have been impacted by this. so you can see a little bit of a shift there. proponents of the ban say the cost of the business, that it would have, would have been great. we have some businesses like dunkin' donuts printing flyers to indicate what the change would be, and some of the mom

and pop businesses saying they needed to buy new glassware, but mayor bloomberg says the impact wouldn't be that bad, take a listen. >> i don't think it will hurt your bottom line, but even if it did, we're talking about lives over profits. nobody can make a case that 16 ounce cups verses 32 ounce cups would cost anybody any appreciable amount of money. the take away is that the mayor did dismiss the impact this would have. the mayor also saying at that press conference that the fight is far from over. they plan to appeal the decision as soon as possible. >> thank you for that report, and saving myself from myself. >> this moment has been brought to you by andrew ross sorkin.

coming up, paul ryan's budget proposal expected to stir up controversy. up next, we'll speak to chris van hollen. and then the pimco ceo. it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here.

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welcome back, paul ryan unveiling his budget proposal today, and earlier we heard from tom price. >> were in a spending-driven debt crisis, it's time to get washington spending under control, and we're going to present a budget today that will balance, within a ten-year period of time, that's something to celebrate. >> ginning us now is chris van hollen. congressman, you look at this budget, is there much that you agree with in it? >> well, unfortunately not. that's because this budget is a totally uncompromising document. it's a retread of last year's budget. we litigated a lot of this in the last election, and this is looking in the rearview mirror and nothing looking forward.

what is. >> terry: does, at root, is protect special interest tax breaks at the expense of seniors on medicare, and it will, in the short term, put a big drag on the economy. >> and the congressional budget office just looks and this and says over the ten year period, it would boost gross national product by 2023. >> the cbo also points out that it would do that if you balance the budget by raising revenue. the real question is what mix of policies do you want, we should be making sure that we're reducing our long-term deficits, making sure they're not growing faster than the economy, and also investment our kids, in our future, and meeting commitments to our seniors. because they take such a lop sided approach here, they don't

do that. >> we spoke with congressman price a few minutes ago, and we brought up the idea that this is probably dead on arrival, it takes a very broad reach in terms of doing things like repealing obama care. but cutting spending to the current 5%, which doesn't sound like that big of a deal, and they're talking about balancing the budget by 2023. are there areas of common ground, areas you could find some agreement with republicans? >> well, we have not seen the details of their budget yet, becky. in the past there were very limited areas of common ground. we agreed we could eliminate some of these agriculture subsidies. i suspect they'll do that again in their budget. the fundamental difference remain that's we support a balanced approach to the

long-term deficit. we already made $1.5 trillion, we can do more in a targeted way, and we believe that you cannot meet the other important priorities in our budget, and in our country's values, if you don't have any more additional revenue, which we think we can get by reducing tax loopholes, and you all remember, speaker boehner said he had a plan that would raise 800 billion -- they said there were all of these tax breaks in the code, and they could raise 800 million -- >> yes, but the republicans teal like they have given by saying yes to higher rates, which they were originally opposed to, do you think it was handled from the end of last year to the beginning of this carry, if you could do it over, would you?

>> i would have preferred to see a different result. i would have preferred a larger agreement. that would have contained additional revenue, and it would have had cuts through the kinds of decisions we were talking about then. as you recall, speaker boehner was not able to deliver his caucus on anything that included that kind of revenue -- >> but congressman, before we go back, i think the speaker would have trouble with the caucus, and i think the president had trouble with his caucus going back 18 months. and changing some of the goal posts at that point. what i wonder, though, is to your main point, is can we get to a broader agreement, a broader grand bargain, does that exist? >> i do. i think we have a window of opportunity now between august and september. i'm concerned if we don't get it

done, that window will close. in my view, the framework set forth in the bipartisan commission, on the cuts and revenue, is the path forward. the reality is that the budget that we have and will put forward are very close to those kind of ratios where as the republican budget doesn't come close. >> i agree with you. i think simpson bowles is the right way to go. >> it also generates more revenue than even the president has put on the table. >> would you take the document as a whole? everyone has things day like in simpson bowles, everyone has parts they hate, it's getting everyone to come together. >> it's true, but i think we should embrace the basic overall

structure framework, then we can debate the particulars. congressman, paul ryan today in playing out his plan makes this note. he says that senate democrats haven't passed a budget in over 1400 days, can you explain why that could possibly be? >> sure, well for the last two years, we have been operating under the budget control act. it replaced a budget resolution. the budget control act had more impact than that, because it also had the president's signature. we're now in a period of time where we're in a new budget season, i'm glad the senate is moving forward. house democrats have consistently put forward alternative budgets. >> what do you make of the markets? here we are at these all-time highs, a great run for the s&p

500 as well. as you're sitting there bickering, we had the sequester, now we're fighting over the budget continually, that the markets have voted and you and your colleagues irrelevant. who cares what you're doing at this point. >> well, more concern is that this going from manufacturing to manufacturing crisis is creating a drag on growth in the economy, and i'm concerned that the next big looming fight, is that the threat holds the debt ceiling hostage, and it will to the final hours, and it will create furniture uncertainty and make a drag on the economy. i'm glad that the market is performing well. at the same time, i don't think we're totally out of the woods yet in terms of the uncertainly generated from washington and the negative impact that will

have. >> when we suppose with representative price, we asked him for areais of common ground. he said that he thinks some areas of common ground could be in terms of saving and strength strengthening medicare. >> yes, let's start quickly with energy policy, we support a so called all of the above strategy. we think we need to focus on every aspect of energy generation. with respect to tax reform, the question is, becky, is if we do it as simpson bowles did, as opposed to the republican approach, which is not. and when it comes to medicare, in one of the ironies of the n ryan budget is the medicare

savings that we generated that was demagogued against. we achieved those savings a different way. they want to put them on the backs of seniors, we change the incentive structure, we modernize it, so we can reduce costs, rather than reduce costs to medicare by putting them on to the pabacks of seniors. >> i take issue with both sides how you get to those numbers, i think it's garbage in and garbage out, and i think it's unclear what will happen under the new health care reform plans. i think there are a lot of issues that need to be talked about when it comes to entitlements, do you think both plans will sit down to find a way to deal with changing demographics, and to deal with people living longer hand than

before? >> we believe we should continue to adopt the approach that we have taken where we have already seen some significant reductions in the per capita increase. we believe we can build on that approach. but what we have -- what we will not do is what the ryan budget does, it's the kind of toucher pl -- voucher plan that we have seen. there are ways to further achieve savings without taking it out on beneficiarbeneficiari. >> thank you for joining us, we appreciate your time this morning. >> good to be with you. also a quick programming note, don't miss paul ryan on the kudlow report tonight. when we come back, the judge is still in court. the rally, the fed, and the economic recovery,.

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all right welcome back, let's look at stocks on the

move. yum brands getting a boost this morning. one of it's most important markets, china, has improved. we're also watching shars of dc's sporting goods. they took a hit yesterday on lower than expected fourth quarter profit. this morning, goldman sachs added the retailer to it's list. also cabela's on the move this morning. it said current quarter earnings should be ten to 15 cents higher. it credits improvement in most of it's merchandise categories. >> scott, thank you. we've been talking about the fed spurring economic growth inspite of congress, and i cording to our next guest, that's what's

happening. we have a squawk market master, mohamed, they're doing all kinds of things, they say it's not just the fed by the economy turning. >> absolutely becky, in addition to the economy healing, in addition to that, i think that the hypothesis that the market has been conditioned to believe -- one is that the fed is all in, in particular the fed will not tolerate a big sell off in risk assets. two, the fed is forcing other central banks to be more aggressive. you're seeing the bank of japan do a u-turn. you're seeing the bank of mexico cut by three basis points, and the other is that we can slug off the political issues. i think that is correct. these are correct. the issue is that over time, they become less effective.

therefore, we need that handoff fr . >> i'm really glad you're here today, in the last several weeks, we had heard a drumbeat of guests coming on saying bonds are the wrong place to be. we had someone last week that said buying treasuries, government bonds, is the equivalent of bending down in front of a steamroller to pick up a dime. and another guest said if you have any bonds, you should sell them. what do you tell people right now? >> a few things, the bond market, like every other market, is artificially valued by the involvement of the fed. in the short-term, we think that we are range bound to treasuries.

and the range is 185 to 225 on the ten year. on the longer term, a lot depends on if you believe in this handoff. if you do, then you should migrate to risk assets. >> and have you seen retailer investors getting out of bonds starting to think that the end is near? i can't tell you how many people come and and say there is a bond market bubble. >> what you do see is an encouraging inflow into equity funds. so for the last nine weeks, there has been about 36 billion that's gone into equity funds, and that off sets off of the flow of last year, so investors are coming back to the equity market, however, it is out of cash, and in particular money market funds. we have seen no sign as of yet

of the great rotation that people are talking about. >> we have richard bernstein who was talking about the problem, can you talk about how youty it could help the economy? >> if the the fed were to extra case itself from qe and just sell long or medium term bonds, the curve would steepen. and if it steepens with they could encourage lending because the margin on loans will go up. so the fed would raise rates thinking they would be slowing the economy, when they would be stimulating the economy. and it's important when, because of that, when they extra case themselves from qe, they have to do so in a curve neutral format, do you agree with that? >> so there is no doubt that by

artificially altering prices,ed fed has changed behavior, and what has changed is the normal lending that goes on to various sectors, that's absolutely correct. the problem is it also changed massive behavior elsewhere. so it's very delicate and this exist will be one of the most challenging issues facing any central bank. and remember they're not just exiting from purchases, but also from very aggressive policy guidance language, and from interest rate fraud at zero. when it comes, it will be incredibly complex, and they have to do it in coordination with other central banks that have been forced to do the same thing as the fed. >> wouldn't you say that everything has been in the normal cycle but on steroids? it's done so more so because of

the depth of the recession and what the fed is doing. aren't we going through the same discussion we go through in every cycle about the fed taking the the punch bowl away from the party? isn't this kind of normal? just the discussion on steroids? even if you look at asset performance, it is normal, it's been right out of the textbook. >> i heard you say that earlier this morning, and my reaction was yes, butt. unlike the past, we're structurally impaired as an economy. we haven't mixed many of the structural problems that grew up over a number of years. so we are still structurally impaired. we can walk, but we can't run. so if we take away the stimulus, it's not going to be quite the same. the second issue is that we

haven't been quite here in terms of what bernanke calls the cost and risk of unconventional policy. the problem is that it changing the functioning of markets. and therefore, that is different from the past where he only -- where the fed only applied a price instrument here, it is applying a quantity instrument. so there is lots of question marks. and i think we're going to have to learn as we go forward. >> all right, mohamed, appreciate having you on. >> coming up, fed watchers are going to be looking for signs. what we just talked about, blue the positive february jobs be enough for chairman bernanke to take his foot off the gas? combining your customized charts with leading-edge analysis tools from recognia

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all right, welcome back, the february jobs number may have sparked the rally, but the up turn won't be enough to satisfy the fed heads. why not enough at this point? it's certainly a step in the right direction. >> it's a step in that direction, but i'll give you a couple reasons, the unemployment rate is still 7.7%. we also had three years of head

fakes. we had several years now where it looked like the economy was getting stronger early in the year, and by summer -- each of those years, there was talk about exist in february and march. by summer, they had to start a new program. i think they want to be convinced this is real. >> do you think they fear the negative effects have not quite taken hold yet, the tax high will filter down and hurt the economy? >> i think that's a good question, and it's something they don't want to talk about. they don't want to look like their facilitating fiscal policy, but they're very concerned about the sequester. the private sector is looking pretty good right now. the job's numbers are strong, we're seeing more spending and investment, but you're seeing fiscal drag coming down the pipe -- >> look what they said

yesterday. talking about the drags that we're seeing, he worries about what's happening here in the united states more so than other places. >> and the job's numbers look good, but the estimates that i'm seeing for growth in the first quarter are around 2%. that will not continue to produce a lot of job growth, and another thing they're worried about. >> it comes to a point that mohamed made a few minutes ago. if you think this financial crisis began with that moment in ought 2007, and lasts that many years, then we should not expect the fed -- i'm a chicago boy, in the financial crisis, we destroyed a lot of money. why would they be expecting them to tighten at this point.

why would anybody think they would be tighten. >> the talk works against them, right? so when there is talk of an exist, the markets tighten for them. you have see bernanke pushing back against that. so the conversation that we're having here, that conversation has started there. there's been a lot of talk about financial stability issues. i think one of the things that we could see coming out of this meeting, the petdal says to the metal, and it is elevate second degree, we could see some talk about that. they don't want to push too hard on this yet. >> i don't think there has been ever a cycle where the fed led the market. you mentioned before -- the market has kind of pushed back on them. i don't think there was ever a cycle where the fed dictated to the market what happened.

the fed reacts to the market. >> they have two separate incidents their managing against. one is 2002 to 2003 when they were worried, and they said they would come out of this very slowly. the other one is 1994 when they sent a signal they were retiring. they had some blow ups. so, i mean what they're going to be looking at this time around, and it's probably some time down the road, is how do they something this without moving -- you know, it's like the gol goldilocks program. >> in the past, they had essentially one thing they could do. now they have the interest paid on excess reserves as a way of managing the short end, they have long-term, they have credit

purchases still on the portfolio, and they can begin to move in lots of different side h operations with, you know, where do they move first? >> that's a really good point. in the past the fed managed one interest rate. an overnight interest rate that banks charged each other. what i'm starting to call this is yield curve management. it's a geeky term, but they started managing long-term rates and the conversation has gone toward recently is they're going to continue to manage long-term rates far into the future. so there's an interesting debate that's started there about the exit policy and what they're doing with their balance sheet. the strategy a couple of years ago was that they would gradually sell down their mortgage-backed securities which would push long-term interest rates up and they're saying

maybe we won't sell down the interest rate securities and we'll hold them and hold the interest rate reserves. so what we're looking at for a number of years is a federal reserve that's not just managing short-term interest rates, but also long-term rates. >> when we come back we'll get you red for the trading day ahead. jim cramer will join us with stocks to watch right after this. transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business.

let's get right down to the new york stock exchange where jim and david are getting prepped for "squawk on the street" at the top of the hour. what are you going to be watching along with david this morning? >> i'm focused on a little deal that may not be so little. the number of bidders and this is the kind of thing, thermo fisher, it's surprising. there are deals happening on tuesday and not monday. >> deal talk, at least. >> deal talk. >> we talked about boards not wanting to meet on sundays anymore. >> daylight savings time threw people off. >> say that again? >> daylight savings time threw people off. >> we haven't seen as much m & a about oh, my god, we're back. there was a lot there.

there hasn't been nearly as much. the life deal on the private equity side would require a number of firm to participate to get to any number that they would potentially consider. >> this is a great company with technology that is biotech that makes you do gene sequencing. they're moving into health care equipment. a number of bidders and this is something worth focusing on because we need to see m & a back to sustain these levels. >> cramer, looking at merck in the pre-market it's up about 4.5% in large part because it said it's going to be able to move along with the study for its vytorin cholesterol treatment. do you know anything about it? >> this is supposed to be the next quantum leap in anti-cholesterol drugs. lipitor went off patent and this whole group has not been making money for anybody. pfizer tried to protect the

brand. if merck can do this and it does get axe proved and it is the next leap merck will be dramatically higher than it is right now. >> do you have 30 seconds on dell or no? >> there's not much to say new today, right? carl icahn's in there. i did notice they signed up citi as another bank. when you think about blackstone signing, you know this, as well the biogroups signed up almost all of the banks out there which questions, at least the ability to raise the financing if you were not a counterbid which i think is highly unlikely. what do you think? >> i'm completely in agreement. there it is. >> that's what i like to hear. >> a "squawk on the street" agreement. i like that. >> worst over for young? >> you bet it is. they'll wait until 75 because they're stooges. i'm sorry. they're misinformed. >> we have to run and we'll get the last word from our guest host after this break.