and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin, and we're going to start things off this morning with the markets. look the u.s. equity markets, barely budging. the dow is coming off another winning session, and guess what? this is the 19th straight session of tuesdays of gains. so, 19 tuesdays in a row the dow has ended higher. the s&p and the nasdaq have now been up nine tuesdays in a row. and stocks actually took a turn higher around midday yesterday. among some of the reasons that were cited were some comments from st. louis fed president jim bullard. he told an audience in germany that the fed ought to stick with its bond-buying effort to try to bolster the economic recovery. that's not things you usually hear out of someone like jim bullard, so it is not a stretch to say that fed chairman ben bernanke will be in focus today. he's going to be testifying

before the joint economic committee. that starts at 10:00 eastern time, and obviously, investors will be looking for hints of a policy shift, although none is expected. if you go with conventional wisdom, this will be more dovish talk. also we get the minutes from last month's fomc meeting, released at 2:00 p.m. eastern time. in other news on the fed, politico is reporting that chairman bernanke met privately last week with house oversight and government reform committee chairman darrell issa, along with other lawmakers. they are said to have talked about the central bank's efforts to try and stimulate the economy and possible exit strategies as well. now, issa sent a letter to bernanke last month expressing display that the fed was not providing lawmakers with more information about how it plans to wind down its bond portfolio. maybe he hasn't wanted those things to leak. the news of this meeting leaked, but the details did not. among some of the other items on today's u.s. economic calendar, we get april existing home sales. those are out at 10:00 eastern time. some of the polls and economists expect that the headline number

actually rose by 1.4%. and in global economic news today, the bank of japan ending a policy meeting today with no change to policy, as expected. the boj has doubled its monetary base with the goal of reaching a 2% inflation target. now, the central bank did say that japan's economy is picking up while also cautioning that there is some uncertainty out there, but some traders say that they were surprised that the boj did not take any steps to ease heightened uncertainty in the bond markets. andrew. >> thank you, becky. in other news out of japan this morning, sony's ceo now saying his company, they're going to be assessing that proposal from dan loeb, the hedge fund manager that's called for sony to spin off some of its businesses. and the nikkei reporting that they're considering spinning off that entertainment arm. meantime, sony is cutting its sales target for digital cameras, smartphones and tablets by 13% to 17%, but it says there are encouraging signs of a revival in the electronics business. take a look at shares of sony. they are rising about 6% in the asian session today on word that

the company is considering mr. loeb's proposal. back here in the u.s., a few key earnings reports today before the bell. we're going to be hearing from retailer target. then this afternoon we're going to be getting hewlett-packard. toll brothers released its quarterly earnings earlier this morning and the homebuilder reported a better-than-expected 46% rise in profit. among the reasons, it closed more sales at higher prices. and numbers from home improvement chain lowe's just hitting the wires. take a look. earnings of 49 cents a share ex-items, 2 cents below estimates. revenues also falling short, and people will be comparing that to the blowout earnings yesterday from home depot. in other news today, prosecutors -- this is pretty interesting -- they are now reportedly considering using a racketeering law against sac capital. steven cohen's firm could be charged as a criminal enterprise with insider trading and stocks. no final decision has been made. this would require approval from the department of justice. and the rico statute, it should be noted, most commonly

associated with prosecuting the mafia. so, this is taking a quick and strange turn. we've got about two months, joe, before the statute of limitations comes up on mr. cohen. >> i guess we understand why the firm decided to not be completely cooperative with everything. what was that, monday's news? >> friday's news into monday. now it's starting to make a little more sense. interestingly, it sounds to me from the reports and a couple of sources i've talked to that they may not go after steve cohen personally. now we're talking about perhaps charging the firm itself with a crime. >> but how much of his money is in the firm? >> it's virtually all -- no, but effectively, what it means is they could shut down the firm to outside investors and he could continue investing his own money. so, it's -- anyway, we'll see. >> just like saying rico. rico, johnny. i guess you don't remember. that's from -- rico! johnny. when you say rico, it's just a cool word. in washington news today, the house oversight and government reform committee's going to hold a hearing on the

irs targeting scandal. the irs official at the center of the controversy isn't going to testify. lois lerner's expected to invoke her fifth amendment right against self-inkrimsion. >> what do you make of this? >> i love it. and refused to answer questions. when anyone does that, looks like there's something to hide. it just gets bigger, and you know, people just -- it's not what you want to hear to allay concerns that something is going on. >> is there a reasonable explanation to take the fifth? >> i don't -- yeah. >> if nothing is wrong? >> it's a weird right that we all have. and i plead the fifth a lot, but it's usually to save myself from saying something or doing something or, right? don't you -- you've used that, i plead the fifth, because you'll get in trouble. >> if you say something that's wrong in front of the senate like that, they could come back to you. >> well, and if you plead the fifth, it's because you're hiding something. >> right. >> if you asked me an opinion about something and i don't want to be honest with you -- >> you plead the fifth. >> -- i will plead the fifth. >> i'm going to start pleading the fifth a lot.

>> you should. it's just a good idea. in fact, it's pretty good to do it a lot, like all the time. if there's any chance of anything -- plus, we're on tv here, which never goes away. you know that, right? it's like an e-mail. and it's like surfing the internet. ♪ >> i plead the fifth. i plead the fifth. >> exactly. all right, a senate panel has voted to make it easier for u.s. companies to hire foreign workers as part of the immigration bill being debated in congress. the amendment passed the senate judiciary committee. it would loosen requirements that employers recruit americans ahead of foreigners for high-tech jobs. the house appropriations committee approved spending cuts yesterday, made it clear that more will come. the committee approved a $967 billion discretionary spending cap, the lowest in a decade and an $80 billion reduction from the current year. the white house is threatening to veto legislation that could strip the authority to approve the keystone pipeline from president obama. the house is expected to vote today on the northern route

approval act. it is expected to pass. the bill could declare a presidential cross-border permit is not required to approve the proposed pipeline. we haven't said anything. i'm embarrassed that we added to the carbon dioxide problem for the last month with the jamie dimon stuff. i'm embarrassed that we spent so much time. i'm embarrassed the entire media used so much paper, so much p p pulp, so much print and you got 32% -- >> 32% against. >> clear victory. and tim cook yesterday -- >> he was good. >> watching him destroy the demagoguery of people that don't understand the way things work and watching -- did you see portman? he's going to be on today. >> on at 8:00, right? >> it's so great, but i got a much clearer understanding of the issue. >> i did, too. it was not what i expected, based on the statement ahead of time. >> i was going to mention to you, because a lot of times they talk about how they don't pay 35. now i know why -- >> because the profits comes from overseas sales. >> they leave it over there.

>> every sale -- what i did not realize is everything you buy here is taxed at that rate, all the profits here are -- >> that's what i mean! so, the reason that it's left over there is because of the 35. we've got to change it. now, i think this might be the moment in time when the most beloved company, the innovator, the job-creator, everyone's got apple products. we all basically have a pretty good, i think, opinion, you know, of apple. and it's one of our great american companies and innovators that has taken up the slack for a lot of companies that fall by the wayside, like record shops and like vinyl, i don't know, whatever was involved in all these things that apple has disrupted. and now we see. if you were to lower it -- and you make a good point. andrew's point is that we have to get to the number where people won't say, all right, 25's good, but i got this little crappy country somewhere i've never heard of that's at 16%, so i'm going to -- >> like tim cook said yesterday, somewhere in the mid-20s seemed like a reasonable -- >> mid-20s. >> think what that would do.

>> mid-20s would be fantastic. the question is if all corporations would agree with 25%, or are they going to say 20 -- >> you're never going to get 100% agreement or a majority. >> but what's the best number, the threshold. >> bowles/simpson laid that out, in the mid-20s, that's fair. >> you could do it so you could lower it, like they say, and i understand what they mean, it would be revenue-neutral. we get the same amount, but all those billions and trillions would be in our economy. >> right. >> and maybe some would go to dividends, maybe some would go back to shareholders, but some would go to plants -- we wouldn't build the plants over there. we would build the plants here. >> here's what i struggle with. >> don't struggle anymore with this. plead the fifth. plead the fifth. i feel like saying something, but i'm going to plead the fifth. >> i struggle with how it could be revenue-neutral. >> why? >> if 60% of the profits are outside of the country and are being taxed at 2%, and now they're going to be brought into the country and taxed at 20% -- >> oh, it's not going to be revenue-neutral to apple. >> it's not going to be revenue-neutral to apple. >> revenue-neutral overall to the u.s. tax code because there

are companies that pay a lot less and companies that pay a lot more. >> but if you're telling me it's revenue-neutral to the u.s. -- >> because it's a fairer situation. >> because all the money would be here. that's the point i just made. >> but it's not just that, it's also a fairer situation for companies that are paying much less than 25% because of the advantage -- >> competitively -- >> -- of other situations. the tax clause is so complicated, there are a lot of ways to take advantage of it. if it's revenue-neutral, it's fairer because somebody stuck paying 25% because they don't have anything offshore -- >> that i'm clear with, but i'm less clear on how it will actually -- >> we had a meeting yesterday and someone was saying what about, don't you think companies owe the money to foreign governments? and it's like, why should we be -- why should american innovation be paying for an entitlement state benefits in france? we pay for all their security with nato already. we pay for all their drug development because they've capped prices. so, we already pay for everything. why should we be paying for these overpromises that they've

made as well as the ones we've made? >> because you're doing business in a different country, you've got to deal with their laws. >> yeah, we do, and we pay whatever the much lower rate, is but they end up with the money that we could have domestically here. >> you're just talking about the repatriation argument? >> it'd be here and we would be domiciling a lot of -- >> i don't think there's anybody at the table who disagrees with you, though. >> then they should change it. >> yes, they should. >> and i think you saw yesterday. carl levin and these other guys shouldn't just say we're going to, you know, seize these profits somehow and add a surcharge on to that. >> the thing that's concerning is this was not a single-party issue. it was not just carl levin, but mccain was standing next to him. >> mccain, that's why he was known as a rebel. he wouldn't necessarily take -- but we've got to get to the point where we understand that corporations aren't the enemy of this country, they're the people -- and not only that, apple, the people that they employ pay taxes. >> right. >> even though apple may not --

and they paid all of the taxes due here, but a lot of the profits are not here. they're over there, but they would be here. you could bring it back if you would -- >> look, i was very impressed with tim cook yesterday. >> well, portman's going to come on and we'll talk about it. >> and then we're going to talk about the corporate governance at jpmorgan, too? is that coming up? >> we already did. i thought i told you, we've added to our, you know, climate change problems with all the co2 that we've wasted on talking about jamie dimon when he was going to prevail. now he's stronger, they say. i love, john lew, the comptroller, was on -- >> we did have jeff simonfeld on to talk about it. >> talk about co2, we'll get him going and you can almost feel it warm up a little, right, globally. anyway, go ahead. why don't we talk about an eu summit that's also coming up today. it's going to be the topic of taxes. that's going to be a big topic there. ross westgate is standing by in london right now. ross, good morning. >> hey, becky. good morning to you.

decliners out-pacing advancers right now through the european session, but you've got to remember where we are because the record close in the u.s. stocks last night and it meant that the ftse also started the day at the best levels we'd seen since 1999. the xetra dax pretty much on its record levels as well. right now down 0.2%, the cac down 0.3%, same for the xetra dax and the ftse mib. the ftse was only about 150 points away from its all-time high, if you want to know where that is in relation to everything else. looking at the sectors for a breaking down on what's going on, you can see sony weighted to the downside. despite that we have some positive up. i'm not sure i would trust this board because it says no sectors in positive territory. i'm not sure that's actually the case. as far as what we have been focusing on today, we have minutes out from the bank of england. for the fourth month in a row, the vote was 6-3. six not to extend quantitative

easing, three who voted again. and mervyn king's among them, out voted by the rest of the bank and arguing for another $20 billion of quantitative easing. also retail sales out. no surprise, it was a cold april here in the uk. that meant that april retail sales was the biggest monthly drop in a year. also, we had the biggest borrowing, company sector net borrowing, 8 billion net pounds, the biggest borrowing figure for april ever as well. but after those minutes, the thought was, of course, there's still an argument for more qe. we saw the low inflation number yesterday as well, so it meant gilts got a little support and it did put pressure on the pound as well, sterling coming under pressure against the dollar. there is still a dollar buying bias, so the feeling is that the rest of the world is adding to liquidity. and in the states, as you know, we are talking about when the fed pulls back from its program, that just means everybody's buying into the dollar at the moment. this is where the dollar stands across the board. aussie/dollar down near 11-month lows for the aussie.

dollar/yen 102.75. the key point we've been looking at. no change from the bank of japan today in its monetary policy outlook. they're looking at the volatility in jgbs basically as you were in terms of whether the pace of their money purchases and bond-buying purchases are. that's where we stand here in europe. back to you guys. >> all right, ross. thank you very much. as we've been talking about, a couple of powerful ceos taking on some tough opposition this week. a senate grilling for apple ceo tim cook yesterday and a jamie dimon averting a title split at jpmorgan. joining us is jeff sonnenfeld, associate dean for executive programs at yale university school of management and he is also a cnbc contributor. jeff, let me ask you first about tim cook, what happened yesterday in front of the senate. how do you think he did? >> i think he did a great job and i also want to say, becky, you just did a great job in that intro trying to oobliterate whatever joe had just done on my intro with the co2 lines,

figuring i wasn't awake yet. >> here we go! >> here i get up at 4:00 in the morning and i have to come in to that. of all the intros i've gotten -- >> jeff, the show's over at 9:00, so you've got to get started. >> one of the rare times that here i am agreeing with you. if you have steven rattner on praising the british for this cadbury commission report, and joe, where are you challenging him on the nonsense of the separation of roles? just because they wear bowler hats in the uk doesn't mean we should wear them in wall street or wear wigs to court. no, you don't challenge them then, but let's talk about tim cook. >> i've watched, i can't name anything we disagree on, really. maybe you know because you're -- >> no, then what's -- no, in fact, i'm going to stay on for the third hour to hear your anthony weiner jokes. i don't want to miss a minute of you. what a cruel opening, but -- >> i actually taped something that says he's back and we're all the richer for it, aren't we? aren't we all? isn't the world a better place that weiner is going to run for may sglor that was the highlight of the day. >> you know, this is the trouble

when you have a whole show that's going to be dedicated to taxes. you need anthony weiner to come in here and perhaps liven things up. >> make it a little more interesting, yeah. >> i actually did a session last month for alvarez and marseilles, a tax group, 700 tax accountants in the ballroom at the waldorf. when they want to talk about are the implications of shifting burdens. and as tim cook did a fantastic job yesterday, and i think you're absolutely right about the repatriation issues, and i think he looked sterling, he was able to defend himself as a great corporate statesperson. however, there is a larger issue here, and that is, even in the uk, where the tax rates are like 20%, 22%, we have major u.s. companies getting themselves in trouble. starbucks, whom i love, amazon, google. there's a big blowback, a big concern where they're wondering, was the tax burden shifting there? they have three years of starbucks not paying any taxes there on revenue earned there, and similarly with google and amazon. and what this is leading to is a

big backlash, where of all things, the accountants in the ballroom at the waldorf wanted to talk about public relations and reputation issues, doing the honest legal things. >> doing legal things that some people will look at and say this smacks of being an unfair situation and maybe not going along with the spirit of the law, although tim cook was pretty clear that he thinks apple has absolutely complied with the spirit of the law as well. >> if you take a look at the actual taxes paid of major u.s. companies, you find they're all across the board. i mean, u.p.s. pays about the full bill. i mean, all the way up there, the full bill, and they're more global than any -- they're more global than united nations, literally. they've got more countries than the united nations and they pay everything everywhere where it's due and nobody raises these charges. you know, so you just have to worry about the fairness here. there was a job creation act that came out in 2004 where, in fact, we're trying to repatriate these funds, because you've had companies like oracle with, i don't know, like $70 billion outside the country and nothing in cash reserves here. how to address it now? well, back then it expired in

2005, it didn't lead to any new jobs, and the complaint was, well, all the money went to shareholders, as if that was a bad thing, but it didn't lead to -- the purpose behind the legislation changes before lowering the tax rate was to see if we're going to invest in infrastructure. capital spending in healthy firms in 2004 when we tried this didn't increase. only weak firms wound up benefiting, but so what? if the money's coming back to shareholders, let's address the tax rate issue. >> jeff, what do you think the number has to be? because one of the things we're talking about is in a world where you have countries that are prepared, like ireland, to have a rate of 12% and, in truth, a rate of closer to 2%, how can you compete against that and say, you know what, we'll change our rate to 25% instead of 35%? sounds good, but ultimately, do companies bring the money back? >> there is a strong movement back in the '70s, when joe was still working in finance, where they wanted to get rid of the tax rate completely, as the double taxation movement. you know, i am not pushing for that, but you do see that even in europe where the rates are

low, people are playing shell games and not paying taxes. japan, it's of course, we're using it as a model, but they're higher than we are. germany's only a little lower than we are. so, it's a very good question. obama, the administration's talking about 28%. tim cook and most in technology, many in industry are talking about 20%. you wonder. i think if we got closer to 20%, we'd see a lot of these funds coming back. and again, i think cook's done a great job. we have to consider the reputation issues. before i'm booted out of here or joe talks about weiners, can we say something about jamie dimon's trial? >> yes. you were pretty outspoken about how you thought this was a situation where he should keep both roles. what's astounding for people watching is the shareholders voted not only overwhelmingly for this, but fewer voted against him than a year ago when this same question was brought up. >> i know, and you know, andrew, in a piece last week pointed out a rift that's growing now basically in the governance community where some of the great guardians of the separation of roles have evolved

over time, although andrew, i'm very sorry that andrew's title was "peering victory." he won as big a vote as bob iger did. >> you're going to plead the fifth here? >> what does that remind us? >> does the headline say that? i can look. i'm pleading the fifth because -- >> it's in your dealbook. >> it says helping towards a challenge. is there that headline? >> want me to send it to you? >> you know what? we picked up a "breaking views" article. it was syndicated. we pick up outsiders. >> all right. >> that's what it is. >> all right, the devil made you do it but it appears under the "dealbook." >> >> that's right, it's on the dealbook site. >> the issue is this was never really about jamie dimon. looking at bob iger, mike white of directv, they're all slammed by the same iss, glass lewis and my wonderful state treasurer heef, denise lappeer and

caliper, we can talk about their own government if you want to, but they're attacking our strongest icons. like putting tim cook in congress yesterday. we should be celebrating apple and celebrating jamie dimon, the nation's most feared and revered foonseer. what did he do? he's brought us three years of historic returns. he's, of course, great profits again this past year. sure, they had a misstep, but it never affected any serious jeopardy for their balance sheet. why do they go after jamie dimon? because he's a big target. and a lot of ceos, i worry, are afraid of responding to you guys, coming on. there was a time where we couldn't get ceos to come on shows like this. they were thinking why step out? why be a public statesperson? you're only going to make a target of yourself. and i'm afraid some of them learned that sad, wrong lesson from this, because jamie makes himself a target? no. part of his job is engaging with public statesmanship. so, if this is the ceo, too, joe, i think you like that. >> jeff, my problem is that with you, we never -- you need to

come in for like a guest host, because i feel like that you have backup. you never really get it all out when you're on. you don't! i mean, right now we're cutting you off again and you've got more to say, don't you? and i feel like -- >> before you get to weiner, i can get there in two hours. i'll be there. >> i'm serious! we never get everything we need to get out of you. >> can i ask one final question? >> you have to use his co2 time? >> i apologize. we were on the same side on the jamie issue, but i talked to a thoughtful guy yesterday afternoon, and i was complaining about how shareholder democracy led to this process. and he said to me, sure, it led to this process, but ultimately, look, jamie dimon won, the process worked in that context, and also, you're going to see the jpmorgan board and management reform, and you'll probably see shifts over the next 12 months and to the extend that democracy worked it worked. that's what was said to me and i thought it was an interesting point and i wanted to get your thoughts on it. >> thanks. let's blow through the ad. that's too important a point. lose the money. this is an important topic. what's happened there is, yeah, they'll bring more experts on

the board, and that's what a lot of the governistas are calling for that. shareholder democracy, by the way, we're looking at a minority of highly vocal people, there's some pension fund leaders, plaintiff counsels some derivative shareholder lawsuits that create a lot of noise, but this is basically an interest group that has an ideological set or commercial set of issues in attacking big targets. but to bring in more financial experts? sure, but you name your problem. was mf global? every single person on that board was an independent expert on those highly risky securities and they couldn't figure out what was going on. freddie mac. when freddie mac went down, the whole board, the entire board was composed of experts in that once arcane field of, you know, of mortgage-backed securities. and in fact, when they got rid of the head of freddie mac, they went to the second in command because the board couldn't figure out the mathematics of their marketplace exposure, and they're all experts. a non expert sometimes raises the good question. mickey lemaitre was the cancer researcher on the enron board.

you read the transcripts there. he's saying wait a minute, these are not nonrecoursive loans, we have liability. maybe i'm the village idiot, but how can fasta be on both sides of the equation? all the financial experts say, oh, no, no. expertise is not what it's cracked up to be. it's easy to measure. just because it's easy to measure -- >> jeff, thank you very, very much. >> we had a limited window on that and we ran out at 25. you're right, we need to get him here to talk more about this. at least he got his point out before the window went down. jeff, thai for joining us. we will bring you back again in studio so that the window doesn't close on us. by the way, we have a programming note for you. ohio senator rob portman will be our special guest to talk about cook's testimony and tax code reform, coming up at 8:00 eastern time. coming up, why summer vacation plans at the u.s. oute makers could be good news for the bulls. but first, as we head to break, a look at yesterday's winners and losers. ♪

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welcome back, everybody. as you can see, u.s. equity futures are indicated slightly higher this morning. dow looks like it's indicated to open up by about ten points. yesterday the markets ended higher as well. and by the way, this was the 19th straight tuesday in a row for the s&p to be higher on a tuesday -- i'm sorry, for the dow to be higher on a tuesday. ninth for the s&p and the nasdaq. in our headlines this morning, automakers are changing their usual summer vacation plans because of maintenance and changes to machinery for new models. ford says that the traditional two-week summer break is being cut to a single week. gm isn't doing any shutdowns, and chrysler plans a two-week break at just four of its ten north american assembly plants. time for the weather now and the weather channel's reynolds wolf joins us now to tell us how things are shaping up. reynolds? >> i'll tell you, it's going to be a pretty nice day across parts of the central plains. they're certainly due for better weather. places like oklahoma city, where they're still cleaning up for some time, they can expect a fairly mild day. however, that does not mean the

severe weather threat's gone. let's show you quickly what we expect. could see strong storms developing along parts of the gulf coast and actually moving into portions of the great lakes and then into the northeast. severe storms possible by midday and into the afternoon for the great lakes. showers and storms moving into the southeast. nice and warm across the desert southwest. but as we get closer towards the weekend, we do anticipate the rain to stick around for parts of the northeast, some scattered showers in the northern plains and still warm for you in the desert southwest. what about delays? are we going to see any today? oh, yeah. we're going to see a few backups. where we can expect backups, possible backups would be in new york. might have scattered showers, maybe a boom of thunder, a better chance of seeing delays in spots like chicago and orlando, along the i-4 corridor. it will be some of the sea breeze thunderstorms that might keep you on the tarmac a little longer than you like, but hey, folks, you've got to deal with it. it's mother nature. let's send it back to you in the studio. >> all right, pretty boy, thank you. [ laughter ] >> you caught him. >> yeah, i did. >> aye-yi-yi. all right, guys. >> you know you are.

you've got it, flaunt it, reynolds. >> i guess so. >> don't run from it. coming up in global markets news, we're going to talk currencies and ask why some traders are disappointed by today's bank of japan decision. stay tuned. anybody know where flo is? are you flo? yes. is this the thing you gave my husband? well, yeah, yes. the "name your price" tool. you tell us the price you want to pay, and we give you a range of options to choose from. careful, though -- that kind of power can go to your head. that explains a lot. yo, buddy! i got this. gimme one, gimme one, gimme one! the power of the "name your price" tool. only from progressive. [ male announcer ] someone said that it couldn't be done.

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and where i can have exactly what i desire. ♪ nespresso. what else? two central bank stories this morning. ben bernanke will testify on capitol hill amid speculation about a possible tapering. meantime, the bank of japan kept its policy unchanged today. joining us from london, steve englander, citibank's strategy global head. is it me or as we get older, bernanke seems like he's always on capitol hill talking.

i guess time flies, is that it, steve? >> i guess it does. he hasn't about there for a while. he's going to have a hard act to follow, beginning that bullard and dudley preempted him with very dovish comments yesterday. so, it's going to be hard to see what he says that's going to be much more dovish than what they were presenting. >> that's never been a problem for him, though. and a lot of times, you know, while these guys, i don't think they coordinate what they say necessarily, and i think that part of the bernanke fed is to let everyone have a say and be very transparent, but he's probably very -- he's on the same page with these guys. you know, we are not at a point yet where unemployment is low enough or where inflation has gone up enough to where they're not going to keep doing it. i think that they think they're having a positive effect. i think they would disagree with people who say the effects, the more they do, the less effect you're seeing. hit a new high yesterday, steve. >> well, i think that they think that they're succeeding. they think that the market thinks they're succeeding.

it may not like the policies, but it's better to have policies that are somewhat dubious that succeed than policies that are somewhat dubious and don't succeed. you know, but they are clearly afraid of a premature backing up of bond yields, and i think that's what they're addressing. >> yeah. i mean, we need to get -- i would almost think that it might not just be unemployment. as long as we're growing below what they think that the growth rate that's possible is, as long as we're below that, i don't think that they see any negative effects to what's happening, unless you see some kind of move in the inflation numbers, right? >> right. and if anything, the inflation numbers are moving the wrong way. they're getting weaker, not stronger, so that's not a constraint on what they're doing. the only issue would be if they ever felt there was too much of a bulliance in financial markets and they have gone out of their way to say they haven't seen it yet. >> is there anything else that would be concerning right now on

the yield curve or in spreads around the world that would indicate that there is dislocations from all this money? >> you know, if you think an 8% bond yield, there could be some, you know, things that are disconcerting. i think what you're seeing is the effect of all this liquidity, assets that people wouldn't touch three, six months ago they're fighting to buy. what we call the risk premium has now become real expected return, so things are getting bid up. but i think all the central banks view that as success, not failure. >> yeah, and i made the point that everybody -- since we were first, we maybe got the best deal on debasing our currency. we got the highest prices for ours and everybody else has followed. so, it's not like the dollar hasn't weathered this pretty well versus the other currencies versus the euro, the yen. >> i think, you know, the fact that the u.s. looks like it's recovering moderately is better than not recovering at all, and

so i think it's encouraging the europeans to be more aggressive in terms of their liquidity provision. it's certainly encouraged the boj in its balance sheet expansion. but they are lagging. it would be months, maybe years before we see things really turn around in these regions, which is why the dollar's the most attractive right now. >> all right, steve, thank you. we appreciate it. thanks for your time this morning. >> pleasure. bye-bye now. >> see you. coming up, the stories everyone is buzzing about this morning, literally. buzzfeed is launching a new business section today. the editor's going to be joining us with a first look. he's going to be talking about some of the big headlines this morning, coming up after the break. ♪

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welcome back. u.s. equity futures flat. that's happening so far today. nice day yesterday. another tuesday making headlines. it is official, and i'm going to say this every time, and we're all the richer for it, i believe. anthony weiner announcing, because we can do that, announcing that he's running for mayor of new york city. this is a video posted on his website. he's a family guy. really, this is -- now we're all being part of his rehabilitation and his redemption. and, well, i don't have my commentary sign, so i can't really hold anything up, but he's back. the weiner is back. weiner's back and we're all the richer for it. kind of busy. i'm sorry?

what's going to happen, andrew? >> what? can s he going to win, you're saying? >> no. i'm embarrassed for new york. can't you do anything? >> i'm working on it. >> are you? >> i am trying to get an alternative candidate. >> please don't do this, because you've got some money left over. go away, huh? >> it's not my doing. >> no, can't you tell him, please don't do it. we know you have money left in your campaign. you don't have to use the money in your campaign coffers, do you? do something good with it. you're pleading the fifth? >> i'm pleading the fifth. i'm going to plead the fifth. >> what are you, temple or something? >> on this very busy story, which is my nice segue to the next story. >> you're really afraid to say -- >> no. i -- what am i supposed to say? >> you tell me. say something. let me hear it. what's your opinion on it? >> i'm not a fan. let's just leave it there, okay. >> all right, good. we're talking about things that are busy. buzzfeed is one of the hottest websites right now, even getting mentioned by president obama's at the white house correspondents dinner.

today they are taking anything to a new level, launching a highly anticipated business section. peter lorae is the editor of the buzzfeed business section. here's what i don't understand about buzzfeed, or maybe how you're approaching this, which is, i was always under the impression that buzzfeed's success is that they look, or you look, at things that are trending online and then you try to develop stories and develop content around the things that are trending to attract that audience. but what i never understood -- is that accurate? >> no, that's not exactly accurate. basically what buzzfeed does is it's set up to kind of create content that will go out into social media and be shared. >> be viral. >> yes, exactly, be viral. so, when you're looking on twitter and you're seeing stuff, what you're saying presupposes that we're making editorial decisions based on what people are talking about. ideally, we'll put stories out in the morning that are the ones that are driving the news cycle and that are getting people to

talk. rather than responding to what other people are commenting about, we want them to be commenting about our pieces. >> what kind of stuff will we see on buzzfeed that we don't see for example in the "wall street journal" or "the new york times" or "business insider" or "deal-breaker"? where do you fit into this world? >> well, the stuff you're going to kind of see on buzzfeed business is the same type of stuff you'll see there. we want coops. it's a scoop-driven business vertical, and you and i go back a long way. you know that i break news and -- >> at the "new york post," this guy was a rock star. >> thank you very much. i appreciate it. so, carrying that ethos over to buzzfeed. we want scoops that are going to move news. we want smart, contextual analysis. we want people to look at buzzfeed business and say oh, that's a really smart take on what's going on. that should have been in the "journal," should have been in "deal book," and we wanted to layer humor on top of it and present business news in a way that doesn't have to be so dry. so it's a combination of things. >> the big part of it that draws you in, you can be a little more irrev rant in this world? >> look, i made my bones at "the

new york times." i have a tabloid streak in me, for sure, but we can't be all jokes all the time. if we are, after three weeks, the novelty wears off and people don't start coming to us. what was he really want to be is scoop-driven reporting, and we actually started off with a big bang today with two exclusives, one on abercrombie & fitch and one on a wul street brokerage house. >> let's go through the wall street brokerage house, john thomas financial. this is an exclusive. you got an instruction manual of how brokers should approach clients. >> right, right. >> i don't know if you got anything like this, but -- >> this is good. >> one of the scenarios that they paint in the book is speak to -- what does this mean? speak to my wife. don't pitch the bitch. >> so, basically, wall street as everybody knows is a testosterone-driven environment, very macho environment and that's instructing brokers at the firm, if you're calling up a client, say you answer the phone or joe answers the phone and

you're pitching a stock and you say, i'm not sure, maybe i want to talk to my wife about it. they're instructed to avoid -- >> that's what i always say because i want to get off the phone. >> in that case, it's actually true because she makes all the decisions. >> not at your house -- >> yeah, at my house, too, definitely. that was always a -- there were different ideas of which way to approach that. it's probably not good to say who wears the pants in your family or -- there's different approaches. what's the approach that you're seeing works better? go ahead and talk to her? >> no, they try and, like at all costs, keep the client on the phone and avoid talking to the wife. >> oh, yeah. >> and don't get her on the phone. kind of, come on, you make the decisions in the household. if you go talk to her and tell me you're going to call me back tomorrow, you're really not going to do that. >> peter, i can help you on this, because you start off everything with, i understand how you feel. many of my clients have felt that way in the past, but they have found -- and then you use your, like, people get into this, you can almost hypnotize them with this closing, this disgusting, you know, closing. it's almost zig zigler, who

recently died, or w. clements stone or dale carnegie. there's all these ways to counter objections, and you're really just -- supposedly, objections are all things that really people are just, they want to buy, they just feel like they have to give them and then you have to overcome them all and then they finally buy. >> it's not unlike an approach a journalist takes talking to a pr person about a negative story they're going to do about their company, right? i understand how you feel. however, we have all these sources and we're going to put the story out and you're not going to like it. >> that's peter lauria. >> that is the man. >> what is the slap and hug? >> so, the slap and hug is when you get a client on the phone and they show some hesitation -- oh, i'm not really show, i'm not sure i have the funds right now. it's like, oh, come on, you want to make money, don't you? you don't want to miss this opportunity. then, tell me what's really bothering you. >> you slap them around a little bit and then give them the hug. >> you get to play good cop and bad cop. >> yeah, yeah, exactly. >> tell us quickly about this

abercrombie story, because it's interesting. >> so you know mike jefferies has been in the news a lot lately for some of his comments. >> ceo of abercrombie & fitch. >> ceo of abercrombie & fitch. i personally love corporate culture types of stories and what's really going on in the executive suite and what's going on now. and this story takes us really inside abercrombie & fitch. and evidently, there's a contingent of executives there that are really concerned about the growing influence or the power that mike jefferies's parter -- they've been in app openly gay relationship, that his partner's wielding at the firm. >> in terms of what, what decisions? >> according to the jefferies family office, he's leading the real estate firm, especially internationally, and that's not really going so well. he walks around the store as enforcer. jefferies is very quirky, can't have stickers on your cabinets, and smith walks around to enforce that. >> and the partner's not on the payroll? >> not on the payroll at all. as a matter of fact, abercrombie's statement to us is that's why they don't disclose

it in regulatory filings or anything like that. >> do they deny the story? >> well, what was interesting was other than saying that he's not on the payroll, they declined to comment on any of what were very specific questions we put to him about smith's role. >> peter, very buzzy. we'll be watching buzz feed's new business. >> thank you so much. appreciate it. >> thank you. >> thank you, guys. when we come back, we're going to talk about why pesticides are making a comeback. and then at the top of the hour, we have gary parr, his take on europe, the fed, markets and much more. stick around, "squawk box" will be right back. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet...

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welcome back, everybody, we're in the chairs taking a look at the stories that caught our attention this morning. i don't know if you saw it. but there was a story on the marketplace section talking about how pesticide is on the rise. . for pesticides they use on crops, good news for the makers of pesticide. those include american vanguard. it used to be you didn't need them as much. you didn't need all these pesticides because the genetically modified crops from monsanto took care of it themselves. they released their own toxins

against some of these bugs that were out there to get them. but the bugs have been overcoming them and have been getting around the pesticide seeds. they're not as effective as they used to be. as a result, pesticides are on the rise. i thought that was interesting. >> bad news for -- >> bad news for monsanto. >> bad news for the pests, that's what i was thinking. >> oh, for the pesticide? >> no, for the pests themselves. >> they're becoming resistant to this genetically modified crops but now they're going to get killed. >> it's not good. >> what have you got there? >> sergio. what an idiot. this is tiger, on the cover of "the post." it goes back to the players championship where tiger and they went back and forth about remember -- >> i did see this. >> whether he was trying to disrupt sergio. and they've been back and forth. >> the officials have too. >> no, the officials actually -- i don't know -- >> there were two sets -- >> there were guys with tiger. but sergio keeps popping off and

they don't like each other, obviously, saying tiger's been lying to the media for 15 years. now this moron brought up, we'll have tiger around and keep serving fried chicken. >> are you kidding? >> i swear. >> that's what he said. >> just like when he almost got run out of golf. and, i know he's spanish, maybe it doesn't translate or something. >> that is ridiculous. >> idiot. and they don't have the same history, i guess, we have here with, you know, with race and everything. but you've got to be pretty -- and you know what sergio's number of major, tiger's at 14 or 15 majors, you know what sergio's numbers of majors are? >> zero. >> zero. zero. so, you know, that's where the rubber meets the road. >> take a look at new york post. a great illustration. jamie dimon as superman and

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the health of the banking industry. our guest host this hour, gary parr, vice chairman of lazard. >> a rare television interview. and he's back. >> i'm running for mayor because i've been fighting for the middle class and those struggling to make it my entire life. >> anthony weiner. making it official, he plans to run for mayor of new york city. "squawk box" begins right now.

♪ good morning and welcome to "squawk box" here on cnbc. along with becky quick and a censored joe kernan. we should explain what happened here. >> earlier just now i said in this i already referenced i said and we're all the richer for it and you saw it, they cut it out. they edited out and we're all the richer for it that anthony weiner is back. >> they can't sensor me, they'd like to when i'm live. i will not be silenced. >> shut off his mike, keep talking. >> okay. there's a censored joe kernan for you. taking the fifth. see how the marks are setting themselves up for the day. nasdaq and s&p 500, we'll call it marginally up. investors getting set for a heavy dose of fed speak today, fed chairman ben bernanke, he's going to be testifying before the joint economic committee of congress starting.

that's at 10:00 eastern time. then at 2:00 eastern time, the fed is going to be releasing the minutes from the most recent policy meeting. we'll bring you that as it comes. home improvement retailer, lowe's, reporting first quarter profit of 49 cents a share. lowe's is saying that a colder than normal spring impacted its results. it did benefit from an improving housing market. that's a contrast, we should say to the upbeat quarter reported by rival home depot yesterday. ford is shortening the time it idles some of the factories this summer in response to increasing demand. 21 of its factories will shut off for only one week this summer instead of the usual two. similar moves are already in place to gm, which won't be shutting factories at all. and chrysler where only 4 of 10 north american plants will take a two-week break. now let's get some more on the latest on the tornado aftermath in oklahoma. cnbc's jane wells joins us on the ground there live. jane? >> hey, andrew, two years to the

day after that horrific joplin, missouri, tornado, the folks here in moore, oklahoma, are cleaning up after their tornado which has been upgraded to an ef-5. we'll show you the latest video as the cleanup continues. the dead stands at 24 plus two who were killed in a tornado in oklahoma on sunday, injured, 237, mostly from cuts or piercings, almost 20,000 people without power and they are expecting they're going to have to feed up to 40,000 people who have been displaced. as we show you some video of the final searching that has been going on here. they brought in cadaver dogs yesterday, particularly over at the plaza towers elementary school where seven children died. they were just making one final check to make sure no one was in there and they are pretty confident that the search there is completed. then there was the aerial tour. if we show that to you now, the governor took a tour just to see how devastating it is. and even for someone like her, with a disaster declared and

five counties in oklahoma to bring in new resources, she was surprised at just how vast the damage has been. listen. >> it's been an horrific experience. the debris field is very wide. two miles wide, 17 miles long, we're not talking about a couple of blocks of a neighborhood that got hit, we're talking about couple miles of a neighborhood that got hit along with the school itself, plus the businesses alongside there. and just to see the tremendous destruction and the force of the tornado itself, the cars that are thrown around. i saw an engine out of a car a few moments ago, and certainly these homes show the force of what people were trying to cope with that were in their homes when the storm struck. >> now, there are over 120 national guards, people here. they are saying they have enough first responders on scene, they don't need more volunteers.

and also at this point, the latest numbers, over 300 people staying in red cross shelters. they've even set up special areas here for animals who have been found that need to be reconnected with their owners. that is all starting to get underway here. but, of course, this mess here on sixth street, for example, is going to take a long time. >> jane, thank you very much. again, that's our jane wells who is live in oklahoma with more on the story. we will be back with her a little later this morning. also, in some of our corporate news this morning, sony ceo says his company will assess a proposal from dan loeb, calling for sony to spin off some of the businesses. in the meantime, sony is cutting sales targets by 13% to 17%. but it says there are encouraging signs of revival and electronics business. shares of sony up 6% on word that the company is considering that proposal from loeb. >> i think dan got in to this company around $12 a share. at this point, even if nothing

happens, he's made a pretty penny. >> among the last couple of things he did himself, right. that's the way to work it. get it moving a little and he may be selling by now. >> i think it's tough -- i think it's tough to go to japan, hand over a letter allowing you to do xy and z and then cut and run. i think he's in it for a while. >> these guys are, in general, brimming with ethics and would never do anything untorrid like that. most hedge fund guys. >> i'm not talking about him, i'm talking about in general. things like that do happen. >> are you trying to besmirch the entire audience. >> sadly that is like the entire audience. among the other stories, tim cook's testimony on capitol hill, grilled over the allegation that apple's irish subsidiaries helped the company avoid billions in taxes.

>> apple has real operations in real places with apple employees selling real products to real customers. we pay all of the taxes we owe every single dollar. we don't stash money on some caribbean island. >> ohio senator rob portman will be our special guest to talk about cook's testimony and tax code reform which i'm hoping this does it. that, of course, i don't know how many people watch that either yesterday. you know, i watch what comes on at -- like after the nightly news at 7:00. i watch the stories that are coming on. and they may be -- i don't know who owns it. but what people are interested in, it's not corporate tax reform, unfortunately. >> access hollywood at 7:00. >> it's access hollywood and it is just, man, i cannot -- it's

good and people like it, i know, but if the remote control. i start panicking if i can't find the remote control. it starts going into my ears. >> i'm worried about the kids finding this stuff. >> i'm worried about me hearing it. and the other -- yeah, put on jeopardy. and the other corporate leader on the hot seat, jamie dimon, winning a shareholder vote to keep the chairman and ceo titles at the bank. wasn't even close. >> not even close. >> spent a lot of time talking about it. and i hope that all of the sanctimonious self-righteous people on the other side, i hope it hurts today. how does that feel? 32%. because the shareholders are ultimately the only people that should be concerned. and they supposedly represent the shareholders, which if they do represent the shareholders, maybe they ought to represent the shareholders.

>> our guest host is -- >> they actually provoked many shareholders to actually think about it this year than last year. >> that's fine. >> the vote was more favorable to jamie this year than the prior year. good for them. got everybody thinking. >> and we had the ubs guy on saying aren't they required by law? >> they have to split it. >> at least we'll keep it in this country, hopefully in the domain of what shareholders decide to do with the company of what they own. >> absolutely. >> our guest host today is gary parr. and, gary, you deal with some of these issues. you advise. >> we do. we do. and on this one, it's good example of form over substance. the corporate governance vigilantes, they go around one to another with these forms. they say this is the way it should be. and the substance ought to be what applies right to each company and each situation. so in this instance, they pick the wrong company to apply a

certain form to. because in this company, jamie's a great ceo with a great track record and there's a very strong independent director. so the form is there. and so they just picked the wrong place to go. i think it was useful that the shareholders fought. >> did it change the conversation? not around jpmorgan. does this change the conversation broadly around the type of proxy fights and other things you're going to see over the next year or two among both the isss of the world and all these big pension funds? are they going to let up or continue? >> my guess is they will continue. there's a group and truly the vigilante group they believe strongly in the form. i will say over the last several years, a lot of corporations, companies are thinking much more thoroughly about what's the right model for us. in substance, what's the right thing to fit this company? so that's a much more active discussion and that's healthy. >> you saw the wells fargo -- we bought wachovia, so we had all

this stuff to do. so we wanted to have him stay on, we split it up for a little while, split it up for a while. and then once it was done, we gave the chairman back to stump. >> it was split at jpmorgan. >> right. >> i advised jamie dimon, advising bank one in one of the critical parts of the merger, let's create a transition so split title for a time and then back. >> i could see a transition to jpmorgan in the future to the extent if jamie chooses to leave. >> successor. >> you might want him as the chairman and to help with the transition. >> exactly. >> well, gary, we brought you here to talk about banks and some of the situations you've seen. you say at this point, this is almost like survival of the fittest at this point. >> there's an element. darwin, we all know the environment has changed dramatically, whether it's regulation, capital requirements and otherwise. and i find it surprising that a lot of banks are not changing as rapidly as they should.

and so you end up, instead, with a darwinian exercise, and that is survival of the fittest. those who are well-positioned gaining market share, many losing market share. and doing it by default. there are a number of management team managing, more like this is a cycle, another cycle like the prior four cycles, and it's not. >> what is different about this time? >> one, the capital requirements are so different, what used to be capital intensive were not capital intensive. basically a big leveraged hedge fund. many of the investment banks were highly levered. it was a carry trade. the carry trade is gone. and you've got to really change how you think about your firm. one is they ought to be shifting, those who have strong relationships wherever they have them, they have to focus on relationships. because that creates an agency business, not a principal business. the other is technology. a lot of these firms have great technology that they should be levering in the exchange space and custody and clearing. there are a lot of services that are good. but the traditional send out a

banker lending money and using the balance sheet to win business is a bad business. >> who is at the head of the pack? and who is going to get cold? >> the firming gaining share and not a surprise. in the full service investment banks, jpmorgan, are gaining meaningful share. they have relationships, global presence. that's full service banks. in the full service securities firm, goldman sachs gaining market share. and, actually, i'll take another category. in the global independent advisory firms, lazard. we happen to be one of the beneficiaries of these trends. but those are the categories. some regional banks, if they really retrench back into where they are regional. they could be fine within country. but the aspirations of being a global firm would be a terrible aspiration. would be a terrible business plan. >> who are some of the big firms. what are some of the big firms that have not kept pace surprisingly? >> any of the big ones that still say they want to be a global firm and they're not amongst the top four or five.

i guess we'll only be five or six or seven firms that can truly be global. there are some that are exiting rbs are exiting some lines of business. both fringe banks exiting some number of lines, and u.s., as well. but on a number of those, it surprises me that they haven't been more rapid in making their changes. where are their strengths? and what should they be exiting? >> how do you measure your former employer. before you were at lazard, you were at morgan stanley for many, many years. they transferred to a different model. >> they are. i'm a big fan of morgan stanley. it was a great firm and still is, but i would say the following, morgan stanley built up over a period of about 15 years a very big fixed income presence, foreign exchange, and, again, it was in a sense the leverage rate. it was a highly levered balance sheet, not as levered as others, but levered. and that environment's changed. so they are going through a -- what needs to be a relatively

rapid change, and that's away from dependency on fixed income, more to equities, agency, the high net worth. they're doing it and they're still in the midst of that transition would be my observation. they're not there yet as to where -- >> you don't know if it's working? >> i think it's in the middle. too early to tell. >> okay. >> gary's going to be with us for the rest of the hour. we do have a lot more to talk about with him. stick around. >> stay where you are. coming up, crowd funding to the rescue. we talk about the trend in relationship to small start-ups. now individuals are turning to the internet to pull money for tornado recovery efforts. proud company behind one campaign joining us with the details after the break. flying is old hat for business travelers. the act of soaring across an ocean

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the deadly tornado that ripped through oklahoma has americans coming together to raise money for the relief effort. one way they're doing this is through crowd funding. and one platform helping people launch fund raising efforts is called fundley and the company's

ceo and also an oklahoma native. i have to pretend like i know exactly how this works, dave. so let me ask you, if you were to explain it to people who don't know, how would you explain it? >> yeah, thanks. i am an oklahoma native. i was one of the kids lined up in the hallway listening to sirens, just waiting, hoping nothing terrible happened. my heart goes out to my friends and family in oklahoma. now it's time to rebuild and the way crowd funding works is literally the ability to set up a website within a minute. takes probably five minutes to get videos uploaded, text uploaded, you can raise money for your friends connected into your facebook, twitter, connected into your e-mail so that you can literally be taking credit cards within five minutes and go to the crowd, your friends, the social network and have them contribute and help fill in needs. right now it's for reconstruction on the ground

maybe to fill in between the cracks of the things that the large national organizations haven't gotten to yet. family recovery, church recovery, neighborhood organizations. we've seen unions. we've seen professional associations, all trying to raise money to help their own on the ground in oklahoma. >> 500,000 already. in 24 hours. >> yeah, the first 24 hours. it was -- this is actually a faster response than we saw for hurricane sandy or the boston bombing victims. $500,000. i know we'll hit over $1 million. we've got a couple dozen campaigns raising money. >> that was it in 24 hours. you must be near a million already, aren't you? >> yeah, i think we'll hit 1 million today. we're over 900,000 aggregate. and 2 million was about the clip that we hit on some of those others. i bet we'll hit three this time. >> what do we need to show on the screen so that we can even do more?

>> well, it's disaster-relief.fundly.com. that's where we're campaigns we've noticed. >> disaster-relief.fundly.com. it's amazing what you say as an oklahoma native, in that alley. i haven't spent a lot of time, but the one time i drove through it, i was trying to stay ahead of one, i lost a hat, i had two dogs with me. and while i was out, i lost a hat. >> i spent eight years in oklahoma as a kid. and i did the same thing dave did. >> i remember vividly the big one that hit. and i remember where i was and so i could -- like i would know the date. anyway, thank you, dave. and we hope we help here. and we appreciate it. it's very interesting how you're doing it. >> thanks a lot for having me. the people of oklahoma are strong, they will recover. >> all right. thank you. still to come this morning

on "squawk," peter may. we're going to find out what he makes of the markets. the economy and the fed. time now for today's aflac trivia question. what hobby did sherlock holmes pursue after he retired from crime solving? the answer when cnbc "squawk box" continues. ht. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪ you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes at ducktherapy.com. [ male announcer ] see what's happening behind the scenes your chance to rise and shine. with centurylink as your trusted technology partner,

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now the answer to today's aflac trivia question. what hobby did sherlock holmes pursue after he retired from crime solving? the answer, bee keeping. welcome back to "squawk." if you have kids, our next story is going to come as no surprise. a new poll finding that twitter is booming. the social media destination has become the choice for teenagers. the reason for the change, teens are complaining about too many adults and too much drama, too much drama on facebook. 94% of teens who are social media users have a profile on facebook that's flat from the previous year, 26% of teens say that social media users were on twitter. and that's more than double the figure in 2011.

>> but it's 94%. how do you build from 94%? >> it's hard to build. i agree, sort of like coca-cola, every corner of the world. you can't keep building. but we hea anecdote tally. when we come back, we're going to find out where the two are putting money to work. stay tuned for peter and a lot more when we return. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. [ male announcer ] a car that can actually see like a human

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welcome back to "squawk box," everyone. in our headlines, ben bernanke has a date with congress this morning. he'll be testifying before the joint economic committee. that begins at 10:00 eastern time and you will see his appearance right here on cnbc. we'll also be getting a press read on the housing market this morning with the national association of realtors out with the existing home sales for april. analysts are expecting a slight increase to an annual rate of about 5 million units. and mortgage applications fell by 9.8% last week. according to the mortgage bankers association that was led by a drop in refinancing activity as interest rates spiked. yeah, we'll put quotes around that one.

>> thank you, becky. he is a founding father of one of the most successful activist firms. i don't think you like the phrase activist. though, he prefers the term constructivist. >> correct. >> peter may is president and founding partner, joins us onset this morning for a rare and exclusive interview and, of course, a partner of nelson pelt's who we've had on the program a number of times. >> happy to be here. >> let's get this straight on the activist versus constructivist phrase. i think you're the first person to say he's a constructivist. is that to separate yourself from the others? when you think of -- when i think of activist, i think of carl icahn, bill ackman, sony this morning. >> well, i think they're all very smart guys, all good friends. that i think they're all very intelligent and have their own way of doing things. the reason we call ourselves constructivists and that name was given to us by one of our

investors is that our view is that we focus on the operating side of the business. and so we're looking to make investments in companies that essentially are underperforming, and we focus on helping them build value by improvinge inon income statement. we have a saying in our organization, you find a dollar on the balance sheet, it's great, and we don't walk away from that. you find a dollar on the income statement, it's a recurring amount. you don't pay for it and it keeps oncoming back. so it builds value over the long-term whereas a balance sheet transaction is a one-shot thing creates value, sometimes it can weaken a company whereas if you improve the company by improving its margins and improving its business, you'd do much better. >> where would you put dan loeb in that? and the reason i ask, he's gotten involved in yahoo and now

getting involved in sony. got himself on the board. sort of an operator. and then you have people like bill ackman who got himself on the board of jc penney, probably not as constructive in that situation. how do you weigh all of that? >> i think there's been a change. i think that the kind of things we've been doing and frankly nelson and i have been doing it before we started trian partners, which was in 2005, we've been doing it through investing in public companies where we felt we could improve them while they stayed public, a difference from where private equity works where they believe you have to take it private. but the difference is, i think that people have morphed more into focusing on what we're doing and i think dan loeb, his move at sony is a very interesting one. >> it's a lot harder to have income statement. you know, you've got to improve, you have to improve the company. it's better to do some financial mumbojumbo. i've got to do target, i'm sorry.

target should be trading higher. sorry to interrupt. we'll get right back. but looks like $1.05, which is well above 80 cents. >> weaker than expected sales during the quarter because of some things that were related to the weather. >> the outlook for the next quarter is fine. they're looking, the estimates $1.06 and they're talking about $1.09 for the full year. >> the gap number was 77. >> but gap is meaningless. 4.70 for 4.90 for the full year and they're at 4.48. >> they said as a result of soft sales and seasonal related -- >> why is it $1.05? weird. for first quarter sales? >> no, first quarter earnings. >> really. >> yeah. i don't know what the analysts were counting. some of the stuff in that adjusted numbers. there were canadian stores they opened. 24 canadian stores. they say their first quarter earnings were below as a result of softer than expected sales, particularly in apparel and other seasonal and weather

sensitive categories. we are disappointed in our first quarter performance, but they say they remain confident in the strategy and continue investing in initiatives like the canada stores. i'm looking really quickly. u.s. first quarter sales were up 0.5%, and that -- there was a decline, though, in comp store sales of 0.6%. that explains a little bit of how weak things were. >> what do you see in the economy? what do you see in the economy when you see numbers like this which aren't exactly thrilling? >> i think the economy is a bifurcated one. there are a lot of parts that are stronger, the housing market seems to be coming back and that's impacting a lot of the industrial businesses. the u.s. is certainly stronger than the rest of the world. but i think there's still an enormous amount of uncertainty because the government still hasn't figured out where it's going in terms of sequestration and all the other budget issues.

and i think until the uncertainty, the economy's going to be soft but still getting better over the long-term and the u.s., europe, we know how difficult it is and the rest of the world is. >> here is -- but still for the fiscal year, they've got for 2014, analysts at 4.48, but they're saying they're down to, what was the numbers? down from 4.85 to 5.05. the prior guidance it says was 4.85 to 5.05 and now they've lower it down 4.70 to 4.90. i don't know why the first call consensus would be 4.48. and adjusted is what you compare. you don't do gap. >> i'm just reading -- >> yeah, i don't understand it. and now the stock is down about $1. but the difference would be that analysts are aware -- >> are aware of what the charges are. and probably knew about the canadian stores and the charges. >> maybe. >> gary? >> i'm curious, just because we

see it as advisers, and peter sees it as an investor. and peter, over the years, have you seen the change in the way corporations are responding? or thinking about their more vocal investors now? >> no question. i think that governance and it goes back from when sarbanes-oxley came in, which put the bedroom more on focus in representing shareholders and not simply being part of the ceo's buddy team. i think boards are very responsive today and i don't think that they can just have a knee-jerk reaction to say i'm not interested in what a shareholder has to say or to -- or to just give us the heisman. >> gary talks about the vigilantes, we've been talking about jpmorgan this morning and that vote. there's a whole contingent out there that's now pushing for certain changes that seem to be sort of check the box, paint by

numbers situation. >> yeah, i think you can't do that. you have to take each situation as it is. the jamie dimon thing -- for jamie dimon to lose the vote. i was so thrilled to see the results. for him to lose the vote would have been a vote of no confidence no matter what people said. i saw yesterday, some people on your show talking about we're not against jamie dimon, it's a structural thing. that's not the time to do it. the idea of separating the board and the ceo in many cases means -- is meaningful. the only time to really do it is when you bring in a new ceo and then you can do it structurally. you can't do it when somebody's got that title because it's a vote of no confidence. >> let's talk about your investments. what do we make adds vieweas vi of this investment? >> that's one thing i can't talk about. i can say pepsi put out an announcement after we became public with our investment and we have over $1.4 billion invested in pepsi.

they put out an announcement saying they're working with us. >> dialogue. >> having constructive dialogue and that's all i can say about it. >> on the other side can you say something? >> not a thing. >> we're not going to be able to read too much into -- that's the one situation we all want to know about. >> just watch the space. >> watch the space. >> most of the companies you're in are basically consumer goods. >> well, a lot of them are, we're investors in lazard, we're investors in leg mason and ingersoll rand. i think the consumer is starting to feel a little better. the american consumer is starting to feel better. we see that in most of our businesses. >> did the payroll tax change? did that affect things? or are we strong enough to absorb some of these changes? >> i think there was an initial effect. i think one of our investments is family dollar and i think the dollar stores, wendy's, the

whole fast food industry saw a little bit of softening, wendy's has been doing really well compared to its peers. but there's been a little bit of softening at the lower end where people are watching every penny. i think they're working their way through that now. >> when you look at all these investments, do you need to be on the board? how important is it for you to be on the board? >> totally depends on the situation. there are times where you can have great relationships in the case of lazard. we have a terrific relationship with the firm. we're not on the board. we have no need or desire to be on the board. we have just good dialogue with management. there are other times where we feel that in order to really get the attention of the ceo and get management to really pay attention to our program and our plans, which are very detailed, then we should be on the board. >> do you believe investors and warren buffett and bill ackman and carl icahn, and i believe your firm over the years has used this before.

when you make an investment, occasionally you go to the sec and say, look, we don't want to tell the world about our investment at this moment. we need a little bit of extra time before it goes public. do you think that makes sense in this day in age? >> well, the only way the sec really lets you do that is as you're accumulating stock. and i think that's -- we go and ask for confidentiality only because there are reports every quarter. so you have to report your share holdings at the end of a quarter. and if you're in the middle of building a position, in our view, in our business, the most important thing is to build a position, then meet with management, tell them what your plans are and in some cases, we never go public with our investment and in other cases, we then do go public. but the reason to keep it confidential is while you're building that position. >> you're not a constructionist. do you believe in the concept. i don't think that's a word. is it? did you make that up? >> it was given to us. >> sounds like you're a

constructionist. >> constructionist? >> sounds like you're scalia or something. >> i wouldn't go that far. >> strict interpretation of a legal document. >> i'd rather not get into that. >> i understand. constructivist. activist, you're just trying to -- >> i think it's less today. i think the investing community. everybody's looking for alpha. and so i think the investment community is starting to recognize that people who can have influence over companies improving is a really good way of investing behind that theme. there aren't that many people who have the backgrounds that we have. our background is as running as operators, businesses, and that dna filters through our entire organization. we have a very deep bench for people who know that. >> with the exception of you guys, if you were the ceo of a lot of these companies, would you actually listen to them? >> absolutely.

>> or would you say talk to the hand? >> no, i would absolutely listen to them and hear what they have to say. we call it the power of the argument. if the argument is right, if our white paper has the right information, that's great. if they're, you know, sometimes if they say lever up the company and give buy back stock and six months later, the company runs into trouble, that's a problem. >> even, andrew, we as advisers, one of the important things this has changed in the landscape, the reason i asked earlier, a lot of companies realized shareholders are willing to be vocal and a lot of big institutional investors follow that advice if it's good advice. and they realize there's a larger shareholder base they realize. companies need to be proactive earlier. if you can build value, lasting value in your company, you ought to get on with it and do it. and i'd make the observation -- >> that all the activists, i don't think any of the activists claim to be balance sheet manipulators. they claim to be income statement. the whole election was about

whether romney was a balance sheet guy. did he improve, was it financial? >> other shareholders have gotten a lot more savvy when it comes to distinguishing? >> i agree. but i think the level of sophistication and this idea of just balance sheet engineering, financial engineering is not -- >> it comes down to what your thesis is. we do an enormous amount of work. we have the support. the reason we're successful with very large companies like heinz and craft and companies like that, we have the support of the large institutions and mutual funds who are frustrated, but they can't be active. but it has to do with the argument. >> he has a statement -- >> yeah, never mind. there i go again. >> they're playing the music. >> up next -- >> my pleasure. >> say hi to nelson. >> i sure will. >> our trading block this morning, focusing on the rally in equities and the economic recovery. then at 8:00 a.m., senator rob portman from the great state of

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and talk about the equities. joining us now, head of investments for north america city private bank. oversees more than $270 billion in assets, and bruce kazman, global economist at jpmorgan chase. let me start with you, bruce, i'd like to just start with someone who knows about equities. when the fed has this much to do with equities, we should start with an economist, i think. i don't expect anything new today. they're not going to taper for a while, right? >> yeah. i think bernanke is pretty much going to keep the course here and tell us that the fed is open-minded. it's feeling a little better about the economy. he's not going to send any signal about tapering or anything broader about monetary policy at this stage. and i think the fed is still quite a few months away from beginning the tapering process. >> and, it's a different era that we're in with so much fed action. but in the past, it paid like in the '80s and '90s not to

question why the market was going higher and say this is not a real rally supported by anything. anyone that has used the idea that this is all fed orchestrated, they sat there and not made any money that everybody else. does it matter why the market's going up? >> yeah, it does. and the biggest effect of the fed is not yet so much on economic growth. not yet on jobs, it's really been on reduction in uncertainty. and that's helped to lift asset values higher. so we think now bonds and stocks are pretty fully valued and people have to be selective about where they're looking for returns. >> is the idea of passing the baton -- for a while they get the wealth effect, the stock market, asset appreciation. but doesn't that filter and become self-fulfilling in the economy and they eventually end up improving the economy? >> well, with fiscal policy on the sidelines with political gridlock and the like -- >> is that good or bad? >> well, it's a mixed -- mixed blessing. >> depends on where you stand.

>> well, i would say it was good that fed has taken this action. and as you say, they're not going to be able to carry the economy all the way back. >> would you like -- like i've asked people. let's say that nancy comes back in, 2014, boom, fiscal problems, they are solved. everything that the president wants, he gets because there's a democratic senate and a democratic house. no more gridlock. is that good? >> not necessarily, right. so i think that the market -- >> all right. wouldn't be just the fed at that point. they could do everything they wanted. >> if people from that kind of outcome are thinking about loss of fiscal discipline, that would be a negative signal for the market. i think some balance but some progress on the budget deficit, which we're getting. maybe a little bit accidentally with some of the reductions and i'll look for the budget deficit. but more progress on spending, i think, would be helpful. >> where are you, bruce? some people say, wow, it's nice that it's just the fed. these other guys haven't been able to screw anything up for

the past year. >> i would just take a broader global view here and emphasize that uncertainty as we've removed tail risks, we've seen the bank of japan moving in a more constructive fashion and as we've seen, i think more importantly on the u.s., it's not about what policies get done here, but the risk that policy makers do something very damaging has gone down. and what's that doing is allowing global monetary policy that's easy to get a lot more traction. and we should look at this as a much broader global event playing out and gives us the leverage to feel somewhat better than where we're going to be on growth six months from now. >> where will we be on the ten year in six months? >> in our forecast, i think the u.s. is going to be grinding. i'd say somewhere in the mid twos on gdp. if we're right and the fed is beginning to taper toward the end of the year, we think the end of the year ten-year yields will be 2.5%. >> whoa. okay. you figure they taper by the end of the year? you think so? >> they start tapering.

>> yeah, we could see bond yields, ten-year in low twos. >> you think so? >> 2.5% to 3% on gdp. >> i don't know about, it's interesting, you touched on the confidence question. and a lot of confidence certainly in search of yield, in search of investment alternatives. it has not moved into the ceo suite yet and that is we see, for example, capital expenditures or merger and acquisition activity. m&a activity is flat. >> it is. >> confidence. from their point of view, what could happen in washington has major implications on their corporate decisions, which are longer term decisions. so short-term decision, should i buy a stock versus a bond. >> they do it in spite of themselves. >> yes. but that may be, but this uncertainty, and i have to tell you, it's a high degree of uncertainty in europe. but even in the u.s., it's holding back. m&a is a good barometer of what are ceos thinking.

that's still flat. the market's back at a peak, m&a's half of what it was at its peak. >> in the form of dividend increases and share buy backs. >> exactly. >> bruce. i introduced you, you're jpmorgan, no, right? >> yes, i'm jpmorgan. >> so you wanted to split the roles. i remember you saying something. that was bad for you yesterday, wasn't it? where were you on the issue? >> i'm not going to comment on that. >> kidding. >> i do want to say, if i can, that corporates are caution here, but in the last 18 months, we've been running 200,000 on private payrolls a month. corporates are providing fuel, labor costs are cheap. it's not a world where corporates are booming, but the incremental move is supporting growth against a fiscal drag. >> i mean, i would just say best ceo -- best bank ceo in the business is all you had to say. i'll give you one more chance to say that if you want. >> i have a lot of confidence in

jamie dimon, i'll leave it there. >> thank you. there you go. thanks, steven. when we come back, we have some parting shots from our guest host gary parr. plus, the animal orchestra has competition. we'll have more on that right after this break. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. nespresso. where there is an espresso to match my every mood.

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>> there it is. >> this is what gary brought with him. >> it is. you're okay with it. you like the animal orchestra. >> i perform in orchestra. >> one of the things i want to bring up with you before you go, the changes to the tax code, there are a lot of talks on everything we saw from tim cook yesterday probably puts what's happening with corporates in the spotlight. but you're concerned about what may or may not happen with the deductions for charitable giving. >> charitable deductions, yeah. involved in some number of philanthropi philanthropies. but whether someone's interested in the religious organization, university, schools, hospitals, whatever it might be, the various plans that cap, put a cap on the charitable deductions, the obama proposal that it would be capped at 28%, for someone that has a 39.6% marginal tax rate, when they have $100 come in of income, if

they want to give away $100, previously they'd have $100, under the obama plan, $12 goes to the government and only have $88 to give away. it's deeply concerning money going into washington -- >> not to the charity. >> not to the charity, but washington decides where it goes. >> we'd love to have you back again soon. thank you very much for being here. >> i enjoyed it. coming up, ohio senator rob portman's going to join us at 8:00. ♪

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tim cook keeps his cool. >> we pay all of the taxes we owe. every single dollar. >> we'll talk to senator rob portman about the apple ceo's tax testimony and the immigration bill headed to the senate floor for debate. china investing in the united states at a record pace. michelle caruso-cabrera brings us a story about bringing manufacturing jobs to new jersey. we'll get a nobel laureate to weigh in. how better economic relations with china could boost global growth. third hour of "squawk box" begins right now.

♪ welcome back to "squawk box" here on cnbc. first in business worldwide. i'm becky quick along with joe kernan and andrew ross sorkin. and why don't we take a look at some of today's headlines. the u.s. equity futures are indicated slightly higher this morning. dow futures up, s&p up by less than two points and the nasdaq looking the same frame. the dow, of course, coming off another winning session and that makes it the 19th straight tuesday of gains. 19 in a row. set a record with 18, another one yesterday. the s&p and the nasdaq have been up nine tuesdays in a row. stocks took a turn higher around midday yesterday because there were some comments that came out from the st. louis fed president. he told an audience in germany that the fed ought to stick with its bond buying effort to try to bolster the economic recovery. we do have some earnings to tell you about this morning, target trading lower after the retailer came in with a gap number of 77

cents a share, below estimates of 85 cents. now, the retailer itself said the numbers came in lower than expected, cut its full-year earnings outlook. target says that cooler than normal weather got the spring season off to a slow start. apparel was one of the things they cited with weakness. home improvement retailer lowe's reported a first quarter profit of 39 cents a share. lowe's also mentions a colder than normal spring impacting results. it did benefit from an improving housing market. of course, this comes in contrast to the upbeat quarter we got from the rival home depot yesterday. let's talk about jpmorgan, jamie dimon surviving an effort by shareholder activists to split the chairman and ceo roles. cnbc's kayla tausche back from florida. >> yes. >> back from -- i can't believe you got back. >> yes, some people have said i can't believe you're not more tan like i was supposed to have gotten some color.

the sky absolutely just opened up in the afternoon and we actually had our "closing bell" hit canceled because there was lightning everywhere and our shot went down. i was like a wet dog by the time i got to the airport. it was a good assignment nonetheless. but as the debate evolves, the results of the jpmorgan vote mean. we're now looking at the fact it was not just a win for dimon, it was a win for firms like iss and glass lewis, each of which published opinions advocating for shareholders to vote in favor of splitting those roles. both favored in an independent chairman and also raised questions about board member ellen fedor who received 53% approval yesterday. the opinions of these firms often sway voters since many let iss do voting for them. but now experts are saying companies are viewing iss recommendations more as a challenge and not necessarily as an end game. a spokeswoman for iss said the concern all along was about the

risk management at jpmorgan and the focus was on the board's actions there saying, quote, the directors on the risk committee receiving less than 60% support is quite substantial. but iss has been in the crosshairs elsewhere this year and a proxy battle at hess, leading hess to publish a white paper on iss calling the logic bias toward activists, fundamentally flawed since it favors the activist candidates 73% of the time. now, this is hess' white paper on the matter saying iss absurdly states that hess director nominees owe an allegiance to the director nominations simply on a basis that hess nominees came in through the nomination process. almost every independent director sitting on a corporate board today would therefore not be independent. hess, of course, settled that issue by coming to an agreement with eliot in a unique vote. i was talking to a source this morning who said the role of these firms is in a big gray

area and that the sec is actually looking at firms like iss to see if as this proxy -- the proxy of process, so to speak, evolves, that maybe they should be regulated. >> kayla, real quick. ellen futter on the board of jpmorgan, also the head of the museum of natural history. there was a report she threatened to resign. jamie dimon called her and said, come down, we don't want you to resign. does she stay on the board? >> i don't believe with a number like 53% that she can. you know, i think that a lot of shareholders raise questions in the weeks leading up to the vote about some of the financial ties between the museum and between jpmorgan, of course, jpmorgan's a big bank, american museum of natural history is a big cultural institution, it needs loans, some sort of financial backing. but some shareholders were just confused about where her exact expertise lay. and if there is a seat where the company could benefit from

someone taking that seat with more risk management expertise, i think they think it's that one. >> kayla, thank you for that. >> ellen futter was on the board of the new york federal reserve at one point. >> no appearances by anthony weiner today. no planned events. he's letting his video doing the talking and tweeting. he's going to do some tweeting. >> are you going to do some talking for him? >> he's going to be doing tweeting from home. so -- >> do you follow him? >> i don't know. i'm looking to see. >> let's get to rob portman. apple ceo tim cook faced lawmakers on capitol hill tuesday. defending the company's tax policy and a special hearing. check it out. > apple has real operations in real places with apple employees selling real products to real customers. we pay all of the taxes we owe every single dollar. we don't stash money on some

caribbean island. >> and senator rob portman, a member of the senate on investigations, was one of the senators questioned cook, he joins us now, good morning, senator, it's great to see you. >> good morning, thanks for having me back on, guys. >> i shouldn't admit. i need a commentary thing all the time, rob. but i watched you and i was cheering your questions. a lot of times, the public, the only people they see initially are people like carl levin and others talking. and then finally the officers get up in front of them and answer the actual questions. it's like night and day. and the one thing that i think might have happened yesterday, it was really useful in highlighting something needs to be done so that our economy can grow to the extent that it is able to and it has to be done in this setting. >> absolutely. look, it was supposed to be a subcommittee hearing about a scandal of tax, you know, loopholes that ended up being about the scandal of our tax

code. >> yes. >> and let's be honest. we haven't performed our tax code since the 1960s on the international side. it's a relic of the past. it makes us noncompetitive. what apple is doing is trying to do the best it can in the tax code that disadvantages them. every u.s. company, which is one reason we are using headquarters, losing capital, losing people overseas. apple is paying basically the same tax i pointed out as samsung on the global earnings on u.s. and international. and yet, they can't bring their earnings home, they can't repatriate them, they can't choose where to invest. plus they have this huge tax compliant cost, which is a lot of lawyers and red tape. so, look, u.s. companies need to have the environment to succeed. and that requires us to reform the tax code. and there's a consensus about that, it seems. we've got to do it. >> the other good thing, rob, this isn't an evil company. you know the ones i'm talking about. exxon mobile that basically are evil. general electric, this is a company that the liberals love because of innovation. they've all got iphones and

ipads. so right from there, they get -- you know, they get the benefit of the doubt. and you can see that the corporations are trying to hire people in this country that will end up paying taxes and reducing the deficit and they're not able to because of the tax code and drove that point home and hopefully both sides of the aisle were listening to move on this. >> i think apple pays more taxes than any other taxpayer in america now. they could pay even more tax and hire even more people when they have a competitive tax code. they do about 60% of their business overseas. that means a lot of jobs in the u.s. are supporting their global sales. we like that, we need to create more jobs here in america. we've got to help make them competitive. >> and people that say, well, they're not paying taxes abroad. it drove home the point. do we want a lot of apple's taxes -- or a lot of the profits when they're left over there. you're going to be paying taxes to support the entitlements that other countries have overpromised to their people in

europe and other places. it would just be so much more efficient if we brought it back here. and that's why it's going over there. >> exactly. bring them back. the other thing i liked about what apple said, honestly. they said let's not do a short-term tax holiday, let's reform the tax code permanently. >> you pointed out there's -- the apple cfo every year, it's 2 feet high, the tax return that he sent and he's got how many people do they employ just in their tax department? and how many outside law firms do they employ, as well? >> a few dozen people and more around the world and they employ a lot of law firms. i'd like you guys to hire more innovators rather than more tax lawyers. so, look, this is an opportunity for us. if you listen to what the chairman of the finance committee and the ways and means committee. and the president who said it's the same thing which is we ought to reform the code by lowering the rate by getting rid of some of the preferences to do that. and then also by reforming the

international code. our other competitors have switched to this system where they don't pay taxes in the united states, for instance. >> andrea has a good point here, and that is if you went to 20 or 25, sounds like people would bring back the money. but they want to go to 15. >> no, i agree with you. we've got to reform the code, the question is, what is the magic number given that you're competing against other countries and there's sad race to the bottom, right? >> yeah, look, i think 25's the number you got to get to. talking to a lot of cfos, i've been working this coming out of the so-called super committee. i do think if you can get to 25%, you'd be bringing a lot of those foreign earnings home. and, frankly, there's a way to do that in terms of a repatriation policy. there's a way to bring this home and reinvest in america.

between 1.5 and $2 trillion locked up overseas. and as apple has shown us, they're going to go out and borrow money rather than give that back at the 35% rate. >> you lay out strong points. there are senators on both sides of the aisle who agree this is similar to what simpson/bowles laid out. what do you think the odds are that something gets done in the next two years? >> becky, i think they're actually pretty good. and i would hope we could do it before two years. we'd have to do something in relation to the debt limit coming up. the president has been talking about doing some things on the entitlement side. these important programs that are unsustainable currently. along with interest on the debt are about 65% of our budget now and the fastest growing part. so if you do something there, the president's saying we need to do something on the revenue side. while republicans are not going to do something on the revenue side except possibly if there's real progress on this so-called entitlement mandatory spending, plus real tax reform that grows the economy. i think this is an opportunity,

actually, that's coming up pretty quickly here in the next four or five months. and look, we had over 30 hearings in the ways and means and finance committee. we know what to do in my view, pretty good consensus about it. for the first time, really, since the 1986 period when we did this last time. and i think the chances are pretty good, maybe not 50/50, but pretty good we'll do it this year. >> and also made clear to a lot of people when you say, well, u.s. companies don't pay 35, it's a much lower rate. it drove home the point that the reason it's lower is because they don't even attempt to bring it back here. >> exactly. >> it makes sense. so of course their blended rate is much lower, 60% of their profits are from overseas and it's a lower rate over there than. it's like -- that's the reason for it. it's like a chicken/egg thing. so you could do 25 and it would be revenue neutral even though it's not 35. you might get more money back at 25. >> yeah. >> our effective tax rate is still above the average of,

again -- >> even with that. >> even with that. >> and if you're a domestic company, you've got the 35% rate. >> right. and in estate tax, 40%. >> yeah. >> rob, cincinnati, i grew up, one of the most conservative places around. the irs -- they're doing that in cincinnati? what's the world coming to? >> well, it's pretty sad. we've got good things going on in cincinnati. >> and beating the mets too is fun. >> yeah. >> but kind of mean, you know, yankees is better, mets are kind of defenseless a lot of the time, weren't they? >> they were last night. >> i think it's at 1:00 this afternoon, i saw. >> okay. >> senator, what are we going to learn in the irs thing? how high does it go? >> we don't know yet. and that's why we have to continue the investigation. >> don't plead the fifth, rob. >> well, nothing as concerning as one of the witnesses that

knows these things decides she's going to plead the fifth which is not good news for the administration. we had a few hours yesterday in the finance committee. i got a chance to ask a few questions and frankly we didn't get the answers that we need. what the inspector general did was an audit, not an investigation, meaning it wasn't a deep dive, meaning, for instance, he didn't talk to anybody at the white house to find out the answer to andrew's question. we did find out yesterday that the irs knew about what was going on and yet didn't inform the members of congress and the american people asking the questions. and this is what frustrated me is that we found out they actually, particularly mr. miller knew what was going on and we asked very specifically about whether and they were getting back to us and saying everything's fine. more importantly the american people could've known about it. you wonder why they were pushing this beyond the election. but it's really sad. and it's -- it's both about what

happened, which, of course, is outrageous to target people based on their political views. but also it's about this politics issue. it's this pattern very troubling of putting politics ahead of the public interests we've seen in a number of these so-called scandals. >> i'm glad you weren't the veep pick. and you're the -- maybe you're the new republican. marriage equality, you're -- we need you. we need you or else the party's going down the tube. >> i've got to come back and guest host. >> i know, i'm partial to you because we like the reds. but, you know, good luck, rob. loved hearing you. >> thanks, senator. when we come back, we're going to be talking china with the nobel prize winning economist. michael spence will join us on the foreign policy moves that could boost economic growth. >> much better picture. and still to come, riding the rally, planning your portfolio for fed tapering and the coming debt battles in

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the economic relationship between china and the united states is anything but simple. it's also the subject, though, of a recent study which was

co-authored by our next guest, michael spence was the 2001 nobel laureate in economics, the professor of economics at the stern school of business at new york university. good morning, michael. >> morning, andrew. >> let's go through the study and sort of pick out what you think is the biggest point we all need to understand right now. >> well, i think, you know, the two presidents are meeting in california at the start of june. and i think they need to do really three things. one is to sort of figure out where they want to be ten years from now and how they want the relationship to evolve. then they need to sort of set in motion some processes that look for areas where we can benefit, you know. we have the two largest economies in the world, china growing quite well, but major challenges. we have the american economy coming back. it seems like the right time for these two economies to set the agenda. and then, of course, they have to figure out a way to address the areas of friction and mistrust, as well. >> let's talk about the friction

and mistrust. one of the things this report suggests is china should consider establishing a special national court for intellectual property. how would that work? >> well, you know, they've got a lot of work to do in building up the judicial system and the rule of law. the regularization of the economic environment they hope to create. and this would be a component of it. they're going to generate quite a lot of intellectual property internally in china now and so they have a domestic constituency that has a demand for the protection of intellectual property. i think the alignment of interests is coming together. >> michael, there's been a lot of talk on that issue, but ultimately between hacking scandals and all sorts of other things, there's a lot of anxiety among u.s. corporations and multinationals about doing business in china for that very reason. >> this is absolutely true. this cyber security and multiple dimensions is a first order of importance. and i think the two presidents need to agree on a process, a

cooperative process of sort of getting at this. whether it's state sponsored or individuals rogue activity, this has to be settled down. it could disrupt the relationship badly, andrew. >> do you think there's a reasonable chance they figure this out? >> yeah, i do. i mean, we've got on both sides of the pacific, we've got the talent to do it, it's a question of will. i think they need to understand and i think they probably do understand that this is an issue that left unaddressed could be very disruptive. >> the chinese aren't even copping to the fact this is happening. so, you know, first you have to -- what do they say? you've got to acknowledge the problem before you can even get to a solution, right? >> i think, actually, sort of slightly hidden from view, there's a start on this. my understanding is that our, you know, john kerry was in china, had some discussions that are going to lead to a joint effort to investigate what's going on here.

>> right. in a similar vain, the study suggests a relaxation of export controls of high-tech products which is a long standing request of china. so if you're a u.s. official, how should you think about that? >> well, i think it should be thought about in the broader process of opening up both on the trade and especially on the investment side. you know, we have two very different systems. you know, the chinese one still has a much larger state presence. so making these things -- these systems work together is not an impossible task. we have sovereign wealth funds that behave well and the chinese as you pointed out earlier in the program are starting to invest. but what we need is a set of sort of guidelines, rules and so on that protect the interests of both countries. we will always have national security issues to deal with in the process of dealing with foreign investment. that's really the main concern on the investment side. there's lots of investment that could come in in businesses,

small and medium sized businesses, that wouldn't be an issue. >> michael, are you a believer, a, in the chinese economy, where it is now? and b, this idea that within the next 10 to 20 years they may overtake what's going on here in the u.s.? >> i'm a believe that they're pretty good at managing these massive structural changes. and this is one of the biggest they've ever met. this is the middle income transition. one of the reasons that makes their market so interesting. we're going to have new middle class consumers in the next decade. on the last point, andrew, you know, they're within 10 to 15 years of having an economy about the same size as the united states or europe. but when they get there, they'll have a per capita income, a quarter of ours. you know, they're many decades away from having an economy that has the income levels and

technological sophistication that our economy has. size is one issue, full trip to the end of the road is a longer journey. >> we've had the famed short seller on the program, many a time, who has talked about china, i get notes from him weekly if not daily how the economy is a charade? what do you think about it? >> fundamentally i don't agree with that. there are lots of potential sources of imbalance or even disruption in the economy. but the thing that i think people tend to forget in general, and i'm not commenting specifically on what jim says, but the chinese economy has an unusually large state balance sheet. you can have an awful lot of loans and poorly conceived debt that they can deal with provided

they're alert and get at it. >> we're going to leave it there. study's fascinating and if you get a chance to read it, please go do it, thank you, michael. >> thank you very much. when we come back this morning, the dow and s&p closing at all-time highs once again yesterday. up next, we'll talk to a portfolio strategist to try to figure out how to plan for fed tapering. right now as we head to break, take a look at the u.s. equity futures. dow futures up by about 27 points, s&p up by about three, but target is going to be a loser at this point. looks like it's still down by about $1.50 in the early activity. [ penélope ] i found the best cafe in the world.

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welcome back to "squawk box" this morning. let's look at stocks on the move this morning. toll brothers earn 14 cents a share for the latest quarter, more than double what wall street expected. toll a jump in order. $2.97 a share, excludeing certain items, four cents above estimate, the software producer's current quarter eps guidance up 3 to 7 cents a share below current consensus of 11 cents. and staples reported quarterly profit of 26 cents per share, that's one cent below estimates with revenues falling short, as well. staples says its results were impacted by store closings as well as currency fluctuations.

the dow climbing for the 19th straight tuesday session to close at another all-time high. joining us this morning from charlotte is john lynch, he is regional chief investment officer at wells fargo. also, joining us onset this morning is mark lehman president at jmp securities. why don't we talk about this elusive rally. you point out if we were to hit a bear market, we still wouldn't even hit the lows we saw in june of last year. >> that's exactly right. many investors have continually asked about whether or not we're going to hit a correction. i know it's been a big focus for your show, as well. and, unfortunately, or fortunately for investors, monetary policy provided this put option for the market that's prevented it. and to your point, we could see conceivably, this is not our call, but it's possible to see a 20% bear market and we would only go down to 1,330 on the s&p which is 13 points higher than last june when everybody thought it was armageddon.

interesting perspective, i think. >> we could have a full-fledged bear market that wouldn't get us to where people told us not to invest. >> that's right. >> i know. >> they're still coming on. i want a little bit of a pullback before i put money into this. they do it with a straight face. i saw another well-known guy. valuations are getting stretched here he finally has decided. it won't mention any names. again valuations are getting a little stressed. go ahead. >> one thing i think is very encouraging, an argument could be made it looks stronger at 1670 than it did at 1600. we had a flattening yield curve, defensive leadership, commodities falling out of bed, while the commodity story is pretty much the same, we have seen a switch to cyclical leadership, we've seen transports, we've seen small caps. we've seen energy, we've seen industrials. that cyclical leadership, i think at 1670 is more encouraging, if you will, market acting as a longer term

predictor as opposed to what appeared to be a defensive stallout at 1600. >> what do you tell people to do with their money if they're worried they've missed out on everything? as you pointed out, even if there's a bear market, it's something where you're above the lows. what do you tell them to do now? >> do not jump in all in at an all-time high. we're encouraging our investors to look at a minimum of three if not a six-month period where you want to enter the market accordingly in a diversified strategy for existing money, we're trying to make sure that investors if they were, for example, way overweight in the staples sector, rebalance out of those areas and try to participate in some of the gains where they may have been underweight given the performance year-to-date. >> do you agree with the strategy like that? >> i do. i think piling it in at all-time high is a tough pill to swallow for investors who have missed it. again, i think the market has value in it. i think people -- the width of the market is accelerating. and one part of the market that we haven't talked about is the

ipo tape, which is very strong. and we don't want individual investors piling into the latest ipo of the day. i think the recent reaction in the market speaks to higher volume going forward. >> is that because of the market action itself? where things are headed? >> i think that's part of it. friday was an interesting day in the market. we saw two ipos price and both up over 50%. as we all know. that's the first time that has happened since 2000. and we think, wow, what happened in 2000. but let's look at what happened on friday. there were two ipos, both in the tech space, did very, very well. of the ipos this year, only 10% have been in the tech market. this is not a feverish market, i think it's somewhat tempered, i think, again, it has the tone that will be a good one for the rest of the year. >> can social media do things like that, though? we watch how the market has changed, how investing has changed where you can invest in some of these things before they become public in an ipo. does that mean you're not going

to see a reaction like that in one of the social media stocks? >> i think you could. it's ironic a year after the facebook ipo, we had a much better ipo tape last friday. it's ironic to me on a positive side. sure, you see something that everybody at home is playing with and downloads their app and says i've got to own that because my kid loves it every single day. that could happen, i don't think it will. i think there's a much more tempered environment out there. i do think the portfolio managers are looking at ipos more actively in the width of people looking at those. look at life sciences, which was a relatively cold ipo sector, that's been some of the strongest performance. >> is that a sign of individual investors being much more interested overall. can we read more broadly into what it means beyond the ipo market? >> i think it's a combination. it's a combination of institutional investors getting more interested in seeing value.

and secondly, i think you're seeing what you usually see which is investors looking to chase performance. and it's been in the ipo tape, as well, in 2013. >> john, we're going to be getting -- you mentioned already the fed and what a big impact that has had in the markets. we're going to be hearing from bernanke later today as he addresses congress. what should we be looking for in that and the fomc minutes released later this afternoon? >> well, i think today's going to be very interesting. perhaps it was underreported, but when bernanke changed his statement at the last fed meeting saying fiscal policy had gone from restrictive to restraining economic growth, i believe that's really bernanke taking the gloves off against congress. and i think he's done this twice a year now for about a decade. and i think he's really going to try to put the onus on congress going forward. i'm looking for some more positive and aggressive statements from the fed chairman because monetary policy has been

carrying the load. and i think it's up upon fiscal policy makers to work in concert with monetary policy. >> john, mark, thank you both for your time today. >> thank you very much. coming up, china investing in the united states at a record pace. michelle caruso-cabrera is going to bring us a story about a chinese firm bringing manufacturing jobs here. and a new study showing strong growth for twitter among teens but not on facebook. more on that still ahead. ♪

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welcome back to "squawk box," everyone. listen to this. facebook may be losing the cool factor for teenagers. there's a new report by pew found that teens are flocking to twitter, instagram and tumblr

and complaining there are too many adults on facebook. that's the spin, at least. mark zuckerberg probably isn't worried yet because 94% of teens who use social media have a facebook profile. that number was flat from the previous year. 24% of teen social media users were on twitter and that is up from 16% in 2011. when we come back, the chinese are investing in america at a record pace. up next, a story about a chinese company that is bringing manufacturing jobs right here to new jersey. and don't miss "squawk box" tomorrow, honeywell's david cote will be our special guest at 7:00 a.m. eastern. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need.

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welcome back to "squawk box" this morning. take a look at futures right now for a second see how the market's setting itself up. with the dow looking higher. looking like it would open up about 25 points higher. and the s&p 500 up about 2 1/2 points. let's update you on a complex earnings report from target. the correct number to compare is 82 cents. that would be 3 cents below the consens consensus. that excludes the sale of credit card receivables but does include dilution related to target's canadian stores. we need to mention that target itself is calling the quarter disappointing. in the meantime, let's talk about headlines about chinese investments in the united states which usually focus on deals the u.s. government won't approve due to national security

concerns. but despite all the high-profile nos we keep hearing about, michelle caruso-cabrera is a look at the biggest investments are getting done and why the chinese are making them. >> good morning. we want to show you this bar chart which tells the story. a little over ten years ago, take a look at the end, almost know chinese investment in the u.s. it's climbed steadily hitting at least $6.5 billion in 2012. up until now, the dominant story line has been about u.s. companies manufacturing and selling stuff back to americans. well, we're about to show you a chinese company doing the opposite. they're going to manufacture in the u.s. and plan to sell to chinese consumers. vitamins of every shape, size and solubility made at this new jersey-based company. from the location and employees to its customers, international vitamin corporation looks like an american firm. that is, except for its owners,

they're chinese. >> costs millions of dollars. >> reporter: born in china but educated at rutgers university is not only one of the investors he's the ceo. >> we have invested upwards of $100 million. >> those hundreds of millions of dollars have gone to increasing the company's head count from 280 employees to 400. all of them from the united states. rich connor head of research and development said at first employees were nervous they'd lose their jobs under the new foreign owners. >> when we met with the new management team, they said they were going to grow the business, retain all of the employees and i think right away that made everybody feel more comfortable. >> currently, all of the customers are in the u.s. but the long-term plan, selling to chinese consumers. >> that's right. by the end of 2014, they want to be selling to the chinese because made in the usa for anything that you ingest in your

body in china is actually a big plus. you can sell it at a premium and perhaps not a surprise considering all of the headlines we've seen, the cadmium in the rice -- >> it's a big opportunity. >> as they talk about ramping up, they've grown it by this many employees, what are you talking about if you start taking the stuff back to china? >> a lot more, of course. manufacturing here. they built a huge warehouse they've maxed out. looking for more warehouse capacity, as well. certainly an increase. they would start to have employees in china, as well. we also have a guest we can bring here. with more on chinese foreign direct investment in the united states, rhodium group research director tilo joins us. you're one of two individuals in the country i know of that directly track extremely closely what the chinese are investing in here in the united states. international vitamin

corporation. are they typical? >> i think they're representative for a trend that we see. the recent increase in chinese investment in the u.s. is mostly driven by changes in the china economy. in the past, they did not have interest or motive to invest in the united states. and now china's growth model is changing rapidly and a lot of companies are forced to change their business models and increasingly interested in foreign brands, distribution channels and technology. >> because they fear a slowdown in the chinese economy? >> right, because a lot of the input costs that the old growth model was based on. labor costs, environmental compliance costs, land, those costs are all rising significantly. so the margins and just midstream manufacturing segment are being squeezed so much. those companies are trying to move up and down the value chain to get more value-added stuff closer to the customer in the

u.s. and r & d and upstream resources extraction. >> later today, you're going to have a segment on the fellow who is taking over or just bought amc. >> the single largest investment in the united states by china is amc, they bought it late last year. >> how does that fit into all of this? we're talking about natural resources, that seems to be in a whole other category. >> the ownership group that bought it and this ceo is incredibly ambitious. wants to grow the revenues from $30 billion a year to $100 billion a year by 2020. he's going to do part of that in china, but really to achieve it, he's got to buy companies overseas, as well. he's going to buy them -- he says he's going to spend another $7 billion in the u.s. over the next decade. >> is that part of a plan to bring things back to china too? >> when we interviewed -- when we interviewed him, he was in los angeles trying to make more deals but also with hollywood studios because he wants content

creation. he says studios need capital, we have it. and we are very willing and eager to provide it. >> got to be a huge appetite for that in hollywood. >> absolutely. >> thilo, should we expect chinese investment in media writ large? >> i think media, entertainment and modern services in general is a fast-growing area of chinese investment. and i think one of the most important targets of chinese companies is to increase competitiveness in the whole market which is still growing at a rapid pace. if you look at movie theaters, for example, it's seen as a bit of a sunset industry in the united states. but if you go back and look in china, that industry is growing very rapidly and will probably will grow for the next five to ten years. so chinese companies are really getting ready for a domestic boom and services sector. >> how involved is the government ultimately in all of these investments? >> twice now, we want you to

invest outside of the united states. -- i mean, outside china. and so, certainly, if you have access to capital from the state-owned banks and say you want to invest outside of china, you're going to more likely get that money. so it's a directive. i'm not sure they're saying you have to do this. it's not this. it's not government owned, perhaps with oil company, for example, that are in china, but buying vitamins, for example? >> no. that's seven individuals that very much want you to diversify from china. that story will be on "closing bell" later today and you can go to cnbc.com about chinese investment and the u.s. has a lot more material that you can look at. >> michelle, thank you. thilo, thank you. >> jim cramer is fired up and ready to go. we'll check in at the new york stock exchange right after this. it's a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions,

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-- get down to the new york stock exchange. jim cramer joins us now. i thought lowe's was -- it's friendlier, the colors are nicer. my feminine side is more spoken to. are they not as good as home depot anymore, jim? >> no. and home depot has worked very hard to get that woman shopper

and lowe's has more outdoor. frank blake, the ceo of home depot will tell you that. home depot had two things going for it. execution versus lowe's and the housing rebound. these are night and day and it really is amazing because lowe's makes it side like the weather was bad on its side of the street. >> weird. >> execution is everything right now. target was bad execution. it's really hard -- kohl's was good execution, case by case. >> in this case we have to use gap. did the analysts know what was in the gap number? they acknowledge they were below expectations and they were $1.05. why, in this case, did we not adjust? >> in each case the companies themselves tell you. their commentary is saying listen, forget the gap, this is what we're doing, we're just not doing well. whole foods was on "mad money"

last night. i don't think they could be having a better quarter. so high end doing better. some places executing better than other and walmart disappointing itself. let's put it that way. >> maybe we got through to first call. they're saying that ex items -- i guess you have to back out adjusted. so it wasn't the gap. it wasn't 77, but it was three cents below. >> if your aligned with home depot you're astonished by how well they're doing. how can they do so well in kitchen and bath. some of it is right at the expense of lowe's and the professional customer is back for home depot. we need to learn more. >> how great was tim cook? tim cook is doing exactly what every american company must do which is try to avoid paying as much tax. i mean, it's literally what you're supposed to do as a company. i don't want my ceos to say, you know what? i'm trying to find ways to pay

more taxes to hurt the shareholders. >> on face value someone who might pay attention would say that's typical wall street, but here we're talking about faced with paying 39% here with state taxes, just for shareholders, to compete globally, to compete with the other companies that want to crush you, you need to move offshore. you have profits offshore. john chambers, how honest was he if he said if they don't change us, cisco is creating overseas. >> it's non-negotiable with obama. it's just not going to happen. what you see are smart executives who can hire people in this country who say you know what? we're just going to get around you and it's legal to get around you so why don't you clean up the act and bring people here. the president hasn't wanted to address with people, and they're not going to identify with rich executives who paid a lot of

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saks, the stock of the day. new york post reporting the luxury department store chain has hired goldman -- that's complicated, chs, hired goldman to explore strategic alternatives including a sale. sales are 19%. thank you, andrew. thank you, becky. >> thank you, joe. thank you, becky. >> make sure you join us tomorrow. right now it's time for "squawk on the street "". >> good morning. welcome to a busy morning on "squawk on the street," i'm carl quintanilla with jim kramer and david faber. we have a hearing at the house oversight and bernanke in front of the joint economic committee this morning and all of that is coming up in the next hour or so. futures are mildly positive here, up 24 points on the dow after another unbelievable day in