>> he is very smart. >> he's, like, he's the iconic tech guy. >> yes. >> along with -- i don't know, who's left? larry ellison, maybe? >> when it comes to what's happening on the web? i can't of anybody -- >> zuckerberg. >> his willingness to focus long term and take the flack about the short term. >> congrat. >> make sure you join us tomorrow. "squawk on the street" is next. ♪ ♪ ♪ good tuesday americaning. welcome to "squawk on the street." carl quintanilla, jim cramer and david faber. alcoa kicks off earnings season with a beat. futures have retraced all of the losses of last week which believe it or not, was the worst week of the year. europe and asia boosted by cool inflation data in china and the nikkei which has moved 1% or

more for six sessions closed exactly flat. that is 0.00%. our road map begins with the shake-up over at penney. out with the old and in with the new kind of. ron johnson is out as ceo. ullman get it on track? >> it's looking like another black eye. bill ackman, and we'll break down what it means for him. he made a big bet on the retailer and his herbalife short. that's also been under fire. >> alcoa kicks off after the bell and jim will give us his take on what they said and lay out the broader market. we will start with penney. the struggling retailer announcing ron johnson stepping down as ceo after a year and a half on the job being replaced by myron ullman. ron johnson was on the show in january talking about his growth strategy. take a listen. >> if i had to do it over again

i would do it almost like we did it. i would change some of the tactics and i would be more clear in pricing, but we had a business model that didn't have any growth in its future. every business needs to build off a growth platform. >> the question now, jim, is whether or not they have growth in their future now. >> i think this is going to be a situation call where the debt side will tell the story. i think it was obviously more dire than we realized. this is a situation when retailers when they get in the tailspin no matter how good the leader is and myron ullman might be able to stabilize the ship, but i worry thousands of people work there, and this is a company that is going to be hard pressed to get the credit it needs to be able to do this well. i think ullman is the right choice because i think he might be able to get that credit. a new guy who is unfamiliar with the landscape would be tough. >> listen.

they need to stabilize this company. it is not clear they're going to be able to do that any time soon in terms of sales. we knew the day when we saw that down 30%. >> that's just horrendous. >> and we'll talk a bit more about the board in a moment, but as for the company, jim, what does it mean to try to stabilize? how do you even go about it? do you keep the strategy. do you completely throw everything out and start again. by the way, we all know ullman was running this company again not that long ago and it wasn't as though it was going great. >> it underperformed kohl's and it underperformed target and there was a period when it did well and i'm defensive on ullman because i hated the way he was treated by johnson and he was given the broom and he was trying to do a good job. a good man, you might argue --

>> by johnson or by ackman? >> my background is retail. my dad worked at game bell's and my mom worked at list's. retail can disappear and people don't recognize how quickly retail can go. >> weven with those names you say johnson destroyed more value in retail than anyone could think. >> jc penney had a lot of customers and a lot of sales and he carpet bombed his own stores and he had a strategy that was untested and he blew it out throughout the organization. i do think that everybody connected with him has to go. it's a new broom sweeps clean, and you have the store within a store model and maybe there were real results and you never knew how this thing was doing. there was a lot of what i regard about fluff about whether it was even working, the store within a store. >> which ullman has not divorced in his early comments. >> just go right back to the

lawsuit. this martha stewart lawsuit that's going on. you build a huge store within a store upon a contract that may be illegitimate between martha stewart and jc penney when you had terry lundgren, the ceo of macy's making martha stewart the centerpiece of his home business. what kind of thing was that? how can they do that? >> there were a lot of things that you can ask how could they do that including keeping mr. johnson in the seat perhaps for way too long after it was clear it wasn't going to work. >> and you kept him there. >> bill ackman ran this company even though there were a lot of shareholders and what it means for ackman and as for ullman, they're not calling him an interim. he is being called ceo. >> million bucks. >> but you've got to believe that again, stabilization is the name of the game for mr. ullman and if they achieve it, they can start to look for a new leader

of the company. they were talking about his exit a few years ago because -- he's not that old, but he's in his mid-60s. he was approached over the weekend. >> is there any scuttlebutt that they couldn't get anyone better? >> that's what we hear, that there are some reports that no one was available who wanted this. it's not the titanic. >> well, i think it does call to mind michael ray richardson about the new york knicks. the ship be sinking. >> he did say right the ship. >> yes. >> let me say one thing about mike ullman. >> the ship be sinking. >> i'm not going with the tit titanic or the hms. >> to use prime minister thatcher's world, the ships that were sunk in the falk lands were. >> yeah. >> i will say this. i once mentioned that i didn't see the right jc penney purchase in the store on the east end of

long island, and i got a call from mike ullman and said will you tell me exactly what store? >> this is a guy who is hand's on. he's going live there. a hands-on guy might stop the turmoil. every single month you seemed to read about another executive going to another retailer. >> what do you do with the stock? >> stock? stock? >> you put it on sale for 30% just like the stuff that will be on sale at jc penney. i'm looking at the preferred. >> things will be tracking along -- >> you will get great comparisons in the not too distant future. that is so absurd. >> can you please shoot that down right now. >> i will shoot it down right now. >> no way, no how, falling knife, and i've asked the

question, not a chance. you can't get a ceo. >> maybe trico. the store within a store was working and there were people rooting for ullman whether it be howard schultz from starbucks. i have to believe that ricky drexler was rooting for ullman. there were people who really didn't like johnson's attitude from the day he left apple. >> there were quite a few and his cavalier attitude, basically my way or get on the 18 wheeler was not exactly -- >> there is a shot given that it surprise at 29 and at 15 he's out $50 million at least for now. >> heel be able to spend more time with his family which is an imperative when ceos leave.

congratulations to scott wapner for breaking the story and it wasn't necessarily mentioned it was amicable. they did put out this amicable thing. is it ever not amecable? >> it's always kisses in the end. >> i want to see what happens in this lawsuit. >> hugs. >> my former lawyer is representing martha stewart and martha stewart will come out clean in this thing. i'm telling you, she will come out clean and that judge, couldn't get in the room and agree that would say the disposables should be jc penney. this thing could be catastrophic for jc penney if this judge says those home goods out of jc penney because then what will they replace it with? what have they got? >> i don't know. i haven't been in a jc penney in a while. >> you have to go there. they have some deals on trousers. i told you that. >> sock garters. >> i got some t-shirts there for under the price of cvs.

they have calvin klein underwear. lowest price anywhere. the klein underwear is good. >> i'll take a look. thanks for the tip. >> tjx, by the way, has underwear from titans. i'm waiting for them to have brioni. >> let's have a trip. >> you never shop for anything. >> i try not to. >> another black eye for bill ackman. ackman in a major fight with herbalife as viewers know, he's put a lot of time and effort into jc penney, but while his voice was the loudest on the board of directors in the last year and a half it might be somewhat silenced at least that is what you might anticipate. ackman not expected to sell and completely say i admit defeat here, but my understanding of the situation is if the board had had its way some time back it would have gotten rid of johnson a while ago.

it was only when ackman finally sorted acceded to the fact, this is not working and they were able to do that. now the expectation is that while bill is not typically shy about voicing his opinion, he will step back a bit and the power on the board has shifted, he's the largest shareholder and he's still on the board, too, even though they cut their share a great deal. >> irony. we know that ackman'se fortune selling short. was this not the great short? >> it was. mr. ackman for his part, last july at the alpha conference thought it was a 15 to 20 bagger. >> 15 to 20 bagger. >> correct. in other words the stock would go up 15 to 20 times. >> it would take over what? the age of jc penney? >> there is the quote. you see it right there. it's the only one thing in my portfolio they own today where we can make 15 to 20 times our

money in five, six, seven years. and i said really? trading for nothing. >> that's aggressive. >> and the value of its real estate assets and inventory because people think -- >> why not get a $10 bid for your whole position? bid wanted, ten bucks. just wash your hands of this thing. why not? >> i don't know. you know what? reputation alley tha reputationally. and canadian, reputationwise, jc penney, having installed this management team and now having to be divided by their demise. >> to be humbled. >> ackman, humbled? >> what do you mean? ackman humbled? did you just use those in the same sentence? there must be some sort of transcription problem here? >> maybe i should recompute. >> no because right now we'll

hear about his herbalife. i expect another assault on herbalife within the next 48 hours and herbalife. >> to take the attention away from this. i expected well orchestrated to michael jackson. right now, ceo of of herbalife. carl icahn, look out. you will see an atomic assault. no! biochemical. it will be an assault over the next 48 hours. >> you have to sound -- >> you sound like kim jong-un with all of the -- >> scary enough. >> can't he just put something out on thor in the and leave it at that? >> this is what you do. he very quickly shines the light on herbalife and says jc penney, let's give ullman a shot and herbalife and we have to come up with something and there's always something to say. any broad lessons regarding johnsons. ceos coming in from the outside

making big promises up front? >> i think there are people who know retail better than anyone in the world and you reach out to them and you say, look, i want to do this, you embrace ullman and say listen, you've done your best. please stick around and you did the sephora store. i think it's a great merchant. maybe you call people in the clothing and apparel business who were little competitors and you say help and you go with open arms and they want jc penney to live because they feel for the workers. people in retail don't want those people to be laid off or fired because of misdirection at the top. embrace people. go to the great retailers of our time. you go to howard schultz. maybe you go to people like retired walmart executives. i'm not kidding. we know there are great people that worked at walmart. >> none of those things

happened. none of those things happened. >> no. it was all in your face and instead of going out and seek great retailers who retired and go become to some of the great people. no. it didn't happen. >> incredible story and we're not done talking about it by a long shot. we'll cover alcoa, too, kicking off earnings season and hear what he said when he was off last night. the president's council of economic advisers. ed lezeer. >> futures are looking okay here. as we said we retraced the losses from the messerable day on wall street. a lot more "squawk on the street" from post 9.w may not be with fidelity,ins but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard

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alcoa beating earnings expectations thanks to strong demand from plane and auto builders. i've heard that somewhere. maybe this guy next to me. revenue, however, was short and klaus kleinfeld talking about 2013. >> i'm optimist take 2013 will be better than 2012 and we see a recovery in the u.s. in the building and construction market and all of what we care for.

these are the things that count for us. >> all right. there he was, your man. >> hilarious, as usual. >> he's got that eastern german humor. why isn't the stock doing as well as the company? that's pretty much how i feel. this has become a rodney dangerfield story. this man, ten years ago this company, 70% of the profits came from the raw, terrible business, the commodity. he's now switched that. they have a huge proprietary alcoa business that is for airline parts. remember, he's seeing the airline business be very strong. this is aircraft, go through the presentation. aircraft more and more aluminum, 3.3 to $3.8 million per plane and that's fasteners, screws, airbus and boeing. >> you were asked this morning on twitter whether or not people can extrapolate that to strength in other names and you said that

was aggressive? >> those other companies may not be doing as well within the context of the plane. one of the things that kleinfeld's done is taking share. >> autos are very strong. >> give me the broader takeaway because yesterday we talked about it and maybe we make a lot of alcoa. >> boeing, ford's got -- it didn't put back and identify the davenport plant. >> all on the positive side? >> ford, yes, but they have a europe problem although the china numbers were good last night and boeing. take away from boeing. the numbers he's talking about. you're talking about 7% growth, but in the airspace, 9% to 10% growth and there is a backlog of 9400 planes. david, that's eight years' worth of plane building. >> that's why boeing didn't go down. >> do you like the multiple to alcoa as a result of these more significant, more value-added businesses? >> henry metier of barclays says

your balance sheet. to save the rating do you have to issue equity? what are you, shorting? >> in the last ten years when alcoa has beat s&p's three-month gain as 4%. when they miss, 3%. people make fun of alcoa being a bellwether, but it works. >> you have to listen to it. you have to do the work and that's too much for people who are watching louisville trounce michigan after -- >> you called it. i bow before you. >> it was an unbelievable comeback and we haven't mentioned that. >> now we have. >> they were down 12 points. it was an amazing day. >> and klaus is funny. he's not going to kill you. >> earnings season is just getting started and cramer will navigate. the of mad dash is next. retail properties of america is up 70% in the past year as one of the largest owners of shopping centers in the country has a lot of jc penney stores

and the company's ceo will join us live after he rings the opening bell. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development.

some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ and never back down. who believe the american dream doesn't just happen, it's something you have to work for. ♪ we're for those kinds of people. because we're that kind of airline. and we never stop looking for a better way. it's how we've grown into america's largest domestic airline. we are southwest. welcome aboard.

we're about five and a half minutes before the opening bell. time for cramer's "mad dash." let's talk about the regional banks. i'll bet i know where you're headed with this, but go ahead. >> goldman came out with a piece saying how the banks that would do well was wealth management. here's my problem with this.

david, this is the biggest week for bank earnings and everyone's got to focus wells fargo. i saw a piece on the street with sheila baird saying she's worried about wells fargo. i am not worried about wells fargo, but the regional banks, this must be the moment, okay? this must be the moment when they shine. >> why? >> because there is -- the valuations here are so inexpensive and the next leg of the bull market, if there is one, must be this group because it's the biggest part of the s&p. i care more about wells fargo than i care about any other quarter. we can talk about alcoa, but when wells reports on friday it will set the tone for almost 18% of the s&p 500. so when i saw goldman talk about some of the regionals doing well, i think to myself maybe that's where we could have some strength. >> interesting. >> if we don't have it david. we lose retail. we lose tech and we lose banks and it will be a couple of tough

weeks. >> i thought you would talk about fannie and freddie preferred. >> we'll do that after the bell. >> the specs are all over that. straight ahead, we have the ceo of retail properties of america and he will join us on post 9, and give us his take on the u.s., plus give us his take on jc penney. the opening bell is just four minute away. ♪

[ male announcer ] this is karen and jeremiah. they don't know it yet, but they're gonna fall in love, get married, have a couple of kids, [ children laughing ] move to the country, and live a long, happy life together where they almost never fight about money. [ dog barks ] because right after they get married, they'll find some retirement people who are paid on salary, not commission. they'll get straightforward guidance

and be able to focus on other things, like each other, which isn't rocket science. it's just common sense. from td ameritrade. you're watching cnbc "squawk on the street," live from the financial capital of the world. the opening bell stoet riet to a minute. >> herbalife is halted for news pending at the open. jim, you were just saying 15 minutes ago. >> this is a battleground. this is obviously a clay nation death match, david. >> it is. between carl icahn and bill

ackman. it has motivated icahn by his disdain for ackman. there are investment considerations for herbalife and that is the number one consideration for icahn is to destroy ackman. >> just incredible. >> we'll see what happens. >> i don't know what it is. i'm going to try to find out before we get it, but it's all good. we'll see if the participants can buy it. i don't want to speculate. >> this is monumental. this is, right now the soul of what will happen today is jc penney and herbalife. >> it's big! >> white knuckle time as someone just said. >> i'm going to herb greenberg. i'm doing everything i can on this. herb is not quite sure. >> there is the opening bell and look at the s&p at the top of the screen. the big board as we said earlier. retail properties of america celebrating the first anniversary as a public company and we'll speak to the ceo, and

cirque du soleil's production of totem currently performing and we'll keep an eye on herbalife. and it turns out jc penney may not be -- >> city field, while the cirque du soleil's performing there. the mets are performing at citizens field. two wins for the mets. >> sorry phillies fans. >> carl, one of the things, to go back to the fact that the market is great. people were worried about portugal. >> you came in and last night, china, inflation data and suddenly we are back in the trade of the materials again and like i said with david, the materials can't lead us. it's got to be the financials and that's what i focused on and alcoa did say great things about autos and that's fantastic. they said terrific things about cans and bottling and -- commercial real estate, they see

the beginning of a turn. that again is regional banking. kreshl real estate -- that's what we need to say. >> nomura is out saying unless aluminum prices go up their free cash flow degrades and they'll be a debt downgrade target. >> that's the wrap. >> kleinfeld is a man of his word. they have a lot of cash and they have some debt they have to roll over. he expressed no problem in doing it. i think kleinfeld is underestimated on wall street, but again, aluminum, the actual business is bad, okay? it's a 10% decline in aluminum. kleinfeld was speaking very clearly that the money's coming out of commodities and that is hurting alcoa, but the proprietary business, and if you look at a ppg. it used to be a commodity chemical company and ppg goes from 150 to 140 and that's what kleinfeld is trying to do with aluminum and i don't know how

quickly he can pull it off and it's just not happening in this quarter. >> all right. jc penney is the biggest lose or the s&p. >> the jillian stock. >> it spiked 11% on the news when johnson was leaving and then got word that ullman would be the replacement. it was up to 16 and change and bingo, right back down. rather incredible. rather incredible. i'm still trying to grasp this herbalife. let's wait and see and i'll try to figure it out before the release comes out and either way the stock's not going to be moving. >> i'm sorry to be so literal in front of everyone. pfh. i'm trying to look at this penny preferred because i think the penny preferred is going to tell the tale. that's what flagged that there were financial problems with penney. much more in the common stock and believe it or not it's actually holding up. that's telling. that's telling.

we did mention mad dash and you mentioned a number of times the incredible resurgence in the preferred shares of fannie and freddie which has benefited some of the banks that stayed in business. don't forget, they did a huge offering -- it was early in '08, i think, and they were putting conservatorship in august of '08. >> right. >> and you had a lot of community banks fail and the fdic ended up with the preferred shares which had then been sold and they had bought those preferreds as fannie and freddie have come back to incredible profitability. how much money has to go to the government? >> i do believe it could because you have -- fannie may is a cash machine. it always was. >> they were rigorous guys. >> yes. i know this is kind of a broken record for me. i don't care. i'm going there.

radian up almost 95%, why? they're ensuring that there are money good. that's fannie mae. money good. money flowing into fannie. no longer taking a risk. >> it's going to become an interesting moment when the government has to shut fannie may down because it's lucrative. >> at this point we don't get conversation about what the future is for these two companies other than letting them run and now they switch the profits. >> the title is ending too big to fail is going to be hard work. the title of the speech, it just gives you an idea of where we're all headed. >> this preferred has had a remarkable resurgence. if fannie mae's profits are so -- the fannie mae comment. >> no, no, no! >> there is also conversation going on as to whether there should be an enormous recap, a convention and 90% conversion for the government. >> did you see it breakout for

aig and it is the most widely held stock by hedge funds according to some of the reports that we've done. this is a return to what were good businesses before the downturn and obviously greenberg says aig was good in the government because they were pressured by goldman sachs sxishgs know that was part of the subtext and it was always a good company at aig. i didn't think so and the balance sheet risk was horrendous and they ended up owning 1.6%. >> the mortgage securities was a disaster and it lowered their own standards. >> some people say there was pressure from congress to do that. >> that's not true. they were more under pressure because of the compensation from the people who ran the companies garnered. that was the -- >> i gave them the republican line. >> and the government-controlled, but also trading and being paid look the lines of most financial services companies. >> it is great to bring this up,

carl. when i speak with hedge finds about where they're making money and they're making money on the return of the shipping lanes and they're making money on the mortgage insurers. >> and short in the end. >> let's talk about herbalife and it's probably not too construct testify speculate until we know, but we do have a live shot of post 10 and we'll go to brian shactman in a moment. >> i like the taste of it. >> i'm sure it smells like more than coincidence. >> one or the other camp, the ackman camp. first of all, they wouldn't halt the stock for ackman. >> unless he has a story and the federal investigation. this has got to be, the company itself -- >> i -- the speculation is unwarranted. we have to wait to see. i don't have a story about why -- if you wanted to hit ackman while he was down.

>> theoretically, if we were going in that direction. below the belt kidney shot. >> follow through. is there are ultimate fight club, david are? and is it the rock? >> i'll tell you what, it's no gloves and no head gear and no head protection. this is a brawl. >> this does feel like the new orleans saints, let's get that, although of course, that never happened. >> let's get to the aforementioned brian shactman who is at post 10 watching this herbalife halt. >> it is halted, of course, trading very thinly in the pre-market before it was halted and the designated market maker with barclays. people don't know anything. he's had to say news pending. news pending to everyone coming by and there's been a fair amount of activity or interest and no knowledge of what might be coming. i popt point out quick things and 14 days of alternating

between gains and losses and the markets have been basically flat over that stretch. earnings with alcoa, people are wondering good profit and light revenue is the pattern that we're going to see. in terms of the global markets and just about everything was up in europe and it was up in asia although japan finished lightly lower and firming in the yen and the japanese stocks are pulling back profit taking and take a look at sony, mitsubishi, toyota, nomura even more than the broader nikkei was down. the dollar was weaker for the last five sessions and you're starting to see commodities and materials and the best sector so far. bhp and u.s. steel and cliffs national to those names and have been hoojly beat up so far in--0 and goldfields, humana freeport all doing quite well at the

open. traffic is down and the capacity is down even more which means each flight is more profitable so that obviously means the industry could be following that pattern and a lot of the airlines beyond united. you have delta and u.s. airways strongly to the upside. we are waiting for herbalife and i'll stick around here and see how it trades when it does open. back to you. >> thank you very much, brian. >> i'm trying to think of other possibilities, jim, we've seen the ftc weigh in in various forms on this kind of business model. it could be something regarding that. >> in order for ackman to win in the short you need the government to comply. and the editors and writers and how often that the government will follow what the press says. >> right. it's never been the case. on the other side, herbalife has a good balance sheet and michael johnson has been continually underestimated. he had to clean up mesha life

and we know some people have the bottle and we've got a lot of good stuff online at cnbc if you want to look about what herb greenberg has to say about it and this is not a dead company and the supplements do have adherence. they -- whether their model is one that you like or not, if you look at ackman presentation you certainly don't think it's legitimate enterprise. >> no. no. i've been fascinated by the story largely because of icahn and ackman and not one way or the other because of herbalife. mr. ackman took a very significant short position on the stock late in the year as much as a billion dollars' worth and he has been up on that position. >> yes. >> it did help his performance towards the end of the year in particular in his funds which had been underer forming a bit. we should also point out mr.

icahn who you just looked at owns 16% of the company. 14 million shares. if you recall, he has the right to go up as much as 25% of the outstanding common. that was a deal they struck at the very end of february and they also reached an agreement under which icahn's entities would appoint or have two board seats. so again, you've got icahn at almost 14% and the possibility of going up to 25, having two board seats. remember, they reached that agreement with him. we'll see. >> right. >> it has been -- i mean, the model itself is controversial which is true, but it's a symbol now, isn't it? of the collision in which activists disagree sometimes emotionally. why doesn't herbalife go after business. herbalife, remarkable business in korea and tremendous business

in mexico. in developing world markets and the herbalife clubs considered to be a terrific business. we saw the ackman presentation and it looks really bad. again, i refer to herb greenberg's documentary about herbalife, but when you speak with johnson, this is a company that is a provider of income for the underclass throughout the world. tupperware has tried to distinguish itself by saying it's not the kind -- they never call herbalife pyramid scheme, but that's the undercurrent of the criticisms and rick has never said that. rick is a terrific ceo of tupperware. avon obviously had problems with this model as sherry mccoy comes in and avon, i think, on the mend and do not underestimate johnson himself who has been very quiet. >> i think that is part of the strategy. there is no rush and there isn't necessarily a rush to deal with ackman in the sense of creating this massive short squeeze that some have speculated would

really cause him pain. >> it hasn't happened, and just because it hasn't doesn't mean it won't. >> why hasn't it? >> it's just a big fluke. >> he's in there and not getting out and he's said many times and that is mr. ackman, i'll take it to zero. >> what kind of bagger? >> that's terrible. terrible. >> it's a mini bagger. >> you want to bring in scott wapner here who knows a lot about the herbalife story and has already had a pretty busy 24 hours. >> you couldn't ask for more tension than this at the opening bell. >> i, like you guys, speculating on what this could possibly beyobe wonder ing if it involves something from carl icahn. worth noting as well that back in early march he upped his position to 15.5%. he now has two of his nominees on the board over at herbalife as well. so he's very much entrenched there as david has been saying. he can go up to, what is it?

25%. who knows what this is. is this some kind of enforcement action? people have been speculating for a long time whether it was going to come from the ftc regarding this position and this company. so we're waiting and watching, as well, trying to figure out what, if anything, carl icahn could be up to this morning. guys, i can't help, but wonder on a day when bill ackman is feeling pretty down whether carl icahn sees that, as well, and can't help himself to try to inflict just a little more hurt. i don't know, just a thought. >> right. >> this is the time where ackman has to step it up and take the heat away from jc penney. start the re-assault on herba lig life. these guys hate each other and we saw it on wapner's show, but it would be the moment that

ackman has to strike, too. it's dueling swords here. >> scott, jc penney by no means is being pushed into the backburner and that was a beg loseir and know you were on squawk sharing your insights on how that went down last night. >> no doubt. i will let you continue the conversation and i have a call that i really need to take. you guys carry on, if you wouldn't mind. >> that's the best kind of televisi television. i would love to talk, i've got a call. >> remember those days? >> i've been making calls and not getting any back. so scott's ahead of me. >> nor am i getting any calls. jc penney down almost 10%. i think that's important. we were speaking with the real estate investment trust man. jc penney, do they have to cut back dramatically? what you have to do quickly is address the underperforming stores and close them down and try to get someone to buy the leases and we know that real estate's tight and we might be able to do it.

and sears started going places and the stock started going down. >> howard schultz's comments and ullman suggest there was a long-term, scarring effect on the brand and erasing the question of whether or not growth is even possible the way it once was. >> the sales were terrific. in a different period of my life you are outfitting a dorm. i went to jc penney. i had the cheapest stuff and there was high-quality different stuff. you do well and the sales. you destroy those people, gm, when trying to do something that stopped toyota. we don't want to alienate the customers so they come up with the saturn. jc penney was in a pickle and i'm not going to say they were doing great and then they got them -- when i shop at kohl's i

always think it's better than shopping to penney. >> are they going givyou wilull chance? >> his legacy brands he calls them have been doing quite well there. so i know there are some other vendors i speak to. i don't want to speculate on what they think. i think ullman can call them and say you know me. i'm going get those bank loans. people know me as a stable guy. ullman known in the industry as stand up. i think that matters because johnson was not thought of as being someone who was a calming influence on anyone. turmoil does not inspire, here's a credit line. >> yeah. in some of the reports this morning they say ullman doesn't have a game plan yet. for someone who was just approached for this job over the weekend that seems a little harsh. >> it's not fair. it's not fair. i know there are people that i look at who could come in.

there are some great former executives who were hanging around, but i struggle over the idea that he can do it himself. in mid-60s you need a younger team. there's speculation, completely unfounded that johnson might find a home again at apple who is still looking for someone to run retail having ousted their retail chief not too long ago. i would reach out to the number two at ralph lauren. ralph lauren still runs show the and he's the man. some of the people at saks might be good. >> i'm trying to provide names just because simply, i think that ullman can't do it alone. i just think it's too big a job. the stock down over 9% and that has nothing to do with mr. ullman, per se, just simply continued worries about the course of the business at jc penney. >> why would they stick around. >> first of all, he's locked up,

to a certain extent and apparently going to stay on the board at least at this point. one data point for you. itg does some interesting work in terms of tracking debit cards, credit cards and things of that nature and they come out and their data for mid-march on jcp indicated 14 revenue trending to 3.59 billion which would have been around consensus and it appears driven by sharp, selling declines as the company had more promotional and they did drive incremental traffic. the idea that things can think about them getting better. >> you see mayesy's percolating and there is another leg that will happen. these two companies hate each other now. >> hate is the right word. >> lundgren is a man of peace.

he's a man of peace. he's like wales. >> does he say he comes in peace? >> i come in peace. >> the divergence of those two stocks, too, during johnson's tenure, jcp is down 51%. macy's is up 44%. >> well, this is a zero-sum gain, a lot of people feel because they're often in similar areas and lundgren's been very aggressive and lundgren is a great man. there are only a couple of these true department stores and kohl's has not been that aggressive. kohl's has not demonstrated any sort of terrific moments here. >> right. >> let's go over to brian shactman and he's standing by the herbalife post. we're sit waiting, brian. things are still halted and no news as of yet, right? >> the traders are exactly going on on tv. is it going to be a double wham oat heels of jc penney and we

don't have timing here on timing guys and the broader markets have basically gone toward the flat line waiting for it and in terms of news flow there isn't a lot going on. in terms of interest on what's going on. not just from the trading perspective and there's tonses of talk from the ackman versus icahn debate and who will win and people are interested on who is going to come out on the back end of this and there are some people that think maybe it is icahn who will pile it on akron on a bad day. >> it does bring to mind some of the announcements you make with circuit breakers because they're disruptive to the floor. nobody can talk to anything else, and some of the policies aren intended. >> it has to be someone investing and by this point if

it was a government entity or if ackman had new information i would not the halt the stock, and i have to just point out, bays. around the coffee shop and bar kind of stuff. no one has a clue about what this is. >> some people do better than others and scott wapner is back at headquarters having taken a call that i'm hoping turned out to be productive, scott. >> unfortunately, carl, but we're still working the phones and one of the bizarre parts of live television that you have to take. >> yes. we're still trying to work the story here. you guys were talking earlier on hey, does ron johnson go back to apple and in the last several weeks as trying to report on this story that i would be shocked if that happened. it's also w pointing out and taking a look at the fallout for bill ackman through the jc

penney stuff and now that we happen to be talking about herbalife and waiting to see what possible news this could be, that it hasn't all been bad this year for bill ackman. certainly the jc penney blow up is a big one and people will be talking about that all day, but certainly, canadian pacific, biggest position, good. procter & gamble, good. general growth property, good. burger king has been good. it hasn't been a disaster for ackman, it just so happens when you have a concentrated portfolio and when you're a public and high-flying guy as he is you'll take very public hits and that's what he's doing, but he has had successes this year that shouldn't be ignored. >> absolutely. your point, scott, you would be shocked if this were, in fact, icahn putting his boot on ackman's neck? >> oh, i don't know. >> i would be surprised based on my reporting over the last couple of days and some conversations that i've had, but you never know. you just don't know. i don't think i can dismiss the

fact that on a day when bill ackman is hurting a guy who wants to inflict as he said, on this very network more pain because he does not like bill ackman, it wouldn't be beyond carl icahn to inflict more pain. >> sec should right now be issuing -- lessen, you have two minutes. where is the sec, david? >> as for any potential news he here. i do have the new york times, herbalife poised to disclose on tuesday that kpmg will have to resign as the company's auditor follying the firing of the senior partner. the new york times citing a person briefed on the matter. so that would be one reason why you might halt the smyres that's a good reason. >> disclosing late monday it

fired the partner based in los angeles and i'm reading here from a new york times story that just hit providing inside information to an unnamed individual who then traded in shares of several west coast companies. as a result of having fired that partner, herbalife may have to disclose on tuesday. kpmg will have to resign as the company's auditor. it could be as simple as that. >> that's horrendous. that's horrendous. >> that would be helpful for those short the stock. let's wait and see what the news is, but that is what "the new york times." herb greenberg is with us. if that is the news it would validate a lot of the reporting that you've done last year. >> depending on what the reason is the partner has resigned and i will say one thing as i listen to the speculation and i will say this. if someone were to come in and take this thing out which everyone wants to say is a possibility, whoever it is, even icahn, he is assuming so much risk of a regulatory -- years of

regulatory investigations, why would somebody do that right now? that to me is somewhat suspect, but i've been called around trying just as everybody has here and everyone is mum. mum is the word at this point. and by the way, by the way, you are talking about this halt. when was the last time you saw a halt before the close just continue to drag on on a company like that? >> strange timing and for a long time. >> that's why the sec should be calling someone. >> lettay go to scott wapner. maybe he's in touch with the government. scott? >> what we don't know and here's the statement from kpmg in front of me. we were informed that the partner in charge's l.a.-practice was involved in providing non-public client information for the third party who used that information in stock trades involving several west coast companies and herbalife based out in los angeles. what we don't know is who is the third party who got the information and was shorting the stock and going long on the

stock based on whatever information they were being provided by kpmg which is now as we've reported just a few moments ago resigned as its auditor as herbalife's auditor, but this is just one more development and we'll continue to follow it at the news desk. >> repeat that line about the third party. >> what exactly is kpmg citing? >> kpmg says we were informed that the partner in charge of kpmg's audit practice in our los angeles business unit was involved in providing non-public client information to a third party who then used that informati information in stock trades and insider information it was provided by kpmg about clients it was auditing. what we don't know that the point and it doesn't say it in the kpmg statement is exactly who the third party was. was it a short seller? was it a hedge fund manager? was it someone taking a long position in the stock? those are questions that have

yet to be answered. >> they're going to have to fire their auditor. if in fact, that is the case it's not about the accounting at herbalife. >> no. >> it's not a restatement or anything. >> it's almost a neutral. >> the fact is they'll be a plaintiff. >> they're not resigning because there say problem. >> guys? >> yeah. >> i should also mention that kpmg is resigning two clients after this investigation. so it's not just herbalife. it's somebody else, as well, unnamed and herbalife is not mentioned by name in the kpmg statement. >> there are a lot of johnsons. j & j. if you call herbalife. i personally have not. >> he wasn't the one that called me on the phone when i was talking to you guys a few moments ago. >> have you called the sec and

asked them why they don't clarify this? >> i'm sure those calls are being made as we speak. >> we certainly have reached out to the nyse and asked for a statement who was going on half an hour there, and maybe it was from the annual report or the filing that michael johnson made, i think, $10 million last year as well and there's been a lot of talk about herbalife's place in the news. a lot of those are put through right now. jc penney's wasn't filed that long ago. this is a story that continues to dominate conversation, i know in this room and in newsrooms all over the place. >> everyone comes to the story with their various suspicions, guys. this story just took a turn three times in the past half hour. at one point you thought it was icahn and if the auditors are leaving why would they leave?

>> it's not particularly decisive in any way, shape or form. >> sure. >> if kpmg is being forced to resign as a reaction with the partner that had little to do with herbalife and it is not in any way a reflection of their believes of beinging at herba leave, it's kind of surprising. i guess maybe you halt the stock for this kind of stuff, but we'll see. >> no. no. no. you don't hold it, you let the market decide. >> especially if it was not something that was actually related to the actions of herbalife. >> once a new auditor comes in, jim. ostensibly you'll get a fresh set of eyes. >> and the kpmg is reasonable and i can't conclude -- >> we're sitting there and they're not opening this stock. it is outrageous.

this is outrageous. what is this? what is going here? herb greenberg. i think we'll stick with this because lord knows as soon as we go to break -- >> accounting has never been one of the big issues here. this has been something much broader than that. remember, we're talking about the issues that are raised or the underpinning of a business model or whether this is a company that's being propped up by a business model that itself may have legal issues and legal questions. no, this is not halted because of kpmg. i'm willing to sit here and say that, although i've said other things. >> i think you'll be wrong. >> if that is the case then the system is really screwed up. >> that may be true. that may be true, but we'll see. my sense is that may be the reason. >> the rest of the market is doing okay. >> yeah. other stocks trading besides jc penney and herbalife? >> really?

i wasn't aware of that. >> there are a couple of drug stocks doing well. alcoa is up a penny and remember alcoa? >> right. after the bell and that was not a bad quarter -- >> it was up 2.5%. >> netflix, you can float whatever you want there, right? >> yes, you can. >> another icahn stock. he's done extraordinarily well. >> to think that, you know what's funny? >> to think that literally five hours ago everyone was focused on china and -- and tame inflation and that was the big story around the world and ron johnson, the prefer side trading roughly in line and the preferred has been a better tale of the structure. remember, it's all in the debt side now when you're a retailer that it's perceived to be in trouble. they're not in trouble. we're not making them in trouble and we'll not declare jc penney in trouble because that's not the way it works. >> your point is a good one for

the rest of the week. we'll get financial earnings on friday and the street.com with the piece from sheila baird. >> i think wells is just -- when you look at a company that has a handle on what happens with banks, last time it reported decent wells. it's a gigantic, 30% of the mortgage market, and it is way too big and it determines things. >> the interest margin will be a key there. >> right. >> it should be bad. >> right. it should be bad and it's not getting better. you need to make it up by commercial real estate lending. >> klaus kleinfeld feels good about aluminum because it is the backbone of construction. >> again, we made the point, we had the fun fact about alcoa beating and missing about the effect on the s&p and the subsequent performance of the s&p and overall you feel like it gets earnings season off to a decent start. >> it's not the 3 billion new cans and it's in china and steel

cans going the way to aluminum cans, and china actually has an impact and the one thing i haven't mentioned is derelict to me is that klaus with supply and demand are tightening. and they're tightening and this matters tremendously given the fact that a lot of people have felt that china is flooding the world and they're not flooding the world. they simply have not cut back on their production and therefore, if you see a tightening, that will produce for the part that is not proprietary and just a straight-out aluminum that alcoa makes, that is going to be better and that's why i think klaus kleinfeld thinks there will be better cash flow going forward. not writing these guys off. a big piece in the f.t. today saying basically the fed needs to start to taper and bring it down to 40, 45 billion per month. there is a front-page story.

the first time we've had a fixed income manager say the fed needs to take its foot off the pedal. >> if we had better employment. just a couple of days ago the employment number was horrendous. you have the sequester laying off people. again, this month, i can't see a big bounceback in employment. i would like to see these retail sales on a case by case. jc penney has lost so much business that it distorts when you hear from individual retailers how they're doing because people are shopping away nney, but i want to hear individual stores because it's been pretty good. y know march was a cold month and you can't forget that. >> we heard about traffic being down from february and march from retailers and other mall operators. i think black rock is a great firm, i just think this is not the right time to get a strategy.

a lot of us believe because there was going to be fear from the government and i had pay czechs, which is the company that does the payroll -- and he's the ceo that said, listen, there's no small business creation. >> look at nfib today. another down tick on an index that some people say it is not as material. >> that's where the hiring is. >> by the way, i still like the way the bank stocks are not bad today. >> very, very important and the sequester has a ways to go when you talk about the department of defense, the many contracts it has out there, you may forget. you know, an outdoor equipmentmaker that i'm aware of, contract to make gloves for the army. they cut back and how many manufacturing workers are put out of a job? >> remember, it's not uniformed

people that are cut back. there are a lot of people who work for the military who are civilians and that's where they're supposed to be making their cutbacks and maybe there is a deal that doesn't happen, and i think david's right that that's where the layoffs will be concentrated and meantime, we'll see a decent flift tech. at 10:00, we saw it and the japanese seemed to come in at 10: 10:00. and you just take up the semiconductor etfs and i think the money is flowing in a similar passion in 86 to 89 which for some reason the japanese tend to take their orders. it wouldn't shock me to see the boeing in the market when we used to watch the japanese come and throw their money at it in the last seven, eight minutes.

>> the story in today's journal is not about buying equities, but about investors in japan going outside the country given the incredibly low yields only getting lower there as a result of boj action and buying european debt and u.s. debt which will help us keep yields low. italian ten year hasn't been as low. >> everyone's worried about france, but it's been a terrific place to be. >> the search for yield can go arne the globe when you have the boj doing what it's doing. >> you don't think they're looking at u.s. equities and real estate investment trusts and the utilities keep hitting a high and they're more sensitive -- when i asked david about the texas utilities deal it was written up negatively. >> before we go, what is on "mad money" tonight or do you know yet? >> no. this is exactly the sweet spot of what with we're talking about. mccormack spice, mccormack. these are like hershey, the two best performers in the food group over time.

mccormack had a weak previous quarter and this quarters was good, and i can't wait to talk to him because this is stay at home. david, when you and i cook together we use the bay leaf. >> you like more spice than i like. >> parsley, sage, and what were the other ones there? but they also have a considerable restaurant business and that's not done that well and i look forward to speaking to mr. wilson who is a terrific executive and it's been a remarkable stock. >> we will see you tonight. jim, thanks for sticking with us after a long block. haven't taken a break since before the bell. if you are just joining us on herbalife, kpmg, the company's auditor has resigned as the auditor because the partner was fired for leaking non-public information on what the news audited. when it opens we'll bring it to you. we'll be back with more on "squawk on the street." don't go away. all stations come over to mission a for a final go. ♪ [ indistinct shouting ]

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herbalife is halted for news pending. brian shactman. >> thank you very much. clients are holing the stock and they're short the stock and want to know what went on. kpmg is supposedly a -- and the non-public information on the third party and how much has

involved herbalife and if it is related to other companies, why is it halted. there's still a real question as to why it's halted and we don't have insight into when it will begin trading and i want to point out some things about the stock. it's been flat for the last few weeks and it hit a low in december of 2424 and it is up 60% since that time. in terms of the stock move am it hasn't done much and it was up quite a bit and the funniest anecdotal joke the news is that herbalife will open a store within a store at jc penney. >> there have been a few of those and the jokes are hilarious. >> brian shactman will keep us posted and simon hobbs joins us at post 9. some are taking note of the fact that there's only one halt that we know of even though this apparently involves two clients and former clients and the statement for herbalife is much

more complicated because people leadly assume this will not be true. normally when an auditor leaves it is not good for the auditor itselves. >> it should be a defendant in litigation or something along those lines. this is a reporting of the new york times because we haven't gotten a statement from herbalife and kpmg has stepped aside as a result of the partner. >> scott has more information for us. >> we do expect some kind of statement from herbalife some time soon, we would hope. i can add some color, though, on how this whole thing transpired and unfolded through a source that kpmg learned late last week about this issue that was going on. they were very aggressive right from the outset. they told the umps can involved, the two of them and the other one individually, the individual

in question was out within 24 hours and clearly they were aware of the potential damage of all of this and also the source saying that the third party involved remember that somebody was passinging information to a third party who was then trading on the information involving herbalife and another company. the source saying that the third party is not at all related to either bill ackman or carl icahn who has we've been talking and following for weeks, if not months now are waged in this battle over their positions in herbalife. we also know through a source that kpmg alerted the second company to this as well. it is then up to that company to decide what to do on their own, but again, herbalife was alerted immediately, aggressively by kpmg. we do expect some kind of statement by herbalife. that appears to be why the shares have been halted. we'll bring you that news as soon as it hits and we'll let you know when the shares do reopen and we're continuing to

follow this story, guys. the halt in trade, scott is at the request of herbalife which seemed to be so, yes. >> let's bring in kate kelly for more on this breaking news. kate, what do you have for us? >> it's certainly an interesting couple of days for bill ackman and his investors. you have major news on jcp which investors are not greeting with a large amount of enthusiasm and more uncertainty with herbalife. i echo what i heard when you heard news was coming and it did make one wonder and the nature of the kpmg issue was the problem was very much with kpmg and it was a victim of that. there was no reason to short the company on this news today as bill ackman has. what this means for them going forward is a great question and just to remind folks, ackman has already made roughly about $200 million on his herbalife short during an overlapping different period.

long holders have made money, as well and that's one of the ironies of this trade. ackman making money on the short is dependent on the ftc getting involved on deciding that this is something they need to scrutinize and that they're going to do an investigation of herbalife and shareholders to react negatively to that because ackman's thesis is predicated on the huge decline on the stock and he said going zero because in his belief it's a pyramid scheme although they deny that. it will be interesting to see how the day plays out for him. pershing square in general and his performance. my understanding is they were up 6% for the quarter and there should be a quarterly letter coming out some time soon and who know, even today, and i was looking for it some time this week and although ackman has had significant setbacks. at the same time i am told he has a couple of undisclosed positions that are doing quite well. he may be trying to control the story a bit by issuing the letter with some of his wins and that's something to watch for

this week. put impots to watch on the story, kate. thank you for that. by the way, still awaiting the story, which is going almost an hour now and the sec has had declining comment on this halt, on this story to cnbc. so information not forthcoming from the exchange or the commission. herb greenberg is back at hq watching the story, too. in a way, we're flying blind here and i'll reiterate what i said earlier and what i tweeted out that again, if this halt were related to this kpmg news, you would expect the company at the very least even though they're in california to eventually come out and have some sort of statement. even if they're hiring a new auditor and as i said in the past the auditing issue wasn't necessarily the issue here. so we are flying blind and, you know, again, i'm hearing absolutely zero. they have this tightly wrapped up. >> let me ask you a question.

is it reasonable to assume that if this director has passed a piece of information to a third party that he's traded on it, there is within herbalife's accounts for good or bad something that will move the stock? >> well, that's possible, simon. but again, we don't know. this would be a fascinating insider trading story and the other question is who is the other company and is that company a california company? is that company based on the west coast engaged in this industry which reminds me i need to check something out. so, you know, great questions. not great answers. >> still waiting on those and of course, wanting it know how the shares will trade and have to wait until it opens once again. still halted for news pending. thank you very much. >> we will take a quick break and bring you more on herbalife when we come back. are you still sleeping? just wanted to check and make sure that we were on schedule.

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ron johnson ousted as ceo of jc penney. that is the worst intraday drop for jcp since late january when it mrurjed in a single day when they had a quarterly earnings loss and it is a big liez or the s&p today, but it is not the only story regarding bill ackman. herbalife is still halted for news pending and the word from brian shactman who has been hanging out at post 10 waiting for some news is the traders have left the post, guys which suggests we could be waiting here a while? they could have just gotten tired, but it's rare that you see a halt of a stock go for an hour which is whery we basically are. and you had the glashial approach where they had three or four days to unravel what was happening within their own company and then they informed the sec that there were a few companies. you wonder if at that stage, late monday night that there is a point when they tell herbalife. in other words, is herbalife

scrambling on the west coast to get some statement together that they can dispel whatever immediate suspicions people may have when in order to resign may be for something completely unrelated to their own actions. >> any sense from you that the model, the complexity of the model, the management model leaves a company like this more vulnerable to leaks of material information? i don't know. >> that's a fair question. i don't know. i think if you're an auditor you are in possession of material non-public information, period, and if you choose to share that with others so that they can trade on it that is illegal and that is going get you in trouble. i don't know that it would vary. that could be said of any auditor. it's clearly confidential information. >> it would appear, if in fact, this is the news that we're expecting that it will not have a great impact on herbalife and certainly not what we thought the minute we saw it halted at 9:31 this morning and we shall see and it is a long time to wait to open the stock.

>> it is so important to clarify, people may be turning on the tv and saying, whoa, kpmg, how is the auditor typically not good news for the company and in this case, it might not have had anything to do with herbalife at all. >> the way it's been described at least it would appear that is the case. >> except they will identify who the information was passed to and you understand what the trades were. you could determine whether that piece of information was negative or positive, but he's potentially quite a complicated set of disclosures that it will not reverberate back in some way. kpmg has got a problem. >> so does herbalife management because you have these two hedge funds who would argue opposing views. >> scott has reported that none of the information whatever it may have been, we don't know who the third party was. >> it could have been, you know, joe smith who was simply doing some trading. >> the longer term arguments

that you have in the market. >> well, it could simply have been their earnings before their earnings came out. >> or something more structural as you were alluding to just now about the way, under the allegations that it was a pyramid scheme. >> i do ubt that. i doubt that because, if kpmg knew that or thought that they have an obligation to divulge that in their opinion. so my sense would be numbers themselves and being what a quarter looks like. the auditors know what their financials are prior to them being public. >> the general counsel's audit committee are on in some form or fashion. >> we'll take a quick break. still awaiting the re-opening of herbalife for trade. back in a minute. tdd#: 1-800-345-2550 when i'm trading, i'm so into it, tdd#: 1-800-345-2550 hours can go by before i realize tdd#: 1-800-345-2550 that i haven't even looked away from my screen.

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if you are just joining us there's a look at herbalife at post 10 at the new york stock exchange. shares are still halted. if you missed the news this morning, kpmg, the company's auditor has resigned as auditor after they fired a partner, kpmg for leaking nonpublic information on two companies they audited. in fact, news on herbalife halted just before the bell this morning about 9:25 eastern time and skechers is halted, as well. >> do they have kpmg as an

auditor? i do know the exchange is checking on the longest halt on record and we'll see where this one stacks up. an hour plus, you're getting into that territory. >> you are. most companies we would not have even noticed it and it's only because there is herbalife and there's so much controversy about this name when we do. when it opens, it probably is not going to have that gait an impact on the share price. we shall see. it would be nice to move on. >> there is lots of other news. >> skechers, scott wapner has more on that. >> an answer to simon's question, kpmg has been an auditor for skechers. we do not know if this is the exact reason that skechers has been halted and that it's related to the incident that we first mentioned about kpmg and these two clients of theirs and it seems hard to be a

coincidence and it is based on the west coast and there were two companies both based on the west coast that were named here and herbalife is said to be named one and that stock has been halted and we do know that kpmg has been an auditor for that company, as well and connect the dots and you start to take the next step in the story and we'll continue to watch for headlines and bring them to you and continue to work our own reporting, as well. i'll make one point, how utterly disgraceful that it is passing on non-public information in this way. when people worry that insider trade is endemic and you come across something like this. this is a partner at a major accounting firm. they know the rules better than anybody else, scott. >> so does a partner at a major consulting firm who finds himself in prison now for insider trading, simon. it's not new, right? everybody knows how to play by the rules. unfortunately, not everybody does. >> a lot of big stories. scott, thank you. >> jc penney trading at its

lowelo lowest level after ron johnson steps down. let's go to courtney reagan outside a jc penney stock. you've been covering this story since ron johnson took over and you've been around the stores with him, in essence, why do you think the man failed in his turnaround? >> you know what, simon? it was a strategy that simply didn't resonate with customers. if the customers aren't there and not buying it isn't going to work and it hasn't paid off for shareholders and it hasn't paid off for the man behind the vision. ron johnson is the former tour of jc penney and he tore the guts out of the old business model trying to change in almost every level in this multi-year transformation. he's admitted it was a tough first year to say the least, market capitalism with $3.3 million, but when he spoke to me on february 6th, he insisted the

strategy would work and at the time the board believed him, too. >> it does take time to change stores and to change customer behavior to impact and influence, but that doesn't mean change is wrong. it just takes time and we are aggressively building the new jcp, but we have patience because we believe in our vision. our board believes in our vision and our industry believes in our vision and we will become america's favorite store. >> shareholders lost 51% during johnson's 17 months as ceo it cost him, too. with the executive data firm, during his time at jc penney, johnson's total cash payout, $2.1 million. total of other comp $402,000. total value as of the monday close of the jc penney shares he holds outright is $14.2 million which means his total take home pay in 2011 and 2012 was 16.2

million and then there were the warrants that he bought with 2992 that expire in 2017. currently way out of the money. so assuming no value is realized on those warrants, johnson actually lost $33.3 million as jc penney's ceo. investors have a lot of questions that still remain for the interim ceo, mike ullman who was ousted as the ceo before johnson. a lot of people think that ullman is going to return the retailer to this high-low pricing strategy with the promotions. i don't know if that's the answer at this point. there's a lot that they're going to have to decide in the next couple of days, weeks and months to come. back to you guys. >> courtney, i just wondered if johnson was quite relieved and he made hundreds of millions at his time at apple. he's a very rich and he isn't need the problems moving forward. >> that is very true, simon. he does have a lot of money that we know based on different sec filings and the compensation

that he made at apple. that being said. he was a very strong believer in the strategy. i can tell you, i have spent a lot of time with johnson, and i truly believe that he believed this was the right thing and we know now that it didn't resonate and he believed in it, he was invested in it with his own money in a number of different ways and maybe there is relief this morning and at the same time i can't imagine that there isn't disappointment, too. >> courtney reagan there with the latest on jcp. >> thank you. >> let's get analyst reaction to ron johnson's ouster at the company and bring in brian nagle. he joins us on the cnbc news line. what does it mean for shareholders in your view? >> think the departure of ron johnson leaves the company very much in the state of flux. jc penney had been suffering for a while and like courtney was saying the turnaround strategy hadn't worked and the ceo change puts the company in further

turmoil near-term. >> it's one thing for you to come through with a company that is not obviously working terribly well and have a high-profile turnaround and then for that to fail. what happens -- what is the returning ceo have to do in order to stabilize the company and to prevent the talent loss and to prevent the company getting worse? >> it's not an easy -- the thing he must do in the near-term is stabilize the business. what we've learned, those watching closely jc penney, the sales have been in a significant state of decline despite the efforts of the company. right now, and we don't q1 results yet and they're as weak as they were in q 3 and q 4. i'm assuming sales will be soft with respect to the remodel remodelediaries of the store, and i spend a lot of time waching jc penney stores and they're in the process of

launching a home depend and that area is still very much in the state of flux. >> in your note called up a creek without a paddle, you say you're surprised at the timing of this and johnson was relieved of his post. i'm curious as to why you think the guy was taken out at any point given the terrible performance of the company? >> like i said in the note i wrote to our clients this morning. it is no secret that ron johnson had made a number of missteps in his effort to turn jc penney around, but i would have thought that the board would have given him another quarter or so just to see how -- given the cadence of this remodel. they remodelled a number of their sections late last year and they're in the process of remodeling now. i would have thought the board would have given him another quarter. we don't have q1 results yet, but this probably suggests that

things are quite weak at jc penney right now. >> you do raise the notion that they have to raise financing in the near future. we keep talking about the revolver. how much money does ullman have to play with? >> so the end of the year and the end of 2012, roughly was called $900 million in cash on their balance sheet and they have a $2 billion line of credit. per my numbers they'll probably burn through $700 million here in the first quarter. so what he has to play with right now is maybe a couple hundred million in cash in the balance sheet. going back to simon's question, one thing he could do was secure near-term financing here. just to give them a little breathing room and maybe take some of their concerns out right now. it is privately --

>> we saw super value taken out seven or eight years ago. do they wait for further deteriorating for the shareholders? >> i think right now i look at my coverage universe. as i look at jc penney, there are attributes here that make it a potential take-out price. it's a company that again, there is a brand there. there's something that can be fixed and probably easiers a private company than a public company. i just don't know how much debt jc penney can support right now. like the comments i made before. they have cash and they were burning through it quite quickly, i would assume there would be debt involved and jc penney would have to service that debt and that may be difficult for the company at this state. >> i think it's highly unlikely

at this point given it's a falling knife. private equities are brave, but not that brave. we'll see. >> i think that's said well. >> thanks, brian. >> when we come back this morning, a lot more on the corporate shake-up over at jc penney and why the retailer is turning to its old boss, as well? and a lot of breaking news cover this morning and we'll bring you up to the minute on it all when we come back.

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ask your doctor about cialis for daily use and a 30-tablet free trial. there's a look at skechers, news halted along with herbalife. we're settling into the notion, brian shactman that this may be going on for a while. >> there are a couple of things in terms of what people have been telling me that sometimes they wait for an official

release from the company and just to give people a sense of the order of operations and the designated market maker is powerless. the nyse has to come down when they get some sort of official release and officially open the stock and they'll come down here and evaluate the situation. no insight into when. we're still trying to find out how this matches up and we're talking about terms of the length of the halt in talking to some of the traders down here. they've had some that have been this long, but with no information or as little information as to why herbalife is halted when we don't know the details of the story is what's perplexing to some. the nyse has to come down here, evaluate the situation and then decide to open it or keep it halted and we're still waiting. no presence of anyone as of yet. >> i am wondering if this may be a legacy of the debacle over facebook until you can take all of the boxes, brian, you're not going take the stock as far as the exchanges are concerned and let's come to bob pisani.

>> perhaps you can add some value here on the role of the nyse, bob. >> i sympathize with brian and i have stood there many hours waiting for stocks to open. they have nothing to do. legally this stock has been halted by the company and legally it is only the company that can unhalt it. the nyse cannot legally call the company and compel them to do anything right now. they're bafblgly waiting to hear from the company, what the news is and once the company is satisfied that they're ready to disseminate whatever the information is they'll call the nyse and they'll make a decision on what time they need to open. the new york stock exchange is not going to know when they're going to open the stock any time much sooner than the general public will actually know. i know it's a little frustrating, but think of it, legally it's the company that wants to control things. as for when it will open there's no way to know for sure. these things can happen in 20 minutes. they can happen for hours. i have been in situations, literally where the stock has not opened until the next

morning until they disseminate information overnight. i know it's frustrating and difficult and you think, good heavens, how much longer can it take to disseminate what is perly simple information. the nyse is not going to force them to do anything right now. >> bob, forgive the question from left field, but for as long as herbalife is halted here, are the drugs halted? total halt. >> halt for news dissemination. halts on all of the exchanges, as well. >> bob, thank you very much. we'll come back to you in the next hour any bob pisani there at hq. >> we'll take a quick break right here. much more on herbalife halt. jc penney down 11% and a lot more news that we've got this morning. we're back after this. welcome to the new new york state, where cutting taxes for families and businesses is our business. we've reduced taxes and lowered costs to save businesses more than two billion dollars to grow jobs, cut middle class income taxes to the lowest rate in sixty years,

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you're looking at shots of post five and post 10. we know that kpng has withdrawn the holdings on herbalife due to problems of its own. we believe that may also be with sketchers. this after a partner was found

to have passed inside information to a third party. but we're looking at a very confusing situation. >> they have resigned the account. they resigned as being the auditor. i don't want anybody to think this has anything to herbalife's accounting. it does not. on april 3rd they said they were renewing. they put a 10k out, in which it's made very clear. that's the annual report that they have an ongoing opinion from kpng. this is a kpmg story. not a herbalife company. both companies we assume were the one who is ran the l.a. office of can recollect pmg was passing along or trading on his own on material, not public information. >> you have to imagine, this is no good for anyone. but for those within herbalife,

this must be incredibly frustrating, having this auditor make this mistake. the st. louis fed president james bowelr sitting down with steve liesman, talking jobs after that number on friday. steve liesman joins us this morning with more. >> i wonder if there's an emerging distribution with the federal markets over the friday jobs report. the fed president became the first official to discuss that friday jobs report and how it changed the forecast. and the answer was not very much. he said he's really discounting it and job growth was averaged 200,000 over the past six months. $170,000 over the past three months. this was only one bad number. >> we had a first quarter that was quite a bit stronger than what we expected in january. so there's been a lot of good

news. this is a down number. but we'll see. there was revisions to january and february. maybe there will be revisions to this number. we want to wait and see. i wouldn't change my forecast based on this. >> he said it's unlikely because the economy is different than it was last year. including better housing numbers as well as less risk in europe. >> i don't see europe coming back in a big way. cyprus showed it's not going to come back to bite us the way it has in previous years. i'm expecting that part of the world to remain calm. at least with respect to financial markets, and that's going to help the u.s. through the summer here. >> a couple of other comments he made. he doesn't expect higher unemployment when the job market improves. 7% is not enough to attract discouraged workers back to the

workforce. he supports adjusting qe relative to incoming data. also says the fed has room to maneuver, because its balance sheet, believe it or not, is not as high relative to gdp as some other countries. substantial improvement. that's the metric for when the fed may end the quantitate i easing. he says it has to be considered when we get to the low sevens for unemployment. he is concerned about the costs. but they're not et to him right now. carl? >> bernanke had not unkind things to say about expansionist monetary policies saying they're mutually unconstructive. is that shared by bullard and the committee? >> i think so. it's unusual to be in a place very different from where the rest of the committee is. that's proibl the case with those comments. >> what a we're that we're in. we're barely half way through it. >> he also said, by the way. that he's not changing his

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a lot of news to recap this morning. it involves the two companies right there. herbalife and skechers. both are halting for news pending. the common thread is kpmg, the auditor that is resigning both accounts because of a partner of theirs who leaked third party information. obviously this is bad news for both companies, but not necessarily their fault. and they've been halted for almost two hours here. there's a good indication they could be halted for a lot longer. they have no reason to believe that they were inaccurate. for reason of independence they have to step back.

a lot for the companies to sort through. we are hearing from sources learned of this last friday. they ran the practice for the auditor, for the company, was out very quickly. not clear how kpmg learned about again what is alleged to have been trading by a third party via information received from this partner. one would expect that perhaps it may have been law enforcement that actually came and said you have a problem here. they monitor these things as we know very closely. that's a bold action for anybody to try to do something like that. whether an accounting firm or investment bank when you are constantly in possession of material, not public information. to reiterate, this does have much to do with herbalife or sketchers. they were the companies that

were questioned. >> right. and as pisani pointed out in the last hour, they are largely in control of the companies themselves. so it's been the dominant story of the morning. are you going to stick around for 11:00 as well? >> woel see if we get the news or the confirmation of what is the news. >> it would be nice. if you're just joining thus morning, here's what you missed. welcome to hour three of "squawk on the street." here's what's happening so far. >> i think there's been a lot of good news. this is a down number. but we'll see. there was revisions to january and february. i think we want to wait and see. i worry. thousands of people work there. this is a company hard pressed to get the credit they need to continue to do as well. i think allman is the right

choice because he may be able to get the credit. jcpenney had a decent strategy. it had a lot of sales. he systematically carpet bombed his own stores. he blew it out throughout the organization. i do think everybody who is connected with him has to go. >> now herbalife is halted for news pending at the hope. >> they disclosed on tuesday kpmg will have to resign as the company's auditor. that's according to a person briefed on the matter. >> the turnarounds work, i think this news today now that the ceo change quit the company and further turmoil near term. >> it's not often they should get the business news world rocked by an audit firm. but in this case this morning

two stocks are still halted, as we said. herbalife and skechers after kpmg resigns as the auditor for both companies. while saying the auditing itself is not necessarily a concern. it has more to do with their own employee, as we said, leaking nonpublic information. the shares have been halted since before the bell. in herbalife's case, after that, shares of jcpenney falling. bringing -- falling to the lowest level since february 28th. that's a 12-year low. it's below $14. want to get more on herbalife this morning. kate has more on this. >> that's right, carl. i've been taking a look at what this might mean for a bill and where his funds stand right now. you take a good amount of bad

press with carl icahn and dan lobe. and all parties have made money at various points. but pershing square is up a little over 6%. they're still managing about $16 billion. and they're in the black across the board except for jrks krrks penny. i could go through this quickly. canadian pacific railway doing very well for them. it's up 21% this year. proctor and gamble general growth, those are all up by a healthy degree. especially up 15%. general growth a little bit less so. it's been a good program over the longer term. the lagers are beam and jcpenney down 30% and plunging as we speak right now. and the other loser is matson, which is down about 5% year to date. we may get news on it this week

to pershing square investors where we learn about new holdings that are performing well. i do think ackman had a couple of redepositisejss during the p quarter. reportedly an investor pulled about $200 million. i'm told that's not entirely true. there may have been redemptions, but nothing of that size. so clearly headwinds here. and the use of the bully pulpit to to get his story out, especially this herbalife story with a lot of news on cnbc has really made him a target of criticism as to whether hoe's right on the merits and his style. >> you've interviewed johnson. i wonder. the skechers things complicates the story. but the complexity of the model

would make it seizier for information to get leaked, yes? >> absolutely. and this comes as such an interesting time if you think about not only all noise around herbalife, but also more broadly if you think about what the justice department has been doing in terms of hedge funds and expert networks. one of the stories i've been covering is the sec investigation and other investigations in new york. and this is another interesting wrinkle. >> i apologize for cutting you off. we have finally gotten the long awaited news from herbalife. we've been waiting anxiously. i believe it is still halted. a press relief is out announcing kpmg notified the company on april 8th that kpmg was resigning immediately. kpmg stating it was not

independent because of alleged insider trading and herbalife securities who until april 5th was the engagement partner on herbalife's audit. they revised the company, resigned the accountant solely, solely due to the impairment of the independence resultg from the now former partner's alleged unlawful activities and not for any other reason. the integrity of the management or for any other reason. and therefore none of the audit reports on herbalife's financial sa statements, on the financial reporting or any of those things are at issue here. they go onto say at no point during the prefiscal years that they have audited the company. and it gets very wordy here. at no point during those three fiscal years were any

disagreements on accounting principles or practices. disagreements would have caused it to make the agreements. the point here, this is is a kpmg issue. the financials of herbalife, which, of course, had been a client of the companies. more interesting, kate, you follow a lot of what has been going on in the insider trading in the goj and sec as what is going to occur because of the alleged action by the senior partner in the l.a. practice for kpmg as a result of this potential trading this appears to have taken place in shares of herbalife. this is another interesting wrinkle. and one has to wonder, was this

initiated by a justice department investigation? there's obviously a lot of activity going on in terms of enforcement and litigation around the issues. so in some ways it would seem to be a natural outgrowth. a senior kpmg official behaved inappropriately in passing on information about the two names, two other parties. that kpmg person did trading as well as other third parties, but we just don't know the details. so obviously we'll be waiting to find out more. herbalife is such an actively traded stock in recent quarters. it certainly could have moved the immediate l if somebody got the tip off. shortly thereafter. later that day we had the ceo of herbalife on the air saying he thought there was a sort collusion going on here. and there was a major options

event happening that week. he was trying to talk the stock down in advance of that. ackman denied it. he said he had no options other than his short position. so they may not have been true for him. and there was an explace date to the end of the week. one wonders if that was connected to the kpmg event today. >> almost comical to see the line. we will wisconsindraw the composer and the auditor. that's obviously not going to happen. kate, thank you for that. >> of course. >> i want to bring in brian shactman who has been managing the post here for us. >> i have returned. the process is going the way they expected. now everyone is waiting for the nyc to come down and reopen the stock. you would think the stock would not trade down sharply.

by any stretch this is a kpmg issue. they do expect it to be soon because these guys have plenty of other things to do. >> this raises a number of other questions. now, it's not completely clear was the partner actually the one doing the trading based on information they knew, or was there a third party doing trading that they were pass information to, but at the end of the reh rerks balife release they go onto say that kpmg felt it could no longer be independent because they had a partner who would conceivably gain one way or another from the information they had. nonetheless they do believe that again all of their audits are --

>> it gets confusing. they don't in the information release the third party. >> they do essentially say, as david said, that our books get the clean bill of health. >> which i point out was never the key issue here. this thing being halted for this long when the news was already in the market. and david by the way, congrats, you got it right. i got it wrong. it was so absurd to think this was the news given the timing and the the fact that the news already filtered into if marketplace. >> yeah, it is strange. stocks still halted. >> it's important to point this out again. will skechers be the next along the line of this? as it applies to herbalife, the

accounting has never been the primary issue here. it's other things. if you're curious to how this halt stacks up? some biotech firms, drug stocks are often halted for an entire day. when we come back we'll get a lot more on herbalife as it unfolds. and a fresh 12-year low today. back in a couple of minutes. (announcer) scottrade knows our clients trade

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all right. there's a look at herbalife. still halted at post ten. one of the big stories today. meanwhile we're watching jc penney. ron johnson, as you probably know, out as the ceo of the retailer. rehiring the old chairman as a replacement that ran the company until 2011. that is a fresh 12-year low for jc penney. courtney reagan is outside of a jc penney this morning. good morning once again. >> reporter: good morning again, carl. many are not surprised at the nature of the move with johnson stepping aside. many analysts that i have spoken to who speak to management often are surprised with the timing of the move.

many thought johnson would be given one or two more quarters to complete the transformation and move the needle more on the sale. and many speculate that had the shares would really pop if and when johnson did indeed step down. clearly investors are uncertain about the choice for mike as the interim ceo. shares seeing the biggest plunge sbins the company announced the fourth straight quarterly loss when shares plunged back on january 28th. i spent time with johnson and while he nitt eadmitted it was h year, he was still steadfast in his belief that this strategy was the right one. on the one-year anniversary i asked johnson what he would do different now that he knows what he knows now. listen to what he said. >> if i that had to do it over again, i would do it welcome like we did it. i would change the tactics. i would be more clear on

pricing. we have a business model that didn't have any growth in its future. every business needs to build off a growth platform. >> and that business model was allman who johnson succeeded. it will be a very busy day for him. that's what i'm told for sources very close to the situation. back to you. >> not the greatest way to start on your first day back. another loser in addition to mr. johnson who lost his job is bill ackman, the hedge fund manager who has taken a large significant position for some time. then went on the board. was the largest shareholder. installed mr. johnson as the ceo and in recent weeks has come around to the belief shared by many on the board on which he is a part of jcpenney that it wasn't going to work under mr.

johnson. while acman has other dollar investments, perhaps this is as big as it gets. he was talking quite a big game in terms of what he believed would be the legacy of mr. johnson and the stock price for jcpenney. take a listen to what he said to me last soummer. >> he was a genius when they hired him. a year or two from how they'll think he's a genius again. >> it will be a bit longer. he also went onto say he believed the stock could be as much as a 20 bagger. means it could go up as much as 20 times in value. it has gone down sharply since. >> biggest statement since that. you will have to live with it a year after the fact. we were trying to find only sound of when johnson was originally on our show and remember he took the stock to 42 in the early days when there was a lot of hype around it. >> great deal of excitement about it.

the strategy was questioned by the likes of mr. a krckman. they both came in. now we have mr. johnson back. some wonder, well, you can't just go back to the plan you had before johnson came in. there was a great deal of euphoria, wasn't there? >> when they said to him, when reuters asked him what to do, he said i'm going to get the team together to find out what is working. if someone said we've got it wrong, maybe the stock would have rallied. >> there's probably a bit of triage going on. my favorite stat of the day comes for s& p. in the time it took johnson to lose $3 billion. wal-mart added $61 billion in wal-mart cap. given their size, that's easy to do. before we go to break. take a one more look at post five and post ten. a lot of posts today. we do have a statement out of herbalife, but waiting for

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. back by popular demand at 11:00 hour with some news this time. not about herbalife. >> a couple of things we've been watching on the 11:00. why not? dell, of course, we know there's a fight still going on there. it's going to be weeks by the way until we hear from blackstone as to whether it's going to make a firm and official fully financed offer for dell. at least the end of the month, if not longer. we did hear from one of the largest shareholders saying the proxy statement from dell and the special committee fairs to make a statement to accept the share that is being offered or was agreed to.

they go onto say the special committee obtained two proposals that they view as superior. they believe the process resulted in an inadequate outcome and we believe the board's sudden rush to sell is triggered by one thing, mr. dell's desire to buy. so southeastern is continues to mount its campaign. if they do make the offer, kpp it to include with the shareholders to voluntarily roll into it. if in fact, he comes forward and silver lake doesn't match and it is deemed superior. a lot of ifs still to come on dell. another story that we've been tracking is agrium. we got a press we lease saying they believed give tennessee previous fights at agrium that it would get two board seats.

not long after that agrium itself came out with a statement strongly denying that that would be in fact the case or that should be the conclusion. we don't know if they succeeded in any of the five. we will know at 1:00 p.m. it is interesting to note that they did put out the press release saying don't rush to any conclusions at all. that would not be good. i believe it's not gefr to an actual proxy fight but has succeeded at putting members on board. >> if you're talking about victim, there's just more examples than you can shake a stick at. >> not that much mma but a great deal of active and rested shareholders. >> thanks, david. when we come back, a lot more on jc penney, plus what will mike

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two posts you've been looking at for most of the morning. skechers and herbalife are still

closed. we are getting word that herbalife may be getting closer to opening. in the meantime, europe is closing in a little more than a minute here. the cool inflation data from china for one. >> china was a major reason why the mining stocks rally. then presumably they can stimulate for longer. we also had copper make reversing the recent downtrend. the other thing that was notable is lee of hutchison won in congress how long, made by a 30 #% stake in telecome, so they have also done reasonably well. as you come to the close, you notice we are off the highs in europe. so we dipped down just a bit. the data from germany, retail experts were soft today. it looks as though france may have avoided a recession in the first quarter. the other thing that i should

note is everybody is talking about this huge stimulus from the bank of japan and that washed into europe. you saw those risks. the netherlands, austria comes down to record lows. >> european markets are closing now. >> i waited for the bells. she is a tough cookie. >> those were just bells. telecom did well. >> we'll keep an eye on how they affect our afternoon session. brian shactman is at post ten. we are about to find out how investors view the story, whether or not they believe it's truly a kpmg issue entirely. >> well, it's opening up any

second. the indications from 40 to 50. it seems closer to the 3850. so it will be up maybe anywhere from half a percent to a percent. but again, and now the indication has changed down to 350. . early indication was slightly here. but again that's already shifted a little bit to the downside. it's not totally open yet. we'll let you know as soon as it starts actively trading. >> all right. we have to watch h herbalife and skechers as well. a viewer says that the proxy cards just went out last week and you have to imagine that logistical nightmare it will be replacing them before the annual meeting in late pral. >> yeah, not to mention having to have a new auditor come in and then reaudit financials that have already been done. years that have gone by. you know, it's not easy for herbalife.

it doesn't appear through any fault of the company's. but it does make things more complex for the company. so now would be a key time to gather the information together. >> for itself part they have a bigger problem, one would anticipate. this company is not a stranger to controversy with with tax shelters for a number of years ago being at issues. never like to have to deal with insider information from a partner, which is what is alleged to have taken place here. but nonetheless, material, not public information about skechers and herbalife being passed to a third party. therefore questioning the independence of the audits that have taken place, though they have no reason to believe that anything has gone at all at the companies in question. >> and they make the point that this is a rogue trader. it's not a rogue partner f you can have a rogue partner.

it's not a systemic problem, as they are presenting it. we have seen banks with rogue traders who have been able to sail along relatively unscathed. >> it's probably fair at least today but people point out the accounting business. the big firms have had a checkered past. as others are pointing out, and there's a lot of conspiracy theorys going out. but as one person here points out, he did not resign when one of the partners wuds engaged in issues with some of its clients. so you know, people want to look at this and say is there something else going on? i'll come back to it, and i will say we don't know for sure. we won't know until we see the lawsuit, if it is ever filed. but this is not the issue at hand. so the way the stock trades

right now is not necessarily related to what the real issues are at herbalife. >> brian shactman, i don't necessarily hear any applause. >> one just muttered ack man is one on one today. the process is just fascinating to watch. it's amazing the way they opened it. just in about two minutes about 200,000 shares traded already. so again, there's no extreme price action here, although it is pretty volatile at the open. >> gave us a heads-up that we were going to get the open a few moments ago. >> i'm going to head over to post five right now to see. i would imagine they were going in the order next. >> there's a look at herbalife. reopened at more than two hours. down 33 cents at the moment. 3806. where do you want to head? let's take a quick break.

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morning. as soon as skechers opens up again we'll bring it to you. in the meantime t other big mover oaf the morning, jcpenney shares are closing. ron johnson being replaced by ullman. we want toe bring in columnist of "the new york times" for his insight. he has been patiently waiting for us to get to him. it's good to have you. welcome. >> good to be with you. >> so the take was he was let go either six months too early or six months too late. you feel six months too late. >> i totally agree. i assumed this plan looked better on paper in the beginning whochlt is the jcpenney customer? and who is the jcpenney competition? everybody cannot go upscale. and what was so brilliant to bring a general yius from apple charge of jc penn nooe.

there was a complete disconnect from reality there. one trip to a store would have made it obviously. >> even the execution was reckless by some descriptions. i just wonder -- i don't know if jobs would have come in and done as little testing as johnson appears to have done. >> it's hard to believe that anybody would. it's also striking that ron johnson doesn't have the capacity admit he made a mistake. he was quoted today saying he wouldn't have done anything differently. how can you say that in the face of the evidence? the sales numbers are coming in. who know what is the latest numbers are showing. they were absolutely terrible. and this did not seem to shift his thinking in the least. and i also feel the ridiculous lawsuit with macy's over mart ya stewart. most of the blame lies with jcpenney. the idea of stealing her away. of rubbing the ceo's face in it.

writing nasty e-mails that surfaced. >> jim, i'm fascinated to know what you saw in the stores that you knew it would fail. >> number one, first and foremost, being called a genius getting rid of the idea of lower prices. i was in the store a couple of weeks ago. next to it is a michael graves boutique. wait a minute, do the people? the few of them around me do they have any idea who michael graves is? whose brilliant idea was this. >> you have a different clash of business people.

can we say there are certain people on certain boards who should not be given the power to delve into industries that they may arguably know nothing about? >> i couldn't agree more. i think ackman has to share some of the blame here. they must have talked all the time. and there's an arrogance here that is really a cautionary tale to any business. the speed with which customers were alienated is almost without precedence in my experience. this is amazing. >> you have to imagine, jim, that books are going to be written about this a long time from now.

why would you want this? after the way that you have been treated. >> i assume he's getting a good pay package. but ullman -- i mean the stock is down because nobody knows what they're going to do now. and i think it's going to be unnerving to investors for a while. wo ould would want this job right now? you have to deal with ackman, his allies. on the other hand, how much worse can it get? on the very least he knows the customer and the strategy. maybe he can get 25% of the rev new back. and there's got to be room in the middle market. there's a big middle class in

this country and there's got to be money to be made. even with wal-mart on the lower end. >> jim, does it survive, would you be in the shares here? >> oh, that's a tough one. i think i would be long. it's hard for me to imagine it getting much worse. >> jim, it's good to have your reviews on what is a day that a lot of people suspected was coming thanks again. >> thank you. >> keep an eye on post five here. skechers, of course, is still halted. not reopen for trade like herbalife is. we will bring that to you when it happens. in the meantime a lot more "squawk on the street." we'll be right back.

coming up at the top of the hour, what a day for trading, and that's exactly what we have with news breaking on many fronts from jcpenney to herbalife. and what's wrong with tech? first apple, now google. dan niles with what can save that sector. is it a time now to sell? carl, we'll see you in about 15 minutes. can't wait to get started. >> off lot to work with today. now that ron johnson is out, what should he do next? he has an opening for the retail.

apple has not found anyone to fill the position since johnson left. so should they rehire ron johnson? joining us to weigh in rocco, great to have you. welcome. >> >> thanks for having me. >> carl. >> are people serious? >> i hope not. like the late, great governor said it, he thought he had a triple. ron johnson read his own press clippings. he went to jc penney, living high on the hog, and he failed miz rably. now people want him to come back to apple? now i don't understand the connection, other than he used to work there. it makes no sense. >> nose. >> those who are kind who said

he was a master of retail in that space. it would well again work at something like an apple whoochlt doi you disagree? >> i think we have all just sort of bought into this line that ron johnson was the arkt tect of apple retail. i don't buy it. he was riding shotgun with steve jobs. steve jobs was the architect of apple retail. ron johnson imp le apple retail. ron johnson imp lmented what steve jobs wanted done. to that extent, he did a great job. he was able to implement and execute. we're saying now there's an opening at retail at apple. that correlates with, with johnson leaving. johnson left. steve jobs died right around the same time. those two things happened right around the same time. a lot of problems that happened at apple, we can trace back to jobs. bringing back ron johnson isn't going to solve anything. >> you know the apple story is

as good as anyone. the destruction in shareholder value over the past year or so. where does retail fit in the fires that they have to essentially put out right now? >>. >> i don't think there's anything wrong with retail right now. i think it's running on auto pilot right now. which says to me they're just running the show the way jobs would want to. i mean, sales per square foolt and everything else. it's fantastic. i don't think there's a problem there. there's problems in other parts o it have business, primarily. can apple innovate and do another big problem like ipad or iphone or ipod. none of this has anything to do with ron johnson, no matter how much the media wants the to push that story. >> yeah, it's going be interesting to see where he winds up. i'll tell you that.

have a great, safe trip and we'll see you soon. >> definitely. i'll be there. switching gears for just a moment here. the national urban league is releasing their 2013 state of america report and releasing details today. mark, it's great to have you. w, d.c. mark, going to you. >> thank you, carl, great. >> looking through the report, it's called redeem the dream. it is almost 100 pages. it is incredibly comprehensive. walk me through some of the encouraging data points because there are some. >> well, the encouraging data points is that the nation made great progress since 1963. a reduction in poverty for african-americans, a reduction in child poverty, and increasing the number of african-americans who have high school diplomas from 25% to over 80%. a five-fold increase in the number of african-americans with college degrees. and that's a very important element of the progress we have achieved as a nation. but the other side of the coin

is that the unemployment rate for african-americans was lower in 1963 than it is this year in 2013. and the relative gap between blacks and whites when you look at economic numbers has not changed. i think, carl, the question for your viewers would be, why should investors, why should business leaders be concerned about this? and i would answer it this way. the more people we have working in this nation, the lower the poverty rate, the more consumers and investors we have. and the more consumers, the more investors, the more economic growth we have. i think that a continuing push to reduce the unemployment rate, a continuing push to increase educational attainment levels is going to help the american economy. it's going to spur growth. it's going to help consumers. it's going to help the business community. it's going to help investors. >> mark, well said. i mean, your data points on the

education gap shrinking is hardening, but when we look at the income gap as you point out, it's just not keeping pace with the way we're improving the education component. the president's got a budget coming out this week. this notion of change cpi would be detrimental to those at the low end. is that something the national league is in favor of? >> we have long been on the record to opposing reforms to social security that will force recipients to pay this great cost, this great price. but i do think that any plan, and i think the president's on message in terms of talking about a battle fair plan, has to look at all aspects of the budget. what i would point out is we need tax reform. what i would point out is we need to insure any plan we have spreads the burden already. already we've seen a number of rounds of budget cuts, which have hit these investments in education and workforce in a significant way. i don't think it's the way to

go, cutting investments in education, job training and the like that's going to help with economic growth in the future. i think, if you will, budget-cutting fever could cost economic pneumonia for the country. so it's a word of caution. our emphasis needs to be on growth and job creation. and that's how we should look at the fiscal challenges of the nation faces do. they spur growth? do they spur job creation? do they help put more americans back to work? >> mark, it's a great read. everybody should get a copy of "redeem the dream." appreciate your time, as always. >> thanks, carl. >> mark joining us there from the urban league. after the break, lynn turner will join us for more on the news out of kp&g. and we'll make sense of what is a confusing story. back in a couple minutes. revolutionizing an industry can be a tough act to follow, but at xerox we've embraced a new role. working behind the scenes to provide companies with services...

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show. >> i kind of wish the circumstances were different. have you ever seen anything like this? >> a couple years ago, probably three to five years ago, another partner in one of the big four firms was caught insider trading and paid the price for it. so it's very, very rare, but it's not unprecedented. >> how come and is it for the firm itself to resign that account and take action as it appears kpmg is against this part her? >> well, i give great kudos to kpmg. they have done exactly what say should have done and they have done everything right. because of the fact you have insider trading is fairly rare. it's rare that you would see a firm resign like this, but they've -- i think, did the right thing. they decided they were no longer independent given the circumstances, and to their credit they did the right thing,

although it's got to be extremely painful for them. >> yes. of course, there's always the collateral damage, the clients themselveses have to build confidence and restore confidence in the street to the degree that they have lost some. sec wouldn't give us a comment on this today, what's probably being said over there today? what's the investigation likely to look like? >> i think the sec will definitely, i give you 100% probability, that the sec is going to investigate this matter and the individual. and i think it's highly likely that if the story turns out to be true, the sec will bring an enforcement action, look for penalties, and you may find the u.s. attorney out in l.a. as well bringing in action. the partner is barring up this for a period of time. >> what indications would you look for to suggest the problem is something more than a rogue

partner? that there was something systemic, and i'm not suggesting that was the case at all. >> yeah, i would doubt that it is something systemic having been an auto partner. anyone in that role knows if you engage in this type of behavior what the ramifications are, in having dealt with each of these firms, i can tell you that i can tell you each of the firms of kpmg have strong policies in place that are unequivocally clear to their auto partners, that they should not engage in this behavior. given how rare it is that we have seen it in the past, i just don't think that you're going to find this systemic risk but instead it is this individual rogue partner. and about a dozen years ago when i was at the sec we redid the rules and the