>> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew ross sorkin is off. he's on vacation. stocks coming off another strong session. the dow and s&p 500 turning into record closes. the s&p by the way is now up more than 10% since the start of the year. the dow transports fell on airline weakness. we'll have more on that in just a moment. down just more than 1% yesterday. metals are continuing to diverge from equities. gold and silver had the biggest drop in more than two months. gold around 1,568. we'll head to trading pits in chicago and talk about those trends at 6:20. joe mentioned the adp report due to hit at 8:15 eastern time. economists are looking for an

increase of 194,000 private payrolls. today's report comes ahead of the government report on friday. surveys are calling for total nonfarm payrolls to rise by 200,000 in march. the unemployment rate is seen holding steady at 7.7%. >> those are some interesting divergences. transports, gold, silver, copper. dow. another big day in the middle of we need a correction all morning long. >> everyone waiting to get in. waiting to get in. >> and transports still looks okay but 75 points with the dow -- >> it was almost 1.25. it was down 1.22%. >> it's not at 14,000. it's at 6,000. 75 points is like the dow losing 150 points and it's on a day where the dow was up 89 points. that is weird. >> we looked at the outside gains transports had. the gains that transports had

outside gains up 18% or something for first quarter. they had room to give back a little more. >> what's the airlines problem? is that oil related? >> i don't know. we'll talk about that. >> i don't understand. we'll have tarullo on. i don't understand what metals are doing. >> delta was one of the big losers yesterday and part of what happened was the growth forecast saying that the federal budget cuts has hurt demand for government travel and potential flyers resisted the company's efforts to try to raise ticket prices. >> government travel? >> government travel hurting things and the idea you raised prices as much as you can. you're getting resistance and pushback at this point. >> more about the economy. one of the feds best known hawks and doves squared off in a rare public debate between two policy makers. chicago fed president charles evans and richmond fed president

jeffrey lacquer, both on this show, discussing inflation risks. evans argued the fed was still in his words missing tremendously on the employment side of the dual manndate and inflation was under the 2% goal but lacker countered with a warning that inflation worries could mount and we'll see it in tips. we have our own fed news maker this morning. we'll see where he comes down. probably somewhere in between these two at 8:30 eastern. live from the federal reserve in washington, d.c., steve liesman will sit down with fed governor dan tarullo who used to come on when he wasn't a fed governor. regulating the banks. volcker rule. monetary policy and the economic outlook. >> we want to know what's happening in the room when these guys are arguing back and forth how close are they to the idea

of tapering things. >> i want to see whether -- some are talking about 4% at some point this year. we'll see. someone was talking about that yesterday on maria's show. maria says where do you see the possibility of 4%? the guy had good answers for where that might come from. corporate profits. housing. just things that are better than in the last three or four years. >> first quarter was better than people were expecting. you are looking for a potential swoon but maybe not. >> overseas market news, european shares opened in the red among the reasons italy's political impasse is continuing to keep investors nervous and then you have cyprus. international lenders have given the country until 2018 to meet some new budget targets and kelly evans will have more from london in just a few minutes. in china, growth in the country's services sector rose to multimonth highs in march.

a construction boom and firmer demand lifted business and confidence and then in japan stocks surged 3% on expectations of more aggressive monetary stimulus from the bank of japan. boj is meeting with a policy announcement that will come tomorrow. >> this is the business meeting under the new leader and people are really expecting a lot to come out of this because that's what they've been telegraphing. if they don't deliver, that will be a shock to the markets. also in corporate news, jcpenney says the ceo did not receive a bonus or stock award after a dismal year at the retailer. probably not much of a news flash. a regulatory filing shows that ron johnson received total compensation of $1.9 million in 2012. his compensation included more than 344,000 for personal use of a corporate jet. johnson commutes to texas headquarters every week from his home in california. that amount is similar to the personal use of a corporate jet

by johnson's predecessor. none of executive officers got cash bonuses. courtney reagan will join us with more in the next hour. down from $50 million he made the year before. a significant drop in compensation. tesla motors announcing a financing product making the sedan assessable to more people. you can think of this deal as part lease and part purchase. partner backs will provide 10% down financing for purchases of the model s. the buyers will still be able to utilize federal and state tax credit available to electric vehicles. not available to a traditional lease. after 36 months the customer has a right to sell the vehicle to tesla at a value equal to mercedes s class of sedans. musk is guaranteeing the resale value of the car. teasing this announcement on

twitter for the last week. phil lebeau will join us with more in the next hour. that is a bad picture of elon musk. he said it was a great ride. >> i haven't been in the bigger one. i drove the smaller one. it's fun. neat. smaller one is small. i'm not that big. i don't know. shaquille o'neal does a buick commercial. i look at him in that buick, you can't drive that buick. >> he says it's really comfy. >> he needs to remove the back seat. >> put it all of the way back. >> corporate leaders addicted to twitter and facebook, they can use social media to make key announ announcements. it seeks to clarify disclosure rules that came up after the s.e.c. opened an inquiry into a facebook post made last july on the personal page of netflix ceo

reed hastings and wasn't even an earnings report. it was just about how many s subscribers they had or something and the agency investigated whether -- it was views. it hit 1 billion hours viewed in june and whether that violated a rule that requires important information to be disclosed to everybody at the same time to all investors at the same time. talked about a press release. more people probably saw the way he released than they would on a press release. we'll talk more about the issues of company using social media with a number of corporate leaders this morning including a very sociable guy. autonation ceo mike jackson. >> who does tweet by the way. he has a twitter account. >> he does. i saw you retweeted something yesterday. >> that he was excited to come on the show today. >> i thought about retweeting it and i tried to do it. >> can't hit the button. >> i don't know. i may have done it. maybe not. also former "playboy" chairman

and ceo christie hefner leaning in 20 years before they thought about it. we did mention futures. yesterday was a big day for the dow and for the s&p. you can see this morning the arrows are green once again. those dow futures like like they are 16 points above fair value. s&p 500 up by three points. oil prices this morning are down slightly down by 42 cents. 96.77. we still have seen some movement with crude well above 95 bucks. the ten-year note right now yielding 1.859%. the dollar at this point is a little bit weaker against the euro at 1.2827. dollar stronger against the yen at 93.57 and gold prices have come down. down $7.80. 15.68 an ounce. kelly evans is standing by in london. kelly, good morning. >> becky, good morning. you mentioned at the top of the

program that italian political uncertainty is weighing on markets. you can see that italy is down 0.7 of 1% today broadly speaking there's no real news out of italy except that there is no government still. the interesting thing about that and story i want to talk about this morning is moleskin. an important barometer for the italian market. the company makes the book covers. this company going public only the third listing to go public in milan in the last 18 months. and it is starting. take a look here. priced at 2.30 euros a share and barely moving. it's sitting at that ipo price. it rallied earlier this morning but quickly retreated back to this level. i did ask the company ceo why he chose milan to go public given we're at a time of such political turmoil and uncertainty in italy. here's what he had to say. >> italy is only 10% of our sales. and europe is the majority of

our market but the u.s. and americas in general are up more than 35% in asia of 11%. as a global business that has experienced very strong growth in the last three or four years and has significant opportunity for growth. >> so he still feels confident about growth. the company gets 10% of sales from asia and australia. they are talking about doing more digital and moleskin branded stuff. glorified stationary but they are trying to argue that they have a strong longer term outlook. you can kind of understand why they did this as well. we've seen companies go public on the milan market and despite all of the eurozone turmoil better than double over the last year or so. whi moleskin is an important barometer sentiment.

i have to say this debut is not necessarily going to spur a lot more activity or at least more confidence in the market right now. back over to you. >> all right, kelly. thank you. thank you. i think, you know, she's smart. she's right over there. she can go anywhere at any given time. she's an hour from everywhere we would plan a vacation. >> joe, it's true. it's tough sometimes to be here and feel like there's almost too much to see. speaking of -- i was in italy in fact just last weekend. that was an interesting kind of -- >> what? >> yeah. let me tell you, he's not popular with the public there. >> i know. a year ago when i was there i told you, kelly, i don't speak italian. shock. but there were signs of him in a beach chair. i asked what is that? he says it says send monty to the beach. where were you in italy? >> i was in rome.

i went to the vatican for easter mass. it was pretty special actually. >> that's wonderful. rome is incredible. i like it as much as paris i think. you too, kelly? >> i have to say, joe, i liked it even more so. i was really pleasantly surprised. all of the investors who have been talking up rome and italy's long-term prospects, i find myself more sympathetic to the sto story. >> you see when italians talk about their economy and bond yields, i'm looking over the bay of naples. i'll get back to you on that later. it's a great place. thanks, kelly. other news this morning, australia -- never been. >> i have. italy? australia, no. >> the country plans to force corporate giants like google and apple to disclose their tax

arrangements. australia's assistant treasury secretary says that the increasingly borderless global economy means big firms have no tax liability and a lot of times they avoid it in their own country. australia wants a piece. >> they're not the only ones trying to get a piece of things. the pay by weight plan is the fairest way for people to fly. they will try to charge passengers by weight instead of by the seat. they asked passengers to declare their personal weight during booking and charged per kilogram at a rate dependent on flight length. the customers will be weighed at the check in counter. just in case you thought about lying. the airline instituted the plan last november but it caught attention when the airline began international flights. this coincided with the publication of a report by a norwegian economists suggesting airlines should charge obese

passengers more. >> i'm going to message leno and there's something here. this is a monologue, is there not? >> probably is. i don't know exactly what it is. >> i was out late. i won't come up with anything. fat jokes just typically are -- they are in this country, two out of three, you're going to offend someone. >> i can't imagine going up to the airline counter and instead of weighing your bags, you have to weigh yourself. >> i would offend myself. i don't want to do that. coming up, we'll head to trading pits in chicago to talk stocks, bonds, currency and commodities. have you ever wondered how you live without your ipad? if so, here's a piece of data trivia that you might enjoy on this day in 2010, apple first started selling the thing that none of us can live out. the original ipad. now as we head to break, a look at yesterday's winners and losers.

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welcome back. right now you see there are green arrows.

dow futures up 16 points above fair value after some big gains yesterday and another new high for the dow. our headlines this morning, china expressing serious concern over the korean peninsula. yesterday a chinese diplomat met with ambassadors from the united states and both koreas. north korea has threatened a nuclear strike on the united states and missile attacks on its pacific bases after a new u.n. sanctions were imposed. it also said that it was in a state of war with south korea. joe? >> thanks. let's get the national weather forecast from the weather channel's eric fisher. i'm ready to walk out this morning without a jacket. big mistake. it felt like high 20s. i think it was 31 where i was. >> it's brutal outside. we're tired of it. we're sick of winter. i want a poster child for endless winter this morning and i picked syracuse, new york. yesterday 10.5 inches of snow. 10.5 inches of snow yesterday in syracuse. so why is this interesting?

it on labliterated the daily re. single snowiest april day they ever recorded in syracuse. you look across the northeast this morning, still snow showers around the catskills and finger lakes. snow showers have reached toward boston this morning. all of that off lake ontario. another very much winter day. cold temperatures outside. jacket necessary. 47 degrees in new york this afternoon. 54 in d.c. pittsburgh, up to 42. and burlington, they've had snow squalls for days on end now. 37 degrees this afternoon. the big weather story is this storm across parts of texas, louisiana, big thunderstorms blowing up over the northern gulf. lots of heavy rain. look at the radar. all across louisiana, mississippi, houston has had storms. in hitchcock, texas, they had hail the size of softballs last night that blew out car windshields and some windows on homes. more storms possible today in south texas. we're watching san antonio into around austin, corpus christi, large hail, a couple tornadoes

can't be ruled out and tomorrow this moves across the gulf coast. florida is really the state we're watching in particular. southern georgia too. could see several tornadoes tomorrow. if you're in orlando or tampa, you'll want to watch this storm very carefully. we track all of the rain across the south. a cold rain for many tomorrow. this moves up the east coast for friday. the end of the workweek if you are traveling i-95 corridor new york down to raleigh. that is where the heftiest rain is going to be found. it's rain and not snow at this point in new york city. it's almost cold enough we could talk about snowstorms here, joe. >> you feel better probably when you make a bad call. if punxsutawney phil can be this wrong, right? if he can be this wrong -- >> if you are going to a rodent for your seasonal forecast, i got nothing for you. i got nothing to say. >> you think i'm the only person that pays attention to groundhog day? he said an early spring. >> i'm curious. do people really watch and believe the groundhog? >> yes.

>> you trust him? >> not anymore. >> i rely on the farmers almanac and i combine it all. i combine it all together. >> i have a rock in my backyard, if the rock is wet, it's rain. if it's dry, sun. if it's gone, tornado. >> that's my idea of a weatherman. he looks out the window to tell you what the weather is like. all right. not that there's anything wrong with that. thanks. let's get to michael from chicago based spectrum asset management. we talked earlier. we wish we had an expert that could explain the divergences of some of these different markets. here you are. we couldn't really find one. i'm kidding. you got to do it. >> i love you. >> transportation. gold all of a sudden is breaking down. >> silver. copper. >> currency movements. the dow at new highs. can you make sense -- can you

try for us? >> we can try. that's why we wake up so early to do this. we love it. most of the reason being on the metals markets in particular for gold to start with has been just the pure long liquidations that have started to flood the market. we've kind of anticipated this for a couple of weeks. now you are seeing this heavy volume pick up in regards to the one sided flow. now that being said, keep an eye on how currency markets are so adverse and that's another overlying factor in gold. lack of demand in europe is another factor and there's a couple barometers that i use in one versus the other and fact is that right now you know because you follow me so closely that 200-day moving average in silver is right here at 2706. we'll get our first real test probably today if we get through that level. i mention that only because gold 200-day moving average is so much on a two-year weekly is so much further below the market right now that gold is in a free-fall where silver you might

see bounce or it could give in and throw in the towel like gold has already. >> why do you think transports have been -- is it just that transports ran so far so fast, michael? >> i think that's exactly what you saw. i think the sectors right now are starting to show divergence in regards to potentially a high in the stock market where you start seeing triggers come in sector by sector where historically you would see something like this with transports showing us the first signs but again the renewed strength in the equity markets is completely understandably historically on why metals would break down and on top of it is why currencies are coming down. a huge move by the dollar against the british pound. we see the euro prop itself back up at 128. sterling is in a free-fall. i'm surprised at that. not just because of the fundamentals of the british government. >> all right. we appreciate it. and thank you for getting up early with us. here's an earlier where you are. cold there i imagine too, huh?

>> what's a day without cnbc? we love it. >> is it cold in chicago? >> it's cold there, isn't it? >> 21 degrees with a slight windchill below that. >> i will say one thing. if it was like last year again this year, that's how people decide on whether they believe in things. we would be absolutely sure -- >> two makes a trend. >> two makes a trend. one storm in new york makes a trend. >> in hawaii it's really cold. i heard this morning it was 60 degrees and they are freaking out about it. >> north america has had warm temperatures. other parts of the world people don't know how cold it is in other parts of the world. it can get cold in north america in april. it can do that. >> i feel for you. i was crying about 33 on my thermometer this morning. >> i froze in naples last week. it was not fun. >> good to see you. talk to you again soon.

when we come back on "squawk box," we'll talk about adp employment report that's coming up today later at 8:15 eastern time and we have key interest rate decisions in japan and europe tomorrow. strategist will sound off on stories likely to drive markets in the days ahead and later this morning, our squawk news maker of the morning. dan tarullo is live from the federal reserve building in washington at 8:30 eastern sitting down with steve liesman to talk about too big to fail, stress tests, volcker rule, monetary policy and his economic outlook. before we slip in a quick break, university of louisville guard kevin ware is back on campus two days after breaking his leg. he arrived on crutches at the practice facility at louisville. he underwent surgery to repair fractures. he's expected to be off the court for a year. look at him. there he goes. i know what you're thinking...

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick. andrew ross sorkin is off today. okay. our mac is not willing to jump in with us. i need someone to make fun of and he's hiding over there. i told you to get makeup. i told you it was going to happen. you're not going to play along? are you miked up? you're useless. any way. we love you.

making headlines, bp put the wind farm operation up for sale. latest example of the continued retreat of big oil companies from renewable energy investments. oil and gas projects are offering better returns. bp would not put a value on any sale but expects attractive offers for the assets and a privately held u.s. biotechnology company called alpha core pharma boosting the early stage pipeline of experimental heart drugs. we don't know the financial details at this point. another record finish for the dow and s&p 500. joining us this morning is tim holland, partner and paortfolio manager and chris is chief investment officer at global financial private capital. let's start off, tim, talking about how you're feeling right now. we keep seeing records every day. we keep waiting for the

pullback. what do you do as an investor right now? >> we continue to do what we've always have done which is find well run companies. everyone is fixated on the s&p and the dow i like to say it's not a stock market. the market is stocks. >> overall when you look at the numbers going up like this, do you feel good about this that it suggests that momentum is there and investors are willing to come back to the market or do you think this is a time where it makes you nervous? >> i feel pretty good. again, you don't look at this in a vacuum. everyone compares this to 2007 or 1999. yield on the market is two times what it was then. the ten-year treasury has gone from six and change to 1.8. on balance i don't think -- >> you see bargains and things look attractive relative to other classes. chris, do you agree with that? >> i agree with that. my goal for the s&p was 1,550

and that's in the rearview mirror. 80 degrees down here today. it's time to take something off the table. no heavy weather expected but trade some of our best players to the other team. >> so you would go ahead and take some profits on some of your biggest winners, is that what you're saying? >> absolutely. no shame in doing that. i think it's time to -- we'll probably get some earnings warning from somebody or negative earning surprise in the next few weeks and that's all it takes. this market is nervous. divergence you mentioned earlier no question that we could see a downdraft for a while and it's nice to have a bit of cash sitting there waiting to pounce. >> it's been interesting just watching what's happened in terms of a lot of excuses the market could have taken to really sell-off if you looked at europe and what happened with cyprus and some of the concerns that have come across from big companies like fedex or caterpillar. it seems to me like if the market wanted to sell-off, it

could have used them as excuses. >> no question about that. the zero interest rate policy and the continuing qe is certainly a floor under it. at some point i think investors will get nervous. it doesn't take much just a little drop like cyprus to start some contagion and then we'll have some weak hands leave the market. >> everyone is waiting to see what the fed does next. that's why people care so much about what the fed governors have to say. we will have dan join us later at 8:30. are you watching these guys to figure out when or how they start to paper back? >> no. monetary policy is accommodative here and europe and japan and we don't see that going away any time soon. everyone puts this rally down to the fed's balance sheet but one thing i came across the other day is s&p capitalization is up $8 trillion off the march 2009 low the feds balance sheet up 1.2 trillion. i don't think -- >> another trillion this year is

expected. >> this isn't all monetary policy. housing coming back. and i'm not that -- you have to pay attention to the fed they've given every indication that they are going to remain accommodative and you assume that's the case for the time being. >> we talked to people like warren buffett who say when the fed starts to signal things it will create a stampede and everyone trying to be the first guy out of the room and definitely not the last one in the room. is that a real short time view of the market? >> i think it's a short time view of the market. you look at fundamentals and discretionary space that haven't done that much. market at all-time highs but there are companies not near all-time highs and that's where we've been doing most of our fishing. >> how about you? again, there are two things that are taking place here. you mention the fed has made stocks look really cheap relative to other asset classes but a situation again if the fed were to pull out of this, would

you still have a lot of confidence in what's happening? >> i think so. i think we get a downdraft. the world is getting wealthier. i agree with tim. there are other factors that make stocks attractive here. >> which ones are attractive and which ones would you be selling at this point? >> i think we've had a huge move in the foodies and to baccos an drugs. most are pushed up by those desperate for yield. there are places to look. defense companies. lockheed, close to 5%. huge dividend increases. cheap companies. not up much. that and old tech. microsoft, intel, western digital, seagate even hewlett packard despite noise about it yesterday are areas that we have invested in and will continue to do so. >> when it comes to defense, you don't worry about the government cutting back on spending down

the road? >> you know, i think that's already priced in. remember the early 1990s when we had the peace dividend and everyone said that's over with but you saw consolidation and these companies can cut back real quickly. the people affected are the poor people in bases and areas that get hurt and not so much the defense companies. >> tim, how about you? areas that you like right now? >> small cap fund has been mostly financials and consumer discreti discretionary. as a sector if you talk about a big part of the market nowhere near 2007 high, we like redwood trust. as real estate comes back, value they own comes back. we owned toll brothers for a while. land heavy. thousands of lots. optioned or control which is good because the asset is going up and back to domestic energy renaissance as well. we like phillips which was spun off of conoco. fantastic mid stream assets.

we think even though it has a lot of reporting, people still don't fully appreciate what's going on in domestic energy production and what a significant positive that is for many, many parts of the economy. >> we'll get earnings coming in. some of the financials coming in next year are jpmorgan and wells fargo reporting next week. a take on those two? >> capital market activity pulled in a bit. deal flow got pushed into q-4. i don't expect great numbers. as the market does well and the economy does well over time i expect a good year for most of those companies. >> thank you for coming in today. great talking to you too. tax day is only a couple weeks away. as of today. before you file your returns, you'll want to hear -- huh? >> i forgot i have to get it in. >> we'll hear our next story how some americans fell victim to identity theft. scott cohn has details next. zynga will take the plunge in

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welcome back, everybody. u.s. equity futures are indicated higher. dow futures up by almost 14 points. s&p futures up after big gains on the market yesterday with new record levels once again for the s&p and the dow. our headlines this morning,

verizon says that it does not currently have any intention to merge with or to buy its partner vodafone. verizon would be a willing buyer of the 45% share of the verizon wireless u.s. venture. >> well then buy it. >> if they would sell it to them. >> less than two weeks until tax day. scott cohn has found -- >> i'm freaked out about this. >> identity thieves filing fraudulent returns. they're not then paying what you owe. i assume they want refunds. >> refunds. >> no one has filed to pay someone's taxes at this point? that would be nice. that would be like those coke commercials where pick pockets are giving people -- that's not what you're talking about. >> no. >> all right. this is a crime. it's a crime that cnbc has been reporting on for a year now. the crooks are getting smarter

but is the irs. the irs is a wonderful organization. they are already very smart as far as i'm concerned. i think they are very good public servants that i admire greatly. scott cohn is here with the latest. >> good looking too. >> do you think that's the best approach if you're on tv with the irs? >> absolutely. >> what a great, great organization. >> all it takes is a name and a social security number and identity thieves have collected $5 billion in the last year in tax refunds that don't belong to them. the irs and law enforcement are working more closely together than ever and there are new filters to catch the bogus refunds before they go out but what if you could stop the crime before it happens? before the fake return is filed? that's what victims outside atlanta say they tried to do with frustrating results. the crooks struck with surgical precision. >> they actually came into the back window there.

>> reporter: right by the accountant's desk and took just one thing. >> my commuputer was gone. i was devastated. >> reporter: social security numbers, prior years returns. everything. it didn't take long before the irs started rejecting her clients' returns because thieves already filed in their names and claimed refunds so she contacted the irs. >> look, these returns are being filed. can i give you a list of my clients to flag those accounts and they said no. we don't do that. >> reporter: she alerted her clients too including vincent and darlene who asked that we not use their last names to preserve what's left of their privacy. >> nothing i could tell them could convince them to issue any kind of pin, flag our account or any way, no matter how many times i told them my tax accountant's computer was stolen and this probably happened to many, many other people. they just seemed to not care.

>> reporter: when we spoke with the irs in january, officials insisted they are doing all they can to stop the fraud. >> irs takes refund fraud and identity theft very seriously. >> reporter: were you the accountant says not seriously enough. >> every person that i have spoken with in the irs identity theft unit gives me the spill about you need to fill out this form. you need to do this. i already know what we need to do. what i am trying to do is to prevent more of the refunds being issued. >> the irs says it's doing that too. here's the problem if you look at it from their standpoint and points to how sophisticated the crooks are getting. how do you know person calling in to report the fraud isn't the thief? the irs says better to let the system play out. call the irs and we're putting the number on your screen for i.d. theft prevention. 908-4490. you say your identity was stolen

and they are working it out faster. you will get a personal identification number for the next time you file. the problem is that the irs only issues these pins once a year in december which was too soon to help our victims in atlanta and the thieves probably knew that. so why not just give everybody a pin? one irs spokesperson says that's a burden that most taxpayers don't need since i.d. theft only affects a small percentage of taxpayers. >> it's $5 billion and every one of us can point to someone that you know. there's a guy at my church this happened to last year. i keep waiting to see who it will happen to this year. >> they say it affects 1% of taxpayers. that's still a lot of people. >> wouldn't it stop the fraud at that point if you had a pin for everybody like i do for my bank account? >> here's what they are always doing the balancing act is. do you want to get your refund faster or do you want it more secure? >> i would like it to go to the right person. >> we all would. they would too they say. that is the issue is do they put this burden as they call it on

taxpayers that don't necessarily need it because then people forget their pins and then they have to deal with that and there are questions about whether the irs system, which is only about three years old, this pin system, is up to it for 140 million taxpayers. >> that's sounds like a better reason. >> send checks to a post office box? you would go to jail for this. >> you get a prepaid debit card, which you can just pick up at a store. and you tell the irs in this fake return send it to this prepaid debit card. >> so you know how to do this. let's say you do get shafted. how long does it take for the irs to figure that out and send you your money? >> that's a big issue. >> how long? >> it can take six months. it can take a year. even longer than that. >> do you definitely get the money back? >> it's a long process. now you have this pin that you have to use every time. now i will say that the states are doing interesting things

because there are state tax refunds. >> you go to jail for how long? >> you would go to jail. you won't necessarily go to jail for as long as you would for dealing in drugs, robbing a bank, et cetera. the crooks know this. the states are doing stuff on this as well. we'll talk about later on today and maybe things feds can learn. >> fascinating. thank you, scott. when we come back, we'll hop behind the wheel with the ceo of autonation. we'll ask mike jackson's about tesla's new finance program and the s.e.c.'s decision on companies tweeting out information. "squawk" will be right back.

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welcome back, mike jackson joins us now. good morning, mike, thanks for joining us. how were sales? >> joe, becky, good morning, pleasure to be with you. we had another excellent month for march. retailing almost over 27,000. just over 27,000 new vehicles. that's up 7% in total on adjusted basis, up 11%. we had acquisitions in there. so if i put it on a same-store sales basis plus 4% plus 8% adjusted, good recovery in our housing states of florida and california which were both up 8%. premium luxury was strong, up

14%. pickup trucks were our strongest vehicle type segment of 9%. so the drivers remain, replacement need, exciting new products with great fuel efficiency, the best financing available, high trade-in values with bright spots in the economy finally around housing and energy. >> wow. >> and for the industry, the industry did for the fifth month in a row over 15 million, 15,300,000 units on an annual selling basis. as we started this year, i predicted mid 15 for this year, that was an outlier, but most manufacturers and analysts are adjusting towards our number. >> how much of that old inventory we've always heard about that people haven't bought cars in a long time. going through that process, of people upgrading new cars, how far along do you think we are along, mike? >> yeah, we're in the early part

of that, joe, we had a depression in auto sales. in '08, '09, '10 with unbelievably low selling rates. so pushed out the average age to 11 years, average trade-in has 150,000 miles on it. so there's pent up demand that's going to continue for years and so we're on a journey back to something over 16 million units as a sustainable rate for some time. >> i've seen your stock, i know you've seen it. i know you're an interested ceo that has skin in the game with your stock. what i'm getting to is you love the tesla, it's the best electric car ever, but it's expensive. if anyone can afford one, it's certainly you with $44 stock price. and this is a compliment i'm giving you. how come you haven't bought one? >> i have a golden rule. i only own what i sell. and we do not sell teslas, so you won't see me in one.

they have a vertical model where they're building their own retail organization, which they own, which is a controversial step and we'll see how that works out. >> but you love the car, right? >> for a start-up, i have to tip my hat to them. it is a first-rate car. but there are other electric cars out there that are excellent such as a chevy volt or the leaf. but for tesla to do it as a start-up is an incredible accomplishment. now, when we talk about electrics, though, there are three anxiety issues out there. namely price, range, and residual value. and what the manufacturers have underestimated was the residual values. because consumers are telling us, look, it's one thing to come to terms with this price and i can work my way around the range, but if you want me to take the risk on what this thing's going to be worth, not me and therefore moving to

leasing. >> i had some other stuff to talk to you about. we've got to go, sell some commercials, it's all about money, isn't it? thank you. >> "squawk" will be right back. a my mantra? trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied

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. the rally rolls on. investors pushing the dow and s&p to record highs. we find out if the bulls can remain in control. and we'll tell you what you need to be watching as we march towards the opening bell. can tesla help customers avoid sticker shock? the company rolling out a new financing program. but does it really pay off for buyers? we take a closer look at eli musk's latest idea to sell you

an electric car. a preview of what you should expect this jobs friday as the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" on cnbc, i'm becky kwquick along wh joe kernan. you do see green arrows again. those dow futures still about six points above fair value, the s&p futures about 1 1/2 points above, and these are both at new record levels. let's get to your morning headlines, we are just over an hour away from the march adp report on private sector employment. economists are expecting the economy to have added 194,000 private sector jobs last month. at the bottom of the hour, we'll preview that number and the government's march employment report. a preview of that due out on friday morning. at 8:30 eastern time, an

exclusive interview with dan tarullo. verizon, meantime, says it is still willing consider buying vodafone's 40% stake in verizon wireless, but contrary to media reports yesterday, it says it is not considering a bid for all of vodafone on its own or in partnership with other companies. apple's next iphone is likely to come this summer. the paper says that the company is also working on a cheaper model that could help it increase market share in emerging markets. yesterday wall street pros were buzzing about goldman's move to take apple shares off the conviction buy list. our own jim cramer cautions investors shouldn't jump to the wrong conclusion, though. >> the big hatred is now game on. and when most of those firms break ranks, cut numbers and say how disappointed they are in management, that's when the stock will be safe and ready to run. >> and attention all corporate leaders addicted to twitter and facebook, the s.e.c. says companies can now use social

media to make key announcement as long as they tell investors which sites they're going to use. and the guidance from regulators seeks to clarify these rules because i know you probably remember this because we talked about it a lot. it came up after the s.e.c. opened an inquiry into a facebook post by that guy, reed hastings, on the personal page of netflix. and what he really said, he was just sort of bragging that netflix had hit 1 billion hours viewed during the prior month. and we had analysts arguing both sides. >> some of them are pretty innocuous. you probably get more viewers there than you would if you showed up -- >> some other analysts that said they were able to game the stock and the stock was up a lot, but up for a totally different reason that the guy was willing to say it was due to this facebook post. >> there were plenty of arguments. we dug into it pretty deeply. i walked away from it thinking,

hey, you got a lot of viewers. >> i'm glad i'm finally tweeting, if they're going to do it there. >> you need to be there. >> mack? are you -- >> he just brought -- he's so nice. >> he was talking, though, did you hear him? he's going to sit in for andrew a little bit. all right. the -- >> that's charlie brown's teacher? >> charlie brown. the agency investigated whether it violated a rule that you've got to tell everyone at the same time. but a pr news wire that no one sees. >> seems to me -- christy hefner is our guest host, what do you think on this? >> i think knowing the different platforms that have been used to make announcements, it's the broadest and seems the s.e.c. was playing catch-up on this. >> i'm glad it came down to the right side of it. you can have a million followers on twitter. that seems just as broad a

platform. >> and completely accessible. >> if you were a small hometown newspaper, i never understood why the others wouldn't. i think it's good. >> i think courtney's here, right, and then we're going to talk more. right? >> real quickly before we get to courtney, the 2008 financial crisis, it appears to have permanently changed how americans handle their money. fidelity releasing the five year after survey. people are saving more, paying down debt and they are taking greater care when it comes to investing. here's some of the key findings from the survey. 56% reported their financial outlooks changed from feeling scared or confused at the beginning of the crisis to confident or prepared five years later. 55% feel better prepared for retirement than they were before the crisis. and nearly half of those polled are cutting their personal debt totals. that's all good things that came out of some really tough times. fidelity says investors have become more engaged about managing their portfolios and

people have become smarter about managing the risks of potential investment losses and trying to avoid unsustainable debt levels. so, again, all lessons we probably walked out of this with. not necessarily bad news. >> and ron johnson seeing his compensation dropping in 2012. probably still got some apple stock. we're not worried about him, are we? >> not really. >> courtney reagan joins us now with more. he's -- whenever i see his picture, he's got a big smile on his face. >> i don't know, he seems like a happy guy. >> he does? >> i'll tell you why in a little bit. we know it was a tough year, 2012 for jc penney, the retailer shed 46% in the calendar year and the first 11 months of the multi-year transformation plan, and others did feel the hit. so for 2012, johnson's base pay was unchanged. but he received no stock awards this time like he did in 2011, much of that to compensate for what he was giving up by leaving

apple. his 2011 compensation totaled $53.3 million with $52 million in jc penney stock awards. johnson isn't the only one at jc penney taking the hit. quote none of our named executive officers received an annual incentive award. he received 44% of the target cash compensation, that's basalry only and other officers received 55% of their aggregate target cash compensation basalry only. johnson lives in california, though, jc penney is headquartered in texas, and the proxy shows johnson used $344,213 in personal use of the corporate aircraft. jc penney had no comment beyond what is in the proxy. however, with help, you can see johnson's $344,000 is not only usual for jc penney's ceo, in fact, it's below the amount that mike ullman used five of the seven years of his tenure as jc

penney's ceo. its sales weren't nearly as troublesome as they've been under johnson. ullman, too, lived in colorado and commuted back and forth. >> i don't know why we're talking about $300,000 when you've got $54 million in stock. >> in 2011. and that was to compensate for the money that would've vested from his apple stock. but additionally -- >> it was in stock. >> it was in stock. >> and additionally -- >> oh, it's still worth -- >> johnson put in $50 million of his own money. this is interesting, through stock warrants, so $7.25 million in shares of warrants wort about $50 million. price $30, were like $14 and change right now. he could lose all $50 million of that. he did puz his mont his money w mouth is. >> now i don't know why he's smiling. now it's a nervous smile. >> i think courtney's making a bigger point, which is that with all the push for transparency of

compensation, which i'm all in favor of, we are still a captive of things that are a snapshot in terms of the value, which may actually have nothing to do with the cash value that he ultimately gets out of it. never mind what you pointed out in terms of the investment. i feel we don't yet have the tools to actually monitor and therefore comment upon as investors what these compensation packages wind up being. >> you have to take a snapshot of some period of time. >> right. it's not as if it's easy b uh i feel as if we need to work on other ways to make it a moving picture, maybe, than just a snapshot. >> you think it's fair, though, to have compensation tied to performance? this is the way the system is supposed to work. >> yes. >> his pay dropped from over $52 million to $1.9 million. and if you look at what happened to the company, investors probably say this is a fair way of meting it out.

>> what are you benchmarking for expectations. this is a company affected by things like showrooming, and it's a company that is in the particularly difficult spot in that it is neither mass merchant in the way that the walmarts and costcos are doing very well. nor the kind of apple specialty high-end boutique. sits in that middle which is the worst place to be. >> i think by any metric, you can look at the performance there has been. and they've underdelivered on the whole expectation. the whole plan was to change the store. they want five years to go and reformat all of the stores. and by getting rid of the sales they've been offering. it bit them. because it drove the customers out who were there, who didn't have the new offerings. and the question becomes, how much time do investors give him? are they going to give him that five-year plan that originally was laid out? >> i know, and i think it's a tough question. because if you were to leave

now, then what? then what do you do? do you backtrack? that's the other problem, i think, is what's the alternative? >> they seem like they have been backtracking, though. they embraced sales again and promotions on some of these things. maybe you try and do both at the same time. >> possibly. i think hindsight's 20/20, they should have changed the product first. then they changed the pricing. but now, i mean, i think the stuff looks better. i've been looking at the website almost every single day, but if people aren't there to buy it, what difference does it make? >> the commercials, the marketing has been there for it. it's fooled me a couple of times. but when it's not what you expect when you see that, i don't know how many times you can kind of use the same trick to get people back in. >> it's hard because not all of the stores transformed. it's going to take a number of years more to get where they want to be. part of jc penney looks good and part of it looks like the old jc penney. >> it seems to me, they have to reset the near term metrics. how patient will investors be, i

think that's a function of whether they're able to achieve what they communicate as their goals along the way. and clearly to your point, becky, they didn't do that in this first period. what are the expectations they're going to give to the market. whether it's on a store year-over-year, or what they want to have the market focus on. and they have to hit those over the next quarters to have the patient investor, patient capital for four plus year period. >> is there anything you think ron johnson can do to buy time, christy? >> well, i would think the most valuable thing is what we're just talking about. what is the narrative? and what are the metrics that fit the narrative? and does the market accept that? and i'm not close enough to the store to know what those should be. but clearly 20/20, hindsight to your point, courtney, how do we recalibrate based on that? >> and jc penney has pulled a lot of their expectations, not really giving guidance. that's up to the analyst

community. we were very surprised in the fourth quarter. much worse than had been expected. >> is it? it came back one other time. does it have it in it to come back? is sears ever coming back? kmart ever coming back? jc penney ever coming back? >> i don't know. i think that's the $64,000 question as i said, you can and i think it's fair to say that the ceo is responsible particularly because some of the strategies he deployed seemed clearly not to have been right. but how bad are the head winds for that company regardless of -- >> is it iconic. does iconic -- everybody knows it, but i don't know it's iconic. >> recognition is not the same as loyalty. >> walgreen's was -- >> wolworth's. >> how did you know what i was talking about? >> all right. >> courtney, thank you very much. christy hefner is our guest host, she is currently a director at the center for american progress. and she's going to be with us for the rest of this hour. when we come back, we'll

talk more about why a diet may be needed before boarding a certain airline. we have that story next. and then the rise of the consumer. we'll speak to jarden's executive chairman about the company's success. it's the owner of more than 100 brands you can find around your house. take a look at the futures. right now the dow futures up by about 7 points. i think ford service is great, but i wondered what a customer thought? hi nia... nice to meet you nia, i'm mike. what do you drive? i have a ford explorer, i love my car. and you're treating it well? yes i am. there are a lot of places you could take your explorer for service, why do you bring it back to the ford dealership? they specifically work on fords. it seems to me like the best care. and it's equal or less money, so it's a value for me. get a free brake inspection and brake pads installed for just 49.95 after rebates when you use the ford service credit card. who doesn't enjoy value?

welcome back. its pay by weight plan is the fairest way to fly. it's the world east first carrier to charge passengers by their weight rather than per seat. see, if you need two seats, you know weight is probably a large -- >> or a seat belt extender. >> they ask you to estimate your weight when you're buying the ticket, they make you weigh in when you get there. >> you can pull up that center thing -- anyway, samoa air -- i said i'm not going to try to make a joke because my mind's not working. but samoa air asks passengers to declare their personal weight when booking and then charged per kilogram. i don't know what i weigh in kilogram. it depends on the length of the flight.

the airline instituted the plan last november, caught the attention last week when the carrier began international flights to neighboring american samoa. and you've got to -- not only do you get felt up, but you also got to get on a scale. >> in front of everybody. >> there's a bigger implication of that, which has to do with employers' costs of unhealthy employees. so there's already been a trend toward wanting to encourage employees to stop smoking, to lose weight, and in some cases not willingness to hire employees who are smokers. cleveland clinic and other people have done that for years. and i hear now. because one of the companies i work with is canyon ranch which is sort of the granddaddy of the health resort business that employers are starting to think about whether or not they will financially penalize not just encourage, but financially penalize employees who are overweight because they feel

that they are bearing the costs of all of the medical complications that go with that. >> feels like it's a big jump to go from penalizing your employees to penalizing your customers. >> yeah. >> why don't you pat it out. >> you don't want to penalize, you want to do carrots and sticks. if it's me, i welcome companies going with their employees rather than mike bloomberg. that whole idea, i watch what he's doing and i don't really understand where he sort of went off the rails with -- it's so let them eat cake that, i'm -- i know what's best for you and for the poor people, i'm going to take that -- this is my responsibility to change -- >> well, obviously government has historically had a role in all kinds of regulatory matters, including in food and drugs. and it seems to me it comes from that great book called "nudge," which is not the idea of what government should prohibit, but

how government can encourage behavior that is in the public interest through in this case making the default mode not bigger than a certain size drink. >> that doesn't sound encouraging, that sounds like prohibiting. >> no, you buy two. it's not -- >> you're prohibiting companies from using a 16.9-ounce. and all of them got ready to do the 16 ounce and the judge threw it out. i'm sorry you all got ready. anyway, let's get to -- >> he says very nice things about you. >> i see him. i'll say it right to -- this is nanny state gone crazy. don't get me started on bloomberg. from investors watching the consumer for signs of a pick-up in the economy, look no further than jarden, owning more than 100 consumer brands ranging from crock pots to coffee makers, skiing and camping equipment, and stock up more than 60% over the past 52 weeks, hitting a new high. joining us onset is martin

franklin, the executive chairman of jarden. if you make your crock pots too big and people get too fat eating out of them, we're going to have to talk. >> they should regulate that. >> can you imagine? >> i can't ine.>> you're listen. >> you were talking earlier about, you know, company wellness. >> yeah. >> we have a big company wellness program inside jarden. and the reality is, it's lead by example, create incentives. we do a tie-up with the health care program where they can get benefits. we have all of our employees in the u.s. with pedometers. we make it fun and it's great. we do these 10-ks with all of our employees every year, we do ten 10-ks in ten days. it's creating an environment, people want to live healthy. you can't regulate health. you have to encourage it. >> i guess it's a private sector answer is what i'm looking for. companies do take care of their employees. i don't want the state to take

care. >> it's good business, it's good for your health care of your employees, it's good for your cost side, good for everybody. >> what change did jarden over the last year, was it the consumer? >> it's a lot of things. i think it's actually more than 60%. >> is it management? >> it's definitely management. no, you know, some of it actually has been management decisions. we've brought back about $750 million of our own stock. and, you know, our view was there are 5,000 stocks for people to pick, why pick ours, we were performing very well as a business and gave people a reason to get interested in jarden again. and we're in an environment where, you know, a company like us which generates a lot of cash can deploy that cash without stressing its balance sheet. put a lot of our debt out long at low rates we're going to continue doing it. >> is it all about innovation and advertising? or execution or what? >> for the last ten year that we've been building this

business, we're now over 7 billion revenue run rate business. we've been driving it based on new product innovation in markets where -- where the market leaders in a niche market and we are the innovators. and that's the culture we've bred. an increasing percentage of sales on new product development and brand investment which includes marketing. and today we're a little over 5% of sales. that's in that investment, a little over 1 million a day. and it keeps growing. the metric of the business has gotten stronger. come out with new types of crock pots, smoke detectors with the lead innovator in skis. all the different niche areas we play and the silos of our group are all driven on the same fundamental philosophy of product development. >> ski technology is incredible. >> it is. and we own k-2, and line a number of other brands. >> you can do things now with

turns that wasn't possible. >> it's like -- it's the old fat head tennis racket. >> it is. you just learn a couple of things and you're like -- >> true. >> but i also think this philosophy of reinvestment and product innovation around the brands is really so critical because too often people think of brands as sort of brand banks they can keep making withdrawals from. and, indeed, i think as you obviously demonstrate, the key is what deposits you're making in that brand bank, which come from marketing on the one hand but also from genuine innovation on product and brand. >> how much do you spend on research and development in terms of boosting these products? >> total is about $370 million and the marketing side of that is 20%, something like that. i mean, we've got certain brands that we call growth drivers that we think we can grow a lot faster than gdp or market

growth. so, for example, we're growing at 15% compound rate, we're spending a lot more money on advertising. we've started -- kicked up advertising in coleman, we do more advertising in things like crock pot and mr. coffee. >> i love crock pots. >> we have a lot of fun products. >> you cook anything long enough, it's like you know what you're doing. >> trust me, i know. >> we have detachable ones that you can do different combinations and it's given the whole business a new life. and it's very active online. there's a huge online crock pot community of people sharing menus. >> you need to come back and guest host. we need to talk crock pots. we're ready to start doing that. >> let's do that. >> you're definitely invited back. >> yeah, definitely. thank you. >> pleasure. coming up, much more from our guest host christy hefner,

plus, elan musk putting drivers in the seat of his tesla. plus, preview of the payroll of the adp private payroll report to be released at 8:15 eastern. "squawk box" will be right back. revolutionizing an industry can be a tough act to follow,

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welcome back to "squawk box," everyone. in our headlines on this wednesday morning, cyprus reached an agreement with the international monetary fund. the $1 billion agreement will supplement the $9 billion. cyprus will be required to implement savings by the year 2018. and the monthly adp report is just about 45 minutes away. economists are looking for an addition of 194,000 private sector jobs for march. this comes two days ahead of the march employment report. that's a big event we'll be

watching on friday. and mortgage applications fell 4% last week according to new figures from the mortgage bankers association. new home purchase applications rose, but that was more than offset by a decline in refinancing activity. joe? >> thanks, beck. tesla wants to give sales a charge with a leasing program. i want to hear these details, phil, but i would never try to take on the post office and fedex did it. i say it's impossible to start an electric car company and make it work. but he's going to do it. >> it's working. >> it's before our eyes, it's incredible. takes a guy like musk to do it. >> well, and listen, he makes no bones, no apologies for when he says he's going to do something, people are skeptical. generally speaking, most of his plans have worked out for him and worked out for those who believe in tesla. the latest step is to start a leasing program. the whole idea, whether you're tesla or porsche, they do bring

in buyers. 10% down payment, that will be financ financed through u.s. bank or wells fargo. residual value guaranteed, and this is important, they're setting the benchmark in mercedes s class. if you don't like your model "s," they're guaranteeing that the value of it will at least be what the mercedes "s" class value will be at the time. they say leasing makes it less affordable. it has posted stronger sales in the fourth quarter, but now they want to bring in more people who might need to look at the way you finance an electric vehicle and the benefits of electric vehicle a little bit differently. >> when you take the gasoline savings per month and other time savings going electric versus gasoline and the convenience of plugging in at home, the actual cost per month is far lower than

people realize. >> what is the actual cost per month? now, the key point here, guys, you have to look at this over a long period of time and say, well, what am i saving every month by driving a model "s," most states have ev incentives worth about $53 a month, not buying gas, you're not going to spend $284 a month. here are some other ones, though, people are looking at and saying, is this really going to apply to me? business use deduction, i wouldn't be using it for business, so that wouldn't apply for me. time savings driving in the car pool lane. this is where tesla says your time is worth an estimated $100 per hour. and they believe that you're going to save $167 by using the car pool lane and not having to drive to the gas station and fill up on gas. that's roughly going to save you about $100 a month. he's saying your monthly payment

might be 14.21. your true monthly cost is $571. some people saying, sure i'll make that back over time. it's 1421. the reaction wall street and others who have heard about the leasing program is it's important and likely bring in buyers. but maybe it's not the game changer that elan musk is making it out to be. >> they play around with funny math like that. don't get into this questionable stuff about how much your time is worth. >> at the end of the day, there's nobody who thinks like -- very few people who think like that. when you go out to buy a car, you're thinking what am i writing in terms of a check that dealer or that bank financing this?

>> you're thinking about your time is money, not worried about the check that you're writing probably. >> you can take the gas off. >> you get anywhere near 1,000, phil, a lot of people driving beamers and porsches and anything really, really nice is probably going to run you a grand for at least -- that's a cool-looking car. >> absolutely. >> and the benchmark being. and joe, the benchmark being the model "s" or the mercedes "s" class. saying p out this on par with mercedes with a premium brand that everybody can recognize. that's a pretty smart move in terms of using that as a benchmark. >> that's what i mean. the real story. >> don't play with that part of the map. >> why would the business deduction be different than the use of of another car. >> you're absolutely right. it's no different there. but this is them trying to make it clear to you. if you look at it their way, the cost -- the effective monthly

cost is maybe $500, $600 a month. that doesn't change. >> if you do the time save during sandy, that's like $800 of time saved. you're going to be making money. >> you'll be making money. >> making money on this thing, right? >> no, all right. i'm with becky on that. do the gas and then -- >> tell people -- >> isn't a lexus $1,000 a month. a top of the line lexus, pretty close i think, right. >> sure. any vehicle that's going to cost you over $55,000, $60,000 a year, you're looking at that payment up there. >> there you go. >> that's the reality of it. >> sure. and you've got that beautiful car. >> you look great in that car, phil. that white -- that thing you were driving, right? >> are you talking about the model "s"? it's very impressive. that's a vehicle changing the opinion of people out there for the first time driving, is it an electric? there's no doubt it's changing opinions. >> changed my opinion of you when you were in it.

that's what i was saying, phil. it was like revolutionary. >> then i've succeeded as a journalist. if i can change your opinion, joe. >> you're the man. >> yeah, see, becky, i need you to be my pr person. phil, thank you very much. we know how mercedes is spelled just in case someone's wondering. tomorrow phil will be onset along with dan ackerson who will be our guest host. really? >> that's cool. >> that's really good. >> please come. starting -- and please watch at 7:00 a.m. eastern. >> if you have comments or questions anything you see here on "squawk," e-mail u us @squawkcnbc.com. when we come back, we have a preview of today's big numbers. due out at 8:15. the futures have been indicated higher this morning. dow futures up by about four points, s&p up by 1 1/2 above fair value. ♪

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in earnings central news, earnings per share falling a penny short of what had been

expected. revenue came in roughly in line. full-year guidance matches what the street was expecting. >> let's get a preview of the adp report and the government employment reports that are coming out. what's today? is today wednesday all day? >> yep. >> tomorrow we get jobless claims. >> friday, again, again. >> the months are flying by. >> joining us onset, president at macro risk advisers. >> reporter: something north of 200. >> that would be something we could believe that would lower the rate. >> that's what they say. north of 150 should lower the rate a little bit. >> it was a surprise lowering last time. >> we will -- do you have a forecast for 6.5%? >> well, i like to see the adp number. >> how long, i mean. how many years until 6 1/2. i'm trying to figure out how long we can count on $85 billion a month.

>> well, that's the big question is, you know, does $85 billion a month in treasury purchases actually lower the unemployment rate. this is bernanke's huge bet which he's got us all, you know, dragging us along for the ride on -- i'm not sure it translates, we've clearly got a significant wealth effect in the economy, just looking at the fed funds flow data and household net worth up $12 trillion in the last couple of years. it's a significant reparation which argues is enjoying to translate back into real economic growth. does it do so at the pace we wanted it to? i would say it doesn't and there's a lot of side effects, and one of them being that financial assets don't really reflect the strength of the, you know, overall global economy. >> except we haven't really. event put your finger on any side effects right now. and the rates been coming down. you can say that's a cause and effect whether it's coincident or just in spite of or whatever anyone says, it's a counterfactual argument. >> he's got tremendous leeway

given inflation is nowhere. >> given the way it is, he's got no choice other than to do what he's doing. >> you saw this open argument between -- >> i think it was evans -- >> right. and it's a little bit of a joke they're arguing because we know what the fed wants to do. >> it doesn't matter what they're arguing about. >> they're going to stay the course. >> yeah. you're going to stay the course and i think there was an economist piece this weekend on who will replace bernanke. and it really to me seems like yellin is a lock for that job. >> what if bernanke sticks around? >> they say he might, but i'm not sure he wants to do it for another, you know, for a long period of time. but his replacement, i think, is going to have much of the same doctrine that he's adopted. >> dean, do you think that the fed can actually taper the amount of purchases that are out there and not set off some sort of a scare or run in the market. that's the big question. that's kind of what they hinted at in the last minutes. but will the market look at that and say, okay, tapering is the

same as getting out entirely, and i'm going to try and front run the feds. >> it certainly puts into question the anticipatory nature of markets, how they will trade well ahead of the ultimate reckoning by the fed. will it create a scare? i don't think so. i think corporate balance sheets are in fantastic shape. i think the scare comes from something like europe which from our perspective at macro risk advisers is a mess. just came back from london and had a series of meetings. what's interesting to listen to, they look at the debt problem in the u.s. with a certain degree of skepticism. there is significantly more skepticism about the growth prospects and the degree to which europe is really taped together. so, you know, the u.s. economy or the u.s. markets become kind of the best of the bad lot. and the reality is in this gets back to the tapering. money needs to be put to work. i'm a skeptic as to the strength of the economy relative to the price of financial assets, but money's flowing into markets

because it can't survive in bonds anymore. you know, bernanke's winning that war of attrition. >> what is full employment? >> what is full employment for the united states? >> without the housing boom. >> i would say we're not too far north of that. i think maybe -- no, there is, and this is the big argument. >> what's full employment in your average european country? 8%? >> well, right now they have 12% unemployment. >> what's full employment? >> i wouldn't be able to -- >> i'm trying to figure out, down this road, what our eventual path would be. because the fed can do 85 billion, but if we don't address the structural problems, what's causing our unemployment, full employment's going to be 7%, which has never been the promise of america, 7%. >> and at least you could argue for bernanke and the fed that they're doing what they can to stimulate the economy. >> what about immigration? we need a lot of things, education, all this. we need all the structural things that are -- without a housing boom, we're not going to get back to 5%. >> and the reality is, these are kind of 25 to 50-year problems

that are going to take a tremendous number of years to fix, as well. >> but i think what you do have going on building on your point, joe, is a growing understanding in the business community that they need to put pressure on government to deal with these structural issues. to come up with a balanced approach between investment for job growth, which is not going on in europe and dealing with the deficit. and the historical kind of either sit on the sidelines or just advocate for that, which is in your short-term as an industry i think is being replaced by a greater concern about the need to not be lurching from manufactured crisis to manufactured crisis. we've got the debt ceiling run out again on may 19th. we've got sequestration. and i think there's an important role that the business community can play in addressing whether it's the education, r & d, infrastructure issues, i'm not seeing that happen. >> i didn't see business make any headway on anything in the

last two years. >> i think this recent agreement between labor and the chamber over the immigration visas. >> i couldn't believe that. two guys involved. >> is an indication of where we're going to have to go and an indication of where we can go in a positive sense. >> that might be the only thing those two guys ever agree on. >> hopefully not the last thing. the other point on the unemployment, of course we're focused on the stats, but i think we also have to look at the issue of what is the wage and benefit package going with the jobs that we're creating? because, you know, our economy and i say this coming out of the consumer side of the economy has always been predicated on the idea of this large and vital middle class that was the driver for all of our companies. and just adding jobs if they are not at wages and benefit packages where people can afford to actually engage in the economy -- >> we're a global -- >> is not going to get us where we need to go. >> setting artificial highs so our companies are aren't competitive. right now, we can't even, our

labor costs here are already way above what we pay the rest of the world. >> you're absolutely right. you can't be competing with the lowest labor markets where the jobs are not skilled jobs. but in the skill job space, which goes back to your point about education and investment, we need to be thinking about that pipeline. >> the success -- the wages that a company pays have to come from the ground up, from the success of the company. then they're able to do it. the company is not successful, that doesn't help anyone. >> absolutely, but it also has to come from the point you raised. what the policies are in terms of education and training that are going to provide the fix for what's right now a skills gap. >> all right. then we've got to make sure the money we're spending in education has to be spent on education, not -- >> spent effectively. >> you just like watching us talk. thank you, thanks for being here. >> absolutely. >> thanks. when we come back, zinga's

first foray into internet gambling, but you'll have to cross the pond for action. and later this morning, federal reserve governor dan tarullo joins us for an exclusive interview. much more. busy morning on "squawk." welcome to the new new york state. what's the "new" in the new new york? a new property tax cap... and the lowest middle class income tax rate in 60 years... and a billion dollars in tax breaks and incentives. new opportunities for business. over 250,000 new private sector jobs were created over the last two years. and 17 straight months of job growth. with the most private sector jobs ever.

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welcome back, everybody. our stock tournament continues and now we are down to the final four. joining us now from new york on apple is hudson square research principal. and managing director and dan, why don't we start off with your thoughts on apple because this is a pretty controversial stock lately. we've watched that stock decline, watched goldman sachs take them off the conviction buy, but they have a price target sharply above where that

stock is right now. how do you feel about apple? >> i think that's right. apple's still in the day is a phenomenal company. they have 500 million itunes accounts in the world. not all the people have iphones and ipads yet. even after this horrendous year that people think they just had with cook the first year after steve jobs. to the valuations is very reasonable. less than ten times earnings, 2.5% dividend yield. you're getting paid to see if they can innovate again. that's our third point. we think there's a lot of innovation left in apple. and it's hard to prove and predict what that next product is. but there's so many different -- the dividend could go up, two, eventually get china mobile. and three, everyone's big concern is that apple doesn't have a 5-inch phone. >> your price target -- your price target is $700? >> yeah, that's right. >> you're out there. you think this stock is going to rise sharply? >> well, the reality is at $700,

the stock at about 16 times earnings, which would be a par multiple with the s&p 500. so if apple is a below par company, maybe it should trade here. but i think on average, it's an above par company. 16 times earnings would be a very reasonable valuation for the company. >> todd, very quickly when you start looking at bank of america, your price target is at $12. why do you think it's held back from here? >> right. we remain neutral on the shares. as you know, the stock more than doubled last year, i think it's up roughly about 30% over the past 12 months or so. but you really are in a transition right now in terms of the stock. there was a big run-up last year, really built on both the repositioning and the balance sheet strengthening the core of the company, if you will. but a lot of the run and where the shares stand today is really predicated on the cost savings program. that's the fundamental driver

for '13 and '14. investors really have built in some pretty lofty expectations that this is a company that while they haven't developed much of a track record the last couple of years in order to grow book value that investors are now kind of betting, you know, fairly significantly that we're going to start seeing some big cost cuts coming through in the next several quarters. >> okay. >> but there's a lot of risk attached to that at this point. >> thank you, both, very much. don't forget to vote. coming up, the number of the morning, adp data and instant reaction from mark zandy. stay with us. at tyco integrated security, we consider ourselves business optimizers.

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"squawk box" goes to the federal reserve. a rare interview with one of the board members who oversee the nation's banks and determine monetary policy for the united states. a cnbc exclusive interview with fed board governor daniel tarullo. >> an early read on friday's jobs report. adp private payrolls hit the tape at 8:15 eastern. we'll bring you the number and the reaction in the markets. and time to improve your portfolio picks. >> i get all my money advice from pbs.

>> where should i put my money? in tech stocks or the housing market? >> tech stocks, foxy moneybags. >> investment ideas from a member of the prestigious round table. the third hour of "squawk box" begins right now. ♪ >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with becky quick. andrew -- andrew ross sorkin is on vacation, and as we said, mack has some comments and forecasts about the -- what do you have for the adp -- anyway. we are less than 15 minutes -- he hates that. we are less than 15 minutes away from the employment report that

gives us an early read on friday's jobs report. and mark zandy is joining us because he does them now. i already forgot the last guy, joel. >> joel. yeah. >> and zandy thinks he's much more accurate. and he will tell us he's much more accurate. >> he will. and for the first few months he's been in close correlation to the monthly jobs report. we'll see what happens. >> i remember last month's number because i was thinking that it would be -- >> you do? >> yeah, because i was thinking it would justify the move in the market. >> what was last month's number? >> i said i hope it was like 240, and i think it was 243. >> you were close. >> so if you were looking for 200 on friday and i think for this private sector that we're looking for at the adp, i think they're at 194,000 is where we're going to find out. and that's the least -- >> i think i remember that number from a month ago. >> because we did a little pro moe thing. >> you are an elephant. >> i am. i don't know. i guess there are other things going on in my life. i was going to say there's nothing else going on, but there are. i've got plenty of -- we only

use 2% of your brain, right? >> i need to use more of my brain too. >> stretch it out. >> let's talk about corporate news. jc penney said the ceo did not receive a bonus or stock award after a dismal year after the retailer. a filing shows ron johnson received total compensation of $1.9 million in 2012, that included more than 344,000 for personal use of a corporate jet. johnson commutes to the headquarters every week from his home in california. that amount, though, is similar to the personal use of a corporate jet by johnson's predecessor. none of the executive officers got 2012 cash bonuses, probably not a sprisz given what's happened to that company, the earnings they've been bringing in, the sales they haven't been bringing in. ron johnson was paid over $52 million last year. we're also going to be keeping an eye on shares of zynga. offering poker and casino style games in the united kingdom.

shares up by about 37 cents, 3.44. still ahead on "squawk" this morning, we have a rare interview with the federal reserve board governor. just in case you're a little rusty on the make-up of the fed, here's a quick refresher. there are seven members of the federal reserve board, including ben bernanke and janet yellin. board members have to be nominated by the president and confirmed by the senate. a full term lasts 14 years. the board has a majority of 7 out of 12 votes on the federal open market committee. that's the fed's monetary policy arm. dan tarullo will be joining us in a cnbc exclusive interview coming up this morning. and everyone is wondering where they think the economy is and what they're going to do with money policy. the futures are slightly higher. dow futures up by about 13 points, s&p up by just over 2 1/2 points. this is all coming after big gains again yesterday and the

s&p sitting at record levels. overseas in asia, you saw the nikkei up by about 3% overnight. that has been a very volatile market with big up and down swings. in europe this morning, you'll see that there are some modest declines in germany, the dax down by 1 1/2 points. and get this, a samoan airline says the pay by weight plan is the fairest way to fly. this is the world's first carrier to charge passengers by the pound rather than by the seat. they asked passengers to declare the personal weight during booking. and that's not enough. don't think you're going to be able to lie and get away with this. you are charged per kilogram at the rate depended on flight length. if you thought you could get away with lying, you're going to be asked to weigh in at the check-in counter. if you're thinking about booking a flight, children under 12 will be charged by weight, but at only 75% of the adulterate. all right, don't quite get that.

overweight baggage will be charged the same as passenger personal weight. as well. one more headline, monsanto's quarterly results hitting the wires. earning $2.73 a share, that's 15 cents better than the street was expecting. the guidance looks a little light. we'll see where that stock trades, right now up about 2% in the premarket. >> some of the great football players come from america samoa. >> you have the practices. >> i don't know, maybe it makes sense. i've gotten some jokes that i'm not willing about that story. >> i'm not going to prod you on that. >> that's good. i appreciate that. let's leave them leno or jimmy fallon. i'm not sure who i'm supposed to be. >> they've been joking around back and forth. >> i figured it was okay for me to do too. is the u.s. economy making a comeback? joining us now to talk about jobs, the fed and where you

should invest your money, the head of north american investments for citi private bank, and our host for the hour, who i guarantee knew the exact number last month, didn't you? >> we did pretty well on our forecast. >> but -- >> i think it was 236, but i could be wrong. >> i thought it was 243. >> but i'm much younger and have a lotless in my brain, so it's much less impressive. you've got younger hair than i do, but everything else. >> all right. which is -- it is real human hair, my hair. >> it's your real hair. >> i'm not saying it's my -- >> no, it is. >> do you remember? what did you think for friday? >> i'm expecting an optimistic report. so we're -- >> above 200? >> we're much more constructive on the economy than we were six months ago. and, you know, we think there's a good growth out there, even more important, we think that business uncertainty is being reduced substantially.

we think corporate executives going to be taking actions doing things more in the way of share buybacks and dividend growth. >> the uncertainty took care of itself. it wasn't something washington needed to take care of. time heals everything? >> no, washington definitely helped. but, you know, after post four or five years after the crisis began, you see real recovery, certainly in the housing sector and the like. strength in the dollar. not job creation. >> but how did the uncertainty get taken care. >> did corporations like the sequester? >> you know, i think -- >> not perfect. >> a bit of a nonevent, but basically reduction in the big swings. the risk-on, risk-off days. you saw the conservatism. europe is going to take a little while to work. >> but that's -- >> what i would say basically you saw the conservatism. the extreme conservatism affecting corporate decision

making. dividend payouts for the s&p 500 had fallen from 50% down to about 30%. so we see tremendous room. >> you sound like -- that was just a hangover from how afraid they were in 2008 when the commercial papers got locked up. >> i think that's right. generally speaking, the rise in the market is partly a result of improved -- >> it wasn't obama care, it wasn't not knowing what your tax rate was going to be? it was a hangover from the financial crisis. >> i think that's right. the stabilizing effects of the fed and reduced swings in the market have made people bolder decision makers right now. >> are you at 4% for any quarter this year? >> no, but we've got a couple of threes in there. and i think this year is going to be good. and if i had to guess, if we're wrong, we're going to be wrong by being too conservative. any given quarter, no, given some of the swings. but i do think if you think about it right, we've had the sequester.

my own personal view of the sequester, business leaders have said it's not perfect, we don't like how it's set up, but at least we're dealing with the deficit a little bit, and now we can make better decisions. >> the world didn't end when we cut 2%. >> the tax cut story ended up being much ado about nothing. and if you look at the surprise index, citi has one, ubs has one. and you look at where those have been going and chart that with the s&p, almost a perfect correlation. the stock markets are responding to the economy. the thing distorting is the bond market. >> if it's private wealth, i imagine you don't do short-term stuff at all. a lot of people are calling for a pullback now. and they've been calling for a pullback for three months and whenever they do that, it never pulls back. >> u.s. stocks we feel are fully valued. >> fully valued? >> yep, fully valued. and we see better values in europe, global players, global franchises, based in europe that

have been sold off too much. we actually see some values in japan. so we're market weight on u.s. equities. you know, in terms of short-term, our clients don't typically trade, but we do recommend in our allocation clients maintain an opportunistic element in their portfolio. >> does that mean cash? >> and working out, working out of some opportunities and the continued working out of the situation in europe will create opportunities coming out of dislocation. you know, european banks are still withdrawing, pulling back from lending opportunities. there's an opportunity for private capital -- >> you tell your clients to get out of fixed income and make the switch? you haven't done that yet? >> we stuck with the bullish bond call. we're basically market weight. now we are calling for a 75 basis point increase potentially in the ten-year. >> the huge shift. you have not told your clients to do the huge shift? >> i'm not saying a great rotation, but we are saying diversify your sources of yield, in other words --

>> you're not giving me anything. you're not saying it's time. >> we can't use colorful language like you just used. our clients get very upset. >> oh, there i go again. >> on the fixed income side, floating rate loan funds are worthwhile looking at. we actually think high-quality emerging market debt is worth looking at u.s. dollar denominated. acceler-rental.

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breaking news. adp private sector payrolls, 158,000 in march. that was a little below the estimates of 194,000. joining us right now is mark zandy, he puts these numbers together. and, mark, this is a little disappointing from what people have been thinking this time around. what happened? >> yeah, i don't think anything substantive has changed. the early part of the year because of strong construction employment gains. i think that might be sandy rebuilding. and that's come off a little bit. if you look at the industrial detail, construction employment was zero in the month of march. so i think -- >> that's crazy, if you look at -- if sandy was part of the reason, sandy is not done, all of the rebuilding from that. i look at our community down on

the shore, i look at our neighborhood here where trees fell on houses all over the place. some of these jobs haven't even started yet. >> well, there was a lot of repair, remodelling, things that ramped up quickly and that goes away quickly, it's now five months in. i just speculate about that lot of things. high level of speculation. we saw a big swing in construction employment. and that's the cause for the big change between january, february and march. so i think if you look through the volatility, we're still at 175,000 a month. that's where we've been over the last couple of years. i think that's where we are today. >> when do we get at the point where we're looking at 200 plus? is that down far away in the distance or just around the corner? >> well, i'm optimistic about the economy. i think the next few months are going to be tricky and we're going to see that in the job market. we will see weaker job numbers in the next few months. one reason is the sequester. i think that will start to kick in. we'll see mostly in hours, but we'll see it show up in jobs in

the next few months. the other thing is health care. this is a little bit of data. >> uh-huh. >> and it's a little circumstantial evidence, but i'll throw it out there. if you look at the employment gain for companies with employees of 50 to 499. and you look in the retail sector or in the sectors where you think you'd have an impact in health care. you're starting to see it. this is the adp data, in february, it was 20,000, in march, it was minus five. minus five. so the data is somewhat volatile, moves around, so i don't think we should jump to strong conclusions yet. but, you know, there is some circumstantial evidence. >> and that's not a seasonal thing. >> this is seasonally adjusted. we do our best to take the seasonality out. >> it's only april. that doesn't even happen until 2014. >> that's consistent with work ubs has done comparing romney care to obama care. it's clear that when

massachusetts put in health care, job growth slowed dramatically. >> employers determine their employee cutoff in 2013. >> 2014? >> wow. >> it starts to affect the numbers this year. and if you look at -- >> it could do ours too. couldn't it? what's the cutoff? >> there's so many cross currents here. they could move from full-time to part-time employees. >> right. >> that could raise employment, right? >> but the hours -- you said hours could be affected too. >> that would be the sequester. the furloughs that were in the sequester. >> it would also be affected by health care, right? don't you get it if you work beyond a certain number of hours. >> i think the larger effects -- >> we're not swooning, are we? we're not swooning again. we're not -- we are set up for not spring swooning. we're looking for 4%. >> what's your forecast look like for the year? >> 2%. 2% growth for the year. >> but the pattern over the year. is it slower in the middle?

>> we're tracking over three, q-1, we're going to be over three. >> we're swooning again? >> you just said you were optimistic and positive. >> i am. i think we're going to make our way through this. >> we're set up for no swoon. >> the 4% number is next year. >> next year. >> in 2014. >> i don't think it's the next couple of quarters. and i think we've all kind of discounted the sequester. it's coming. i don't think we're going to get -- >> we haven't dodged this bullet yet? >> no, it's just starting to have an impact. >> where did he get that info that? we were taking away the stimulus and the effects of taking away the stimulus ended the negative effects of taking it away ended at the same time the sequester kicked in. it's flat. >> net net -- >> in other words, we were -- we had a head wind from the ending of the stimulus, okay. and as that was being withdrawn. once that abated and there's no more negatives from that, that's when the sequester took the place of winding down the

stimulus. we really didn't feel anything. >> well, that's a good point. although, if you consider the sequester, the fiscal drag in q-2, the current quarter and q-3 is going to be at its maximum point in the cycle. >> how maximum can it be? >> the fiscal drag? it's going to be at least a couple percentage points. >> we've had people say the economists are crazy when they say that. >> yeah. >> we already knew that. >> we're not tv -- >> that's true. just the sense. overly optimistic for the next couple. >> where is the 2% really coming from? and where do you expect, where are we losing on the jobs? >> if the economy's growing 2% for the year in the fiscal drag, that's the hit from the tax increases and the spending cuts in calendar year 2013 that's going to add up to 1.5 percentage points. that's for the entire year. that means the private sector is

adding 3.5 percentage points, that's very good and that will shine through once the fiscal drag abates, that's not until the end of the year until next. >> let's take the numbers. 158 is the adp number, if you try to extrapolate and put that into friday's jobs report. some people are looking for better than 200,000, is that, do you think, too optimistic? >> yeah, i think so. >> where are you? >> if you did a straight up calculation, say government loses 10-k, we're at 150, right? roughly 150. you know, my sense is that adp's been missing a little bit on either side. it's 175, the world is 175, i think that's where we'll be. thank you very much for coming in. are we talking to you friday again? >> yeah, i'll be here. >> what's the date? all right. see you in a couple of days. take note. we're going to bring you the latest rumors about the company's products after a becky quick break.

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welcome back, everybody. apple is planning to begin production of a refreshed iphone this quarter. the "wall street journal" reports that the new phone will be similar in size and shape to the current version, the iphone 5. apple is also reportedly working on a less expensive iphone that could be released in the second half of this year. it would likely have a different casing. and for the apple historians out there, the first version of the ipad went on sale on this day in 2010. put a little bit of context with that, the top movie at the box office that weekend was clash of the titans. and the top song on the billboard hot 100 chart was rihanna's rude boy. up next, a rareion interview with dan tarullo. talking about the economy, regulating the big banks, ending too big to fail and a lot more. he will join us live from the federal reserve. this is a cnbc exclusive. [ penélope ] i found the best cafe in the world.

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welcome back to "squawk box," everyone. in our headlines this morning, the monthly adp report shows that the u.s. economy added 158,000 new private sector jobs last month. that was a little disappointing. estimates were looking for 194,000. and it brings up some questions

about what to expect for this friday's government jobs report. monsanto is reporting fiscal second quarter profit of $2.73 a share. that was 15 cents above estimates. revenue also exceeded the consensus. the seed producer also raised the full-year outlook, although that outlook is below current street estimates. the results driven by strength in monsanto's corn business. and food producer con agra earned 54 cents a share for the quarter. revenue slightly below forecast. conagra in the process of integrating the recent purchase. let's go to steve liesman with our "squawk" news maker of the morning. steve, we've been waiting for this interview all morning. great to see you. >> becky, thanks very much. i'm here in the federal reserve special library with dan tarullo who is also head of the fed's banking regulation committee. thanks for joining us this morning. >> nice to be with you, steve.

>> let's start off right away with an important question. too big to fail. five years since the crisis began. have we ended too big to fail? >> no, i don't think we've ended it. the increases in capital, the special liquidation, authority for the fdic, but i think there's more to be done, that's why i think you have the debate going on right now. from our vantage point, we have an important instrument, which dodd/frank gave us, which is the capacity to put in special regulations for systemically important institutions. we've done some of that already. but in accordance with the principle of increasing stringency for larger, more interconnected banking organizations, i think we need to do more particularly in the areas of liquidity and wholesale funding. and we're working on ideas in that area right now. >> is some talk about breaking up the big banks, what's your opinion about that? >> well, obviously something structural like that is a matter for the congress.

that's an appropriate decision for the congress to make. as you know, i thought that it's important and worthwhile for congress to talk about the proposal that would place caps on the nondeposit short-term liabilities of banks. that's consistent with my view that's a big vulnerability. but, again, we without any action by the congress can still use our authority under dodd/frank to put in liquidity requirements and make them of increasing stringency. and that's something, i think, we can pursue even as the congress continues to debate some of this. >> i didn't intend to ask all these questions about too big to fail, but it's interesting, i have to ask, if a big bank failed today, would taxpayers have to be on the hook for bailing it out? >> well, i don't think so. but i don't think anybody can be assured of that right now because this is a process. you know, it's not a binary matter of a bank being too big to fail or not. i think it's a process of building up capital, of the fdic continuing to do its very good

work in building up its resolution authority, and as i say, us addressing the issues of funding. because as you recall, steve, that's what really started the acute phase of the crisis with the funding runs. >> couple areas where we need to talk about that. but first, i want to get to this idea of big surcharges on the big banks, requiring them to have higher capital. it's been agreed, do we plan to propose it here in the united states. >> we will propose it here in the united states. it's been agreed, but the final calibration has not been done. when the agreement was reached a year and a half ago, there was a decision to do more data collection and try to refine the methodology. later this year, what you will see from the committee is a final list with a final indication of the so-called buckets of different surcharges that will be allocated to the firms. once that happens, we in the united states will proceed with implementati implementation. >> do you feel it's a year away

in the united states? >> a proposal should not be that far away. >> when was the last time you got an angry call about your proposal to have -- to put a stricter discipline on banks here in the united states. >> well, i understand the fact that banks sometimes don't like to have increase their capital. but that's something that we've required of banks in the united states, something that congress wanted us to do, and so the proposal for the foreign banking organizations is really an effort to respond to the financial vulnerabilities, which they could potentially pose for us and which in turn would pose vulnerabilities for the world. >> you're getting pushback from the banks, foreign banks, from congressmen, and pushback from the european union. is global international cooperation at risk here? if the united states pushes ahead with these rules? >> no, i don't think so at all. and in fact, we should take note of the fact that a jurisdiction

that has already moved to require subsidiarization to have requirements as the united kingdom. part of the european union. and why is that? because the uk is really closest to us in terms of its being a home for large broker dealer operations that have lots of short-term funding. you know, five of the ten largest broker dealers in the united states are foreign banking organizations. the change in the composition of foreign banking activities over the last 15 years in the u.s. has been dramatic. in 1995, only about 13% of foreign banking organization assets in this country were associated with broker dealer trading type activities. today, the number's 50%. and it's to take account of those changes that we have to shift our regulatory approach just as we have in the past. >> and your point is they have different rules from the u.s. broker dealers. and what you're talking about is a level playing field?

>> well, it's a level playing field is a byproduct of a set of safety and soundness rules which apply to everybody. and that is exactly what we're trying to achieve. >> there's a lot of questions i could ask, subtleties of what happened with jpmorgan. but the one question that occurs to me is, come on, five years after the financial crisis, this happens, is it a failure of oversight at the federal reserve or other regulators that they're in there, they're in these banks and they didn't see this? >> well, i think, steve, first and foremost, we have to recognize that one thing that was the case that jpmorgan and it's true at all of our large banking institutions today is that capital levels a m higher than they were four or five years ago. and thus, the capacity of any of these firms to absorb losses, whether they come from conventional credit losses or from an operational problem, or from something else is just substantially greater. on the question of how much

oversight can supervisors provide, i mean, let's think about it. in some of these banks which have 100,000 or 200,000 employees, we and the fdic together have 100 supervisors, we can't see everything they're doing. and that's why it's important to have strong regulatory requirements like capital, like liquidity in addition to the ongoing monitoring which our on-site teams can provide. >> you didn't mention the volcker rule. is there a reason? >> as we proposed it been in place a few years ago, at a minimum, the firm would have been required to document why what it was doing was hedging. it would have had to have those reports available, those analyses available both to management and to the regulators. and so, again, at the very least, there would have been a series of moments at which people had to really say is this

a hedge? what is the hedging strategy? does it create new risks? >> two years on, it's been delayed again. will it happen? and in your opinion, can it happen? can you create a workable rule that separates proprietary trading at the banks from their service for the clients? >> well, obviously, as i think everyone recognizes, the separation of proprietary trading from legitimate market making or hedging is not a black and white matter. there are going to have to be judgments made along the way. i do think we're going to get a rule. i'm hopeful it's going to be this year. it's complicated as you know because we have basically five different agencies that are involved. i counted it up, we have 22 separate individuals, each of whom has a vote, none of whom works for anybody but themselves. and so this is a matter of taking some time to take everybody's interests into account to develop enough of a consensus that we can move forward.

and there have been a lot of productive conversations. but it does take time. >> i have to pivot now and talk about the other responsibility you have, which is monetary policy. we've got the adp report this morning, 158,000, little less than expected. what is your litmus test for substantial improvement that would prompt you to consider either tapering or ending quantitative easing? >> well, i don't know i have a litmus test, steve. i think it's important to note first that the fomc has identified its standard as a substantial improvement in the outlook for the labor market. that is it's a forward leaning or forward looking kind of standard. so another way of thinking about that is that they're trying to create some more traction for the economy on the road to maximum employment, consistent with price stability, not to actually reach that destination. and i think what we've seen is a general uptick in economic

performance. there have been fair number of data points that have been above expectations. but, remember, this has happened before. in the spring of 2011, in the spring of 2010, in the fall of 2011, we had some increases that lasted for a few months in job creation and then they were followed by valleys. we had peaks and then valleys. and i think at the very least what i'd like to see is some good healthy peaks that have job creation well above the rate of new entrance into the labor market. followed not be valleys that take back some of that progress, but at the very least by a nice plateau that can be the basis of more peaks later. >> the minutes say there are some on the committee that are very concerned about the costs of quantitative easing, are you one of them? >> well, i think like everybody look at costs and benefits and, of course, there could be costs, but there are certainly benefits. at this point, certainly, my judgment is that the benefits

overweigh the costs and that's why i've continued to vote in favor of the program. >> thank you for joining us with this update. >> thank you, steve. >> appreciate it. >> becky, joe, back to you guys, live from the federal reserve. i just like saying that. >> yeah, that is pretty cool, steve. if you see any money lying around -- >> grab it. >> it's all over the place. it's like you walk in and there's dollars just everywhere. it's amazing. >> wow. >> joe, not for him. >> he said, joe, none for you. >> oh, he did? well, that's fine, they're not worth what they used to be, that's for sure. thanks to you guys. kidding. >> all right. i have a quick story, steve. i don't know if you saw it. april 2nd, a.p. officially has dropped the term illegal immigrant from its style book, which is a big deal, because newspapers and schools around the country use -- >> they all rely on a.p. stuff. >> this is after advocates have

argued that a human is not illegal. you have to be talking about the act itself to refer something -- to refer to something as illegal. but they didn't replace it with anything. and they said that a.p. says specify wherever possible how someone entered the country illegally, whether it was crossing the border, overstaying a visa, you can't use that term. so people are wondering. >> headline writers everywhere are trying to figure out what to say. >> there's a linguistic anthropologist said a better term would be unauthorized immigrant. >> that's interesting. >> the reason i did it because jay leno picked up on it last night and he thinks the term should be undocumented democrat. is what his idea was. i don't know where he gets that. anyway, coming up, a stock -- you think he's moved a little

bit to the right? >> seems like he's gone a little right. >> that's probably to set himself apart from that marxist on cbs, right? you know who i'm talking about? >> yes. >> who he's beaten every week -- stock picks from a member of the prestigious round table, scott black has the names that could make you money in the second quarter next. the american dream is of a better future, a confident retirement. those dreams have taken a beating lately. but no way we're going to let them die. ♪ ameriprise advisors can help keep your dreams alive like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. and that's what they can do with you. that's how ameriprise puts more within reach. ♪ just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's.

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we are continuing our what's working series with the best investment ideas from a member of the prestigious bairn round table. scott, great to see you this morning. >> thank you for inviting me, becky. >> i know we've been talking recently and i know you are not somebody who generally looks at the broad indices. but when you look at what happened with the dow and s&p 500, do you think stocks are fairly valued at this point? >> yes, i think they're fairly extended. people are overly optimistic on s&p 500 earnings. the consensus is 111, we're closer to 104, which puts the s&p 500 around 15.3 times. and around 16 times. so we're converging on that. and if you look at small and mid cap, they're over 18 times expected earnings. obviously there are individual stocks to pick, but these things are getting expensive. >> scott, what asset class overall looks better than stocks, though? >> actually, larger caps are

systematically cheaper now than small and mid cap stocks. and obviously, you want to focus on the united states because europe's in the doldrums. and i'm not an expert in emerging markets to be quite frank. >> you know, scott, just hearing your rationale, and i know you're a stock picker and you're always going to say you should be a stock picker, but you're below the consensus on, you know, on where s&p earnings are going to be. and you're still below the average of 16. you said 15.3, even if you assume 104. you could be wrong. you could be conservative on 104, and you're still below 16, which is an historical average, which makes me think at 0% interest rates and nothing -- nowhere else to go, what you just said explains why the market keeps going up. >> well, that's right. and if you look at what's called the ag index, it's down for the first quarter of the year, the first time i guess in about four years, that's the bond index. but like warren buffett, we don't try to pick the market.

we basically allocate capital for what achieves stocks. >> i'd say wow, you know, you're right, but no, you're taking a pessimistic view of earnings and you're not even at the -- you're not even at a rich multiple. just an average multiple. it seems to me you're making the case that the market's cheap. >> i didn't say it was cheap. i said i thought -- >> to me, that's what i'm taking from what you're saying. you're saying it's fully valued. i'm disagreeing with your conclusion is what i'm saying. i think you're making the case that things aren't that extended right now. >> well, i disagree because if you looked at the russell 2500 and the russell 2000 over 18 times expected earnings. >> you're talking about -- you were talking about 15.3 at 104, though, whatever. that's just my point. >> talking about the s&p. >> what would you have to see it go down to in order to get interested again? so if you think it's currently fairly valued, what kind of

pullback would you need to see in order to redirect assets that way? >> see, i'm not a technician. the bottom line is, you asked me about overall valuation. we keep finding stocks that are cheap statistically, that's my job. it's not to buy growth at a reasonable price. we're trying in the old warren buffett benjamin graham to find companies to sell deep discounts to conservative breakup valuations. and that's, you know, that's a more difficult short today. but it's not impossible. >> yeah, and you do make the point that you've always been looking more at bottoms up from some of these companies. why don't we talk about one of the companies you like, scott. noble energy? >> yes, i mean, this is a big cap company, it's over 20 billion in market cap, $115 a share. and if you look at the discretiona rary cash flow for s year, just about 2.98 billion, those are our own numbers, puts it at 6.9 times discretionary cash flow. might be on the high side, but this is a legitimate 20% grower with a drill bit, 20% top line

and bottom line, and they have enormous holdings off the coast of israel, which aren't even booked as reserves. their share of the gas is about 12 trillion cubic feet, we figure the breakup value close to $160 billion a share. you've got good protection and good hedges, about 50% of the oil is hedged about $90 a barrel and in the united states, just under 50% of the gas. >> let's talk about quickly about gollub company. that's not a stock i'm familiar with. >> no, it's a small-cap stock, a business development company. and for your viewership that wants to yield, 7.8% yield, their portfolio's about 760 million of which only 0.6% of the assets are questionable at this point. and they have about $250 million worth of fire power left to put out in senior secured debt. and that would put them up to about $1.32. the stock is 1.1 times book.

it's going to grow 15% and get paid while you wait, 7.8%. and i think they're smart operators. i think it's a very well-run company. and you get paid and for people who are yield and for people wh yield hungry, 7.8% is a good yield. >> that's a pretty good yield. >> you're moving it right now, scott. i'm watching it go. 555 million. yeah. >> scott, thank you. always great talking to you. >> thank you for inviting me, becky. >> see ya. >> i actually did ask for him. >> thank you, becky. >> coming up, we'll check in with jim cramer riding around in a hover raft golf cart. you never want to walk the course again. i will be a guest on "squawk on the street" at 10:15 eastern this morning. tomorrow, the chairman and

ceo of general motors will come to "squawk box." one hour with dan akreson on the strength and recovery of gm brands. a special interview with atlanta fed president dennis lockhart. "squawk box" starts tomorrow at 6:00 a.m. eastern. i know what you're thinking... 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. which is...pretty much what we've always stood for. what's the "new" in the new new york?. a new property tax cap... and the lowest middle class income tax rate in 60 years... and a billion dollars in tax breaks and incentives.

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>> welcome back. jim cramer and david faber join us now from the nyse. the adp number, i immediately said we're not swooning again. we're not swooning, are we, guys? spring swooning? >> how can we be swooning if they sold more than 4,000 porsches ever? i think we're fine. >> maybe this is a winddown from sandy-related stuff. people are quick to -- if we are going swoon and sandy was just on saying the sequester will start biting and people preparing for obama care will start biting he kind of was implying and he said 2% for the year, vandy is. jim, would the market be too high based on that scenario? i mean, i could see why --

>> no. >> go ahead. >> the stocks that are running are exactly what it does best in the 2%. that's a general mills/kellogg market. that's why humana can have a second day. this is a bull market in some parts of the economy and it's a bear market in the companies that are levered to the gdp. no, we don't go down on that. we have to go down if the fed tightens and suddenly the 3% yield that you get from some of these companies isn't so hot. >> you have bubba on a hover craft. that's bizarre, right? >> 10:00. yeah. >> and the masters is in two weeks, isn't it? >> look at that thing. >> look at it, it flies across the water. >> i don't get the masters on my tv. it's on a weird station. who is your favorite this year, joe? >> whenever you need to pick a favorite it's impossible because

there are so many good golfers. mcelroy is with nike now and it's hard to get that right and he's been playing like crap. if you have to pick one guy you'd pick tiger. you just would, right? >> you know, when he's settled down personally, he's the most mentally tough athlete, probably on the planet and golfer and when he seems to have some things going his way personally, i don't see how it could not put him in the top five to win. >> michael jordan, tiger woods, right? >> i'll let bubba know you're going with tiger. >> when you switch club, your ball goes -- >> you did that? i was at the municipal golf course. >> oh, okay. okay. same with sorkin who is not in a 1% vacation riding around in a southeast asian country. we'll see you in a couple of minutes. coming up, our guest host this morning has been ubs

economist drew mattis and we'll give him the last word when "squawk box" returns. [ male announcer ] they say that hard work is its own reward. but there's nothing wrong with enjoying a little extra reward. ♪ that's why southwest built a better rapid rewards program with unlimited reward seats, no blackout dates, and points that don't expire. rewards that actually reward you. we are southwest. welcome aboard.

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nespresso. where i never have to compromise on anything. ♪ where just one touch creates the perfect coffee. where every cappuccino and latte is only made with fresh milk. and where the staff is exceptionally friendly. ♪ nespresso. what else? let's get back to our guest host drew mattis for the last word. you've got