and the main catalyst for today's selloff in the global markets are fears of fed tapering. we're going to talk about chairman bernanke's comments yesterday and the minutes from last month's fomc meeting that came yesterday afternoon. those things both added up. before we get to that, though, let's get right to the charts and see what happened while most of us were sleeping. here is the big news. the nikkei down 7.3% to be exact. hang seng and shanghai were weaker within as well. but the big news that's be about what ben bernanke said and about what this signals for the federal reserve from here is the tapering is to begin as early as next month. take a look at what's been happening in europe in the early trade for some of these. you'll see weakness across the board here. everybody down by just about 2%. the ftse off by 2%. the cac and the dax off by stronger amounts. the dax is off by 2.75%. our colleagues in london are standing by with more, but first let's talk about the fed.

>> be fanky was okay, right? >> well, no, but when bernanke was questioned, in the questioning, he started to say yes, there's a chance -- >> the minutes. >> and then the minutes confirmed what he said in the q&a session. that's what spooked people. early on, it sounded like he was just as dovish forever. but in the qq & a that was coming out. >> he could do it in the next few months. >> we're talking about 85 billion a month that we've been doing. that's not normal. >> no, we knew it had to change, but we also know there's some massive dislocations in these markets. and what happens when they pull back? >> they have to do it. let's do it. >> gets let to the videotape this morning. chairman ben bernanke testified before congress talking about the benefits of the fed's bond buying and what needs to happen before the central bank starts to end the purchases.

take a look at what he said. >> we're trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook. and this is a judgment that the committee will have to make. if we see continued improvement and we have confidence that that is going to be sustained, then we could -- in the next few meetings, we could take a step down in our pace of purchases. again, if we do that, it would not mean that we are automatically aiming towards a complete wind down, rather we would be looking beyond that to see how the economy evolves. >> and, of course, people are watching those words very carefully as becky was saying before, bernanke testified in the morning, but it wasn't what happened in the afternoon that spooked people. minutes from the latest fomc meetings were released. the minutes showed a number of fed officials expressed a willingness to taper the bond purchases. if there were signs of

sufficiently strong and sustained growth. i don't know if we're still going to have substantially strong sustained growth. >> what does that mean, is it the unemployment number? how important is the jobs information that comes -- >> i think we already have -- is it efficient? >> you're not at 50%. >> no, i know. but i don't think it's a negative. i think it's good. i think we have significantly strong and sustained growth. this is if you had to choose, would you rather have sufficiently strong and sustained growth or would you rather have a crafty economy with the -- >> if it's for the right reasons. the question is, is the fed monitoring the economy correctly? they're saying, yes, they have their fingers on the pulse. >> my question is is it procyclical? meaning bernanke can come out and say this and just with the

fomc statement, he can down shift the sustained growth because people will freak out, the margins will go down. >> it's bigger than him. >> do you think it's bigger than him? >> no, for the stock on market, but the economy is -- you know, it's a -- we have a great economy here. it should be doing rel well and it shouldn't need 58 billion a month. >> but we've been arguing that one of the reasons the economy has been doing really well is because of ben bernanke. when have things changed? >> things kind of changed yesterday. didn't you watch it? over a hundred and then we were down over a hundred. >> but i think it's good. >> i mean, and 10%, as well, you know, i hope it tapers. >> we want it to happen for the right reasons. i hope the economy is doing as well as we all -- >> and you watch bonds. did you see the ten year? >> yes. >> now a t-handle on it. >> and some of the ceos we've spoken with recently is the spring swoon is off the table. >> and when we talk about what happens when the fed does it, we

knew that it was going to be initially some trepidation among all the short-term addicts that love the heroine and the me methadone, but since it's an indication of taking the training wheels off, i'm doing it, i'm riding. since you're getting above stall speed, if you're at stall speed, you want to keep your parachutes on. >> if you want to keep the addicts off -- >> he's off heroine, he's on the methadone, he's a recovering addict. >> when did you write that book? that was after it already happened. >> that's true. it's becoming an old book. >> you can't have g1, g2, g3 and be 234 a healing period. it's time to write the sequel, andrew. >> i hope you're right. whiff problems in china, too. >> yeah, we do. adding pressure on the markets.

china's factory activity shrank, not grew, but shrank for the first time in seven months. and, man, a drop in new orders flash pmi fell to 49.6 and i think they do it the way we do it. it's below 50. it's shrinking above. it's contracting. the key 50 point flying of demarcation. and you could call it a perfect storm, sparking the massive sell-off in japan. first it was bernanke and the fomc minutes. then the weak data from china. but then we're talking about yen strength. but you know why. and then a spike in japanese government bond yields. japan's government bond yields took a nose dive forcing the yield on the ten-year to a stratosphere, 1%. that's the highest level in a year and investors were spooked and the nikkei finished the session down nor than 7%. but if you look at a chart of the nikkei in fact last year, 8,000 to 16,000. what is that, andrew? is that -- >> 8,000 to 16,000.

is that a hundred percent? >> those two. >> do you have any -- do you have algebra? >> yeah. >> i think that's a double. >> a double. >> maybe that's a -- joining us from tokyo, cnbc's kaori enjoji. can you confirm that, 8,000 to 16,000, is that a double, kaori? >> absolutely, it's a doubling of the share price and it makes it chose to the top reformer of the global markets. even near term, the market is up 45%. the market is up 70% as this new government looked like it was coming on board. so the sell-off today is being characterized as panicky selling. what's problematic today is the trading volume is disastrous. and there were signs of that earlier this week. the trading volume was starting to really pick up. it's hard to pinpoint what actually triggered the sell-off today. you could say it was bernanke. you could say that it was the

bank of japan's governor who maybe didn't say enough to address some of the concerns about the volatility in the jgb markets. but we knew at the start of trading when there was a trading halt on the jgb futures, when the yield on the ten-year spiked to 1% that it could turn out to be messy. and then we had the pmi numbers out from china that you talked about and then we had the seesaw in dollar/yen which is now 2 1/2 yen below yesterday's highs. so all in all, we're down about 1100 points on the nikkei 225. this is the steepest drop that we have seen since the fukushima nuclear disaster back in march 2011. but the spike in yields highlights the troubles that the bank of japan faces. on the one hand, they're on an extremely monetary easing policy that is unprecedented and they want to push up inflation to 2%. yet at the same time, they're worried about pushing up the yields because they have to finance their debt and on top of

that, financial institutions hold massive amounts of jgbs. and this has been the money winner for all of these financial institutions because the traditional way of making money for banks, lend to go corporations, that hasn't worked for a long, long time. so these companies are sitting on huge paper losses right now. >> yeah. >> kaori, all right, that was a great analysis. because we -- everything in the -- you know, we're oxxidental over here. >> kaori, you said it's hard to pinpoint what happens. bernanke and all of these things, a 7% drop, wow, is it just once things started moving and started rolling, it was like wildfire? >> i mean, the last couple hours were particularly like that. but, you know, i have to point out that earlier on this week, you had the stock like mitsubishi motors. there was nothing fundamental going on. it's now up 35%. so you have a lot of day trading going on. you have a lot of retail money

coming in so that tends to axeser bates the move. so i mean, it might have been a little bit of bernanke. it might have been a little bit of kuroda and he has a chance to explain himself again on friday. i think there will be a lot of focus on that friday here. >> is the retail investor back in markets in japan? >> they are back in. the -- and it's not just the equity market. there is a little bit of froth here in japan for the first time in many, many years. when you take a look at the department sales, overall sales are flat year on year. but when you take a look at the luxury end of the market, $30,000 watches, they say it's up 25% year on year. common minimum sales up but only in the plus $1 billion segment. >> anyone getting married, anyone have a kid, anything like that? any movement at all on that front?

>> well, it takes more than seven months for that, you know. >> i was going to ask that question, but becky said no, don't, about whether anyone was actually -- i mean, it's time, right? let's get back into living over there, you know, 20 years nap is what we hear over here. it's only what we read, kaori, is that there's so much conse e conservati conservatism, put money in the bank, live at home, don't get married. 1% inflation might do it. we're pulling for you over there. if your bond yield is up over 1%, maybe it's time. >> it's probably music to the ears of shinzo abe. he wins big in this election. he has a mandate to do anything he wants. >> she's good, though. she was able to confirm that 8,000 to 16,000 is doubling. and you also know seven months is not -- so that's not different in -- okay.

>> kaori, thank you. we needed the help there. ross westgate is standing by in london. ross, the picture there in london not quite as dire as wa we see in japan, but still, a lot of red arrows behind you. >> yeah. out of the dow jones stoxx 600, only about 16 of them are actually up at the moment. so we're weighed to the downside. we're not quite at the session low. but not far off it. losses have translated. you read about it earlier, 2% to 3% for the likes of the ftse and the xetra dax. there's a snipe up there. currently down 130 points, 2.57% for the xetra dak. the cac 40 down 2.4%. you maybe talked about the data. we had composite flash pmis out for the eurozone. the good thing was, 37.7, it was

forecast at 37.2, so better than expected. that is still deep in contraction territory. it's the seventh quarter negative growth for the eurozone and maybe the trend is easing slightly. as far as the sectorses are concerned, it's worth pointing out because kaori talked about the banks of japan being sold off heavily. china, as well. the china pmi numbers didn't help, either. miners down 3%. and big swings, as well, on the currency markets. we want to talk about dollar/yen. initially we saw dollar/yen dollar index going up high to a three-year high. then there was a rethink.

people have been long nikkei, short yen, that trade went around, as well, so we've seen a 2 mers fall tt today in the value of the dollar against the yen, as well. it's quite a big move in the yen in one day. also impacted is the aussie/dollar on the chinese pmi number, down about a 12-month low at the moment. the aussie/dollar, down 7% in a week against the greenback this week. and so commodities and commodity currencies getting hit fairly firmly, as well. one bit of news out of the uk, gdp up 1.3% in the second breakdown, as well. we had ben broadbent earlier with me on stage. he said i.e. it's data dependent and clearly the markets have taken a different view. back to you. >> we've talked about stocks, now let's discuss some of the broader things.

first up, oil prices. take a look and ushgz that they are down. 93.03 is the last draw for wti crude. also, gold prices, at least at this point are up by about 17 $1/2. this is a relative move after all the strong we've seen recently, it's still at 1384. the dollar this morning after bernanke, after all the global market reaction is down. the euro is trading at 1.288 and the dollar/yen is at 101.37. the ten-year note, this is interesting, the yield is below 2% at 1.982%. let's talk about the economic calendar today. we're going to get weekly jobless claims coming at 8:30 a.m. eastern time. then u.s. manufacturing pmi, the shsa house price index, april new home sales and the kansas city fed survey. so we've got a lot to watch this morning.

>> ed keon has been waiting patiently. we're going to talk about everything we just did. the tapering, china, japan, did you deduce anything significant today in your thinking? are you more cautious today for a near term and perhaps pullback? >> i think i'd be more likely today to be a buyer than a seller. >> you would? >> yeah. i think markets correct from time to time. whether it's in japan or over here. we knew this day was coming and we know we want the fed to taper because that means the economy is getting better. >> i agree. >> and i think the big question right now is why haven't we got into recession this year given that we came into the year with about a 1 1/2 to 2% growth and we had a 1% plus tax increase and cuts in spending at the same time. so if this goal drags, should have pulled this into recession but we're growing at about 2%. so i think it's the underlying economy is much stronger than people think and that is the fed

and it pulls back, it starts to wear out as we go through this year and into next year. and i think we're going to be growing at 4% plus as we head into the end of nkts years and into 2014. >> that would be great. that is the kind of growth that solves so many problems. maybe not entitlements, but it soflts -- >> it's conceivable that we could have a budget surplus by 2015. the cbr came out last week in a story that was reported, but didn't bring attraction. >> i saw that about if deficit. >> that's right. they have reduced the deficit already in half and the 2015 is down in gdp. if you get higher tax gains, tax collections, more money from fannie and freddie, you could conceivably get to a balanced budget. >> i thought i read in your note that you think if market is

fairly valued here. >> i do. and as long as earnings continue to grow, then the markets will trend higher. >> with rates going up, it might be a headwind. >> that's right. i'm not counting on multiples to expand. this 24th do, that would be great. all i need is for earnings to go up. if the economy gets better, which i think it will, earnings will continue to grow. >> you were talking about the cbo report. there is some view that the error was a head fake because of the one-time tax dollars ahead of what hit us, unclear whether that's sustainable. >> yeah, but they're including that. they have basically tax revenue being roughly flat in 2014 compared to 2013. so they're figuring a lot of that surge in revenue we got from people doing exactly that at the end of the laugh yeert is a one-time thing. but it's difficult to forecast anything, of course, and especially taxes.

but the other thing is, as the market hats continued to go higher and as people have a lot of capital gains in bond portfolios, if you see a bit of a rotation, you could see people sell and that would create capital gains taxes and that's very hard to forecast, very volatile. it dropped by $100 billion tax collections between 2007 and 2009. it could gain a hundred million unexpectedly. >> and 4% growth, you would see companies needing to finally do the expansion that they had been putting off. they need to hire people. then maybe the participation rate comes up from 60%. if you could just raise taxes, you could get the same money. but if you can't raise taxes, the growth would be provided.

>>. >> this str promise of the dynamic economy a that's different. you'll never see 4% growth in italy, for example, i don't think. or greece. but we could still do that here, right? >> i think we would. >> where do you think unemployment goes? >> it's going to trend down, but i think we'll get below 6.5% by, say, two years from now. >> do you think the fed starts tapering before tend of the year? >> you know, i really don't know, but i wouldn't be shocked. >> good or bad? >> bad in the short run. guys like me will be buying. >> if sooner we get off this snide, or whatever it is -- is that a dirty term? >> no. >> okay. i worry about that. i never know. >> if it shrinks the need to issue new treasury debt would be down. >> and that is something, didn't

fisher say that the other day, you have to start tapering. >> did you get the sense from fibber, though, that he thought the economy was growing and it was sustained growth? >> i think it depends on where you are. he said in texas things are turning around. >> do we need an employment picture? we weren't just talking about the rate itself but the participation rate. >> that is cyclical and secretary ewe lar. >> and that is why ultimately that rate may not come down as quickly as -- >> well, that's right. >> he uses that to make the point that they need to get their act together. but he also said above 3%.

they jobbed him, but he also said by the end of the year you could be above 8.35%. you really only hear the negative things 37 that's why you only sweat on one side. weird. it's a journalist thing. it's a skeptical -- >> you have to ask questions. >> you're skeptical about everything, except global warming, which is weird. it's a weird thing not to be skeptical about. it's only been seven years since the movie. >> how does it always get back to global warming? so no, it doesn't always. you called yourself a skeptic. actually, if you're skeptical of global warming, you're a heratic. >> and then we'll burn you at the stake. ed is going to stick around. if you have just waking up, u.s. equity futures are sharper below

fair value. right now, down below by triple digit. the nikkei closed lower by more than 7%. the biggest catalyst, fears of a fed tapering. as we head to break, here is ben bernanke on capitol hill yesterday. >> we have focused primarily on our estimates of cyclical unemployment and in particular forward guidance gives a weigh staim station of 6.5%, which is a point at which we'll consider beginning the tightening process. that doesn't mean we think it's the lowest rate that can be achiefd, but we have to begin a process before we get to that lowest rate or we'll risk overheating the economy. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world.

bny mellon. the act of soaring across an ocean in a three-hundred-ton rocket doesn't raise as much as an eyebrow for these veterans of the sky. however, seeing this little beauty over international waters is enough to bring a traveler to tears. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving.

welcome back. futures trading sharply below fair value. we are down about a hundred points. ed cannon says you might even buy. i guess we have to go to break. we will talk weiner the day before yesterday, deit too late for the tabloids to get it, but they're getting it today. he has some ball webs "daily news" says. "hold the sausage" is what the new york post is saying. apparently, the weiner was in.

and no one knows how he's going to do in this next erection. election. i'm sorry, did i say erection? i mean election. >> have you got one? >> no. you did very well with that. >> thank you. i got up early this morning. you know what's great about that photo? he's looking at himself in the mirror. kind of going, oh. >> back from the gym, right? >> not bad. all right. two well known economist less join the conversation next. not bernanke, but we'll be talking about bernanke. bernanke, the fed, and when that paper might happen. stay tuned. neil and buzz: for teaching us that you can't create the future... by clinging to the past. and with that: you're history. instead of looking behind... delta is looking beyond. 80 thousand of us investing billions... in everything from the best experiences below... to the finest comforts above.

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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. futures are down about 100 to 103 right now with fewer value down 35 and 139. >> is that a slump or a fall? >> i would call ate slump. do the math. do a hundred on 15,000. do a hundred on 15,000. >> a dive. >> no, a dive? >> a dive. >> you're a journalist, aren't you? do you want to hype this, call ate crash? it's a hundred points, andrew. >> the nikkei is a dive, a swoon. >> it seems so relaxed. >> it's probably dropped to the lowest level in three or four weeks. >> it's doubled from 8,000. we decided it was a double. there's the -- >> anyway, it's worth paying

attention this morning. >> those other ones, hang seng is bad, but the shanghai is not that bad. wa about europe? >> it really is just a slump after all. >> the % here would get your attention. can you do that math quickly? >> 3%? >> it's 500 points. that will get your attention. so a hundred at this point. it's early. 6:30. we'll see. >> i was surprised to see it. >> you can always hope. >> as we've been talking about this morning, fed tapering fears sparking today's global market sell-off. david tepper was on "squawk box" just two weeks ago. >> if it's a true taper, there better be a true taper or else you're back into the last half of '99. is and so, guys that are short, they better have a shovel to get themselves out of the grave. >> here we go. >> and we got that close. >> joining us on ed right now is ed kieanna. ed hey and michelle girard.

guys, let me start with you. since we are bringing you into this part of the conversation, bernanke and what he did yesterday, michelle, how important is it? are we going to see the fed pulling out sometime this year? >> what did he do? dick, maybe you heard a different testimony. i heard remarks that i think were more defensive on the general level of the combination the fed is providing. i heard him just try to maintain flexibility making it very clear that tapering is completely data dependent. and quite honestly, most people probably don't think the economy is going to be strong enough this year to prompt tapering. i didn't feel like his refusal to rule out action by labor day was in any way a suggestion that they might move before labor day. i just think the markets are skittish. nothing in anything i heard yesterday, in the q&a or prepared remarks made me think it was anything other than -- >> here it is right here. look at the headline.

you don't think this is wrong? >> it's the one thing we -- we got fisher to admit that the other day, that the odds now are more on the side of going down from 85 than -- >> going down or going up? >> maintaining. for a while, they said maybe we'll go up. maybe that's off the table. >> i agree with michelle. i think that bernanke's statements were the excuse and not the reason. let me state three things which i think give the background. some of the old fox technicians have been very concerned here. john mendelson, talking about the level of stock market versus the 200-day average. it's tremendously overbought. ned david has been doing this for decades, saying, hey, optimism went from 48% to 70%. that's a warning sign. and in japan, the hedge funds own about 1/3 of the long position in the nikkei contracts.

they have been selling for the last three weeks. and i think what happened is they suddenly realized, whoops, we're losing our bid. i'm going to get out in the next five minutes before my friend, joe, ups his order. and so the way i look at this is we're in -- we got into an overbought bull market, which was kind of way above its trend. and when that happens, you have a construction. but that's -- i don't think there was really new news that came out of bernanke. i don't see any new news to set them up and, look, he's a dove. he owns a dove. i frankly -- i think they probably taper in early 2014 and maybe december through -- >> you're saying not june. >> no. they're not going to do it in june because he hasn't -- >> i said that and you told me i was crazy.

>> i think dick is -- >> i said it much better. >> he said it like this. i disagree that there was nothing said yesterday. i think your interpretation is probably true that nothing will happen, but i do think that he was different. >> i thought he sounded slightly more optimistic about the economy. i think we took going up off the table. and to see it in the minutes that there's enough people who said it could be -- no one was thinking june. isn't it almost june? >> when fisher was here the other day, i told us maybe we were reading too much into the idea that they could go up or down. he said everybody maybe read a little bit too much into that. that that was our point when we misread that. >> the other issue is that inflation is low and they have a theory that it will come back up towards their target. but they don't have the evidence for that yesterday. i think if they wait, they'll get better evidence that, in fact, that theory is right. that's one reason why i don't think they would think about going in jane with the inflation

so far below their target, what if they're wrong and it doesn't bounce back? >> i didn't find his comments on the economy terribly upbeat. i thought the fact that he reiterated even though we've seen it in the labor market, that the employment situation is very weak. i thought it was even a little bit toned down than what i expected. but the other thing, too, is this fed is very concerned about what fiscal drag and the ee quester is going to do with the economy. and with that risk overhanging us, i think june is off the table. now, if we get to look ahead to september, then there will be three more months to assess the impact on the economy, the economy is holding up, maybe then we can talk about it. but june is too soon given where they see risk in the economy. >> i think that's one of the key points that with the tax reincrease and the sequester, we should begin recession and we're still growing at 2%. pretty much ever economist is raising their forecast for the second quarter. >> we're in a sustainable, global and u.s. economic

expansion. i think we'll be in expansion through the 2016 election. this is a prolonged expansion partially because it's been on the slow side due to fiscal drag. and so we're not building up inflationary excesses. maybe a few risk excesses, but we're correcting a few today. the stuff i do think we're going to sell off hard are the speculative stocks that went up on short squeeze. if you didn't get a list of heavily shorted stocks with the amount of shorting has been reduced by a short squeeze, that stuff is going to get pounded because usually the shorts are short things and they're fundamentally weak. they were forced to cover. get that now, no more recovering. they're going to resort. so the speculative stocks that were up on the short squeeze spike are going to get massive, irrespective of -- >> you do think there's a significant change between then and today? >> it's a change in a technical sense we got overbought and we're start to go correct.

the fundamental moves is that the chinese orders were weak. to me, that is the fundamental news which was negative and probably contributed to the magnitude of the sell-off that we've seen in japan and europe. >> to me it's like people just keep waiting. we're all sitting around and listen to go every word ben bernanke says because we all figure there's going to be that momentary pain, whether you think that's a buying opportunity -- yeah, but whether you think that's a buying opportunity and everyone is waiting for the first person to run out the door, right? >> we have to just pull this thing out. pull it out. >> we went up 7.0% in six months and we've just this morning given back 10% of that. 1/10 of the 70% run and this was a bunch of highly leveraged speculators rolling in with billions. now they're rolling out and -- >> they're going to get a shot and they know it and it's a week before they go to the doctor. for a week been the pain they

put on themselves before they go to the doctor and after it's done they're like, that's it? >> the dumbest call i ever made in my career was the first week of 2001. the fed unexpectedly cut rates by 50 basis point. i thought this meant we were going to go in a new bull market. if you look back at history, the last eight times that they cut rates, the market had always gone up six to 12 months later. except for this time, it went up for one day and continued to go back down because stocks were too expensive, the economy was too weak. this time, again, we're seeing a short-term reaction to a very slight change in rhetoric, are really. i think it's going to away shorpt term effect. i think we're still in a bull market. corrections in bull markets are a perfectly natural thing all the time. >> you're just an economist. this is the guy. he said today this is the day you buy on a day like this.

but you think tapering is coming and you're still saying buy. >> i don't think why this is the correction. >> this is nothing so far, yeah. >> you can still buy today and both of them can be right. >> yeah, look. economists, would you -- >> they say they can be right. >> speculative stocks because the spec lafk stocks that were heavily shorted have gotten way above. >> they never give time and direction at the same time. >> he's not going to be investing in the speculative stocks that have a short squeeze. i think when tapering comes, it's great for the stock markets because it implies better economic growth and better profit growth and it's not necessarily so wonderful for the bond market because what they did, what bernanke did was like they confiscated half the corn crop of treasuries and turned them and they cleared the artificial scarcity and that is going away.

>> you know that's where you park your money when you don't know what the hell you're doing until you give it to ed e's fir. >> you know, i used to work -- >> wasn't price at the money marketplace until you park it and give it to someone who knows what they're doing. >> we offered yields in 1971. that's not part of our current business plan. >> anyway, everybody is staying, right? >> yes. don't go anywhere. >> stick around with us. we're having a good conversation. >> we're waiting for the real fight while we're here. >> when we return, we're going to have more from everybody here around the table on the fed and in the markets. if you're just waking up, we're going to call it a global sell-off now, not a slump or a swoon. the nikkei closing down more than 7% overnight. take stund, would you have got continuing coverage all morning long here on squawk. it's as simple as this.

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there's no risk free strategy here. if we move quickly and unexpectedly, which might suggest that the reason the market is where it is is because of the -- >> well, baus maybe because the market thinks monetary policy is creating more profitses and growth. that's the question. >> fed chairman ben bernanke testifying before the joint economic committee yesterday. and then i -- it reminded me of what fisher said also when he was on because he's initially said you have not wanted to do this for probably a year. >> right.

>> he wouldn't have done any of this for a year so you'd probably end it immediately. and he said, no, no, we would never do anything that would be that dis-tri eruptive. it would be very orderly and flow. so even one of the biggest hawks is not ready to do that. >> joining us on set is dick hoey, michelle gerard and ed. so what did we -- what haven't we talked about? where were the ten-year be, dick, in a year? >> it might be in the 2.5% range. we're going to drift higher. >> not 3%? >> i think it's early for 3%. there's a scarety of loan duration bonds, partially because budget deficit hes are coming down around the world. and also there is a substantial quantitative easing purchasing by the central bank. so there's an overpricing of

treasuries, but overpricing is caused not so much by economic fundamentals, but by manipulation of the supply. >> you've been there for a while. nothing has changed recently. how about you? >> we don't see anything changing. it's get to go 2 1/2 by the end of 14. we have a range this year only of a high of about 220. 180 to 220 has been the range we've defined. and next year, you know, 2 1/2 is our high point. and a lot of it is like dick said, you have a supply and demand in balance that's going to keep. about you but fundamentally, too, i don't think the economy is going anywhere fast. i don't think it's bad, but i don't think it's going to accelerate sharply. it's hard for me, kind of a hawk with this fed back drop speaking of social stake and pain, but i have to say, i don't see inflation being a problem, so i don't see anything from the macro standpoint that challenges this very powerful supply and demand. i think rates are still going to

do the same thing. >> and what's the multiple? anywhere from zero to five on the ten-year, the multiple should be above 15. so there's no reason to think about multiple contractions anywhere between 0 and 5%. >> no. the market multiple is basically equal to long-term average. i'm not counting on multiples to go higher. stay where they are and we'll get earnings growth. >> what ten-year number would cause you to -- >> oh, a much larger amount, over 4, over 5. >> when you're managing all that money, we're above that. >> historically, during the late stages of economic expansion and the bull market, you have a fed who wants a recession because inflation is out of control. i have five phases for monetary policy. aggressively stimulative,

stimulative, neutral and restrictive and aggressively restrictive. it's when you get to aggressively restrictive that the stock market crashes. we're now in aggressively aggressively recessionive. it's going to take us two to th neutral. when interest rates rise, because the economy is stronger, it doesn't disrupt the economy or the bull market or stocks. we're undergoing a correction in the bull market in the context of a long economic expansion that is going to run through the presidential election of 2016. we're not having a next recession in the next several years. >> you have been bullish. >> i have been persistently bullish. i've been the guy saying we've got to stay in there because there's going to be a long expansion. the way i would put it, bernanke's policy has worked. it has stimulated autos, housing, capital spending

without the big inflation surge. the bears have been fundamentally wrong. not just prematurely. they have been dead wrong. and we're up 145% from the devil's low of 666 in march 2009. and they are still saying, wait until i give you the signal to get in. how useless is that? >> look at car sales. they were 17 million units give or take for a decade. they fell below 10. that gap is about 20 million vehicles that we would have bought if we hadn't had the financial crisis. that we would have liked to have bought but couldn't. we have 20 billion cars. so that 15 is going to go back to 17, up to 20 or even higher. i think the global economy and the u.s. economy are going to accelerate in late 2013 and especially 2014. we're going to a faster economic growth, u.s. and globally.

and that's going to valid date the sustainability. >> i don't see the catalyst for that. i'm not negative. i just don't see what causes the growth rate to -- >> you just need the fiscal drag to slow down. >> yeah. but you need something to get businesses to want to go out and hire more workers and invest. i just don't see that in this environment. >> one of the characteristics is for small companies, like one, two, three, four people, houses are the collateral that allows them to start the two-person business. they are starting to come back. people who want to start up their own two-person business will not have collateral they will be able to borrow against to start. that doesn't help the big company but it will help the small. thank you. michelle, dick, ed, it's been

great having you here. our coverage of the markets is just getting started. there is a major selloff that took place in japan overnight. down 7.3% for the nikkei. europe opening in the red as well. a lot of markets down 2, 2.5, even more. u.s. equities are trading lower. down triple digits. we will check in with bob d doll at the top of the hour. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second.

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coming up, japan's government spooks investors overnight. nikkei off 7%. global market story next. plus, two well-known corporate leaders never afraid to speak their mind. both will join us on the set at the top of the hour. it's as simple as this.

at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon. nespresso. where there is an espresso to match my every mood. ♪ where just one touch creates the perfect coffee.

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if we see continued improvement and we have confidence that that is going to be sustained, then we could in

the next few meetings take a step down in our pace of purchases. >> those words rattling markets around the globe. today, another read on the jobs picture. we hear from two business leaders. david cody is here and excel r 8 founder bob nardelli joins us as well. senator ron johnson on why the system needs to be ripped down and rebooked. . the second hour of "squawk box" begins right now. good morning, everyone. welcome back to "squawk box" on cnbc. and if you are just waking up, you better pay attention. futures are lower this morning. at this point they're actually better than they had been just 20, 25 minutes ago. before we were talking about

triple digit drops. the dow indicated lower, but only 67 points. of course all of this is something we're watching very closely, especially after the nikkei dropped by over 7% in trading last night. it was a massive drop spurred by what happened here in the united states. you also saw what happened to the hang seng and the shanghai. hang seng was concerning because it was off by 2.5%. >> i think people do watch. he said on a day like this, tapering actually is something we've got to do. and eventually it would be a positive because it would indicate we don't need the accommodation anymore. you think, wow, what's going to happen here. we were never down more than 100. 103. >> again, much improved outlook even from what we had seen a few minutes ago.

with more on all these different moves, good morning to you, ross. >> andrew, very good morning to you. a sea of red when we started here in european trade. there are just 15 stocks at the moment on the dow jones stocks 600, which is what this wall represents behind me, that are in the green. the rest of them firmly in the red. but like those futures, we have just come off the session lows. dow down 2% at the moment. and 2% to 3% is the scale of losses we have for european equities. ftse started just 90 points away from the record high. you can see we're now another 129 points, down 2%. 2.5 for the ftse. slightly better but the composite, 47.7. it was expected 47.2. it means we will get a second

consecutive quarter of negative growth if that plays through into the gdp numbers. financial services and banks deeply hit today, along with basic resources. we had a pmi number out of china. it was in contractionary territory as well. banks down heavily as we saw, banks sought off heavily in japan. jjb going up to 1% following a spike in treasury yields. that started the rally in japan. dollar/yen 101/67. it was at a fresh four-year high. we dropped 2% or more from that particular mark as well. aussie/dollar continue to go weaken on the chinese data commodities stocks and commodity currencies being hit today. down at a 12-month low.

97/10. that's where we stand right now here in europe. we will wait to see what transverses today. thank you very much. ben bernanke talking about the benefits of the bond buying and what needs to happen before the central bank ends purchases. >> we are trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook. this is a judgment the committee will have to make if we see continued improvement and we have confidence that that is going to be sustained, then we could in the next few meetings could take a step down in our pace of purchases. again, if we do that, it would not mean we are automatically caming towards a complete wind down. rather, we would be looking beyond that to see how the economy involves. >> that testimony came in the morning.

in the afternoon, the minutes were released. they showed a number of fed officials showed a willingness to taper bond purchases as early as next month. joining us now with more insight is fed watcher. and guest host david cody, whaeur man and ceo of honey well and senior bob nardelli. welcome to all of you. obviously a little bit of a chaotic morning. what bernanke said yesterday and the fed minutes kicked off this panic in the markets that spun out in japan. you saw the market down by over 7%. >> yeah. >> if you were what he said, did this really change the equation or the outlook? >> i think, again, just played a clip where he talked over the next two or three sessions. i think there was some emotional reaction. your comments just a few minutes

ago we have seen the futures recover a little bit. i think the key is going to be what happens in the second quarter. we just came off the ceo consult. it was a little bit of pessimism about the earnings in the second quarter. dave and i were talking about that. we want to talk about the full year, what the gdp survey data says. 2.1 to 3. a little bit lower than what some of your earlier guests were projecting. >> that's true. when you look at this, you look around, what's the global outlook look like? have things been improving? is the economy really rolling around right now? >> no. we're going to continue to plan for an anemic global economy. i think it's a mistake as ceo to do anything else right now. as we look forward, we will assume 2% us gdp. europe around 0. china around 6 to 7. europe 4. >> so what does the fed see?

>> certain overreaction, not that the markets would ever do that. they are the guys who have been doing things until we get our fiscal house in order, doing the things that allow us to have the kind of recovery we have had. at some point government needs to start doing its job. so far we're not. we're doing it in little steps. my view, one of the big things that has to occur is we have to address our long-term debt problem. the discussion which some want to put off is a mistake. >> a lot of concerns that have been so paramount, they have aoefd. eased. i just realized how much honey well must love that for you to want to continue so badly. you're tphoplt any ceo.

you're ceo of the year. >> i was pleased to be on the committee. congratulations. this coveted award. >> the stigma of being a ceo. >> we have all learned we are business leaders. >> you look at his comments yesterday and you look at the economy, you don't think it is going to taper. >> what happened to the 6.5% unemployment? that was going to be -- >> that's for raising rates. that's not for tapering. >> i thought he wasn't going to taper until then. >> no. that's for raising rates, right? you can taper before 6.5%. >> absolutely. they have two exit strategies they have to handle here. one is getting out of continuing

to add to their balance sheet. that's what yesterday is all b. when do they move up from zero. nothing he said yesterday or in the minutes to suggest that is any less than a year or two away from us. >> good. >> bob doll, i know you've been watching. futures were down triple digits for the dow. now down 50 points. what happened in japan overnight makes you sit up and pay attention. what do you do today? >> becky, i think we're in a transition period. we're beginning to think about had is the fed going to start that multiyear reversal of what it spent the last bunch of years doing. when we released the fed minutes during the month of march -- eventually it's good news. when the fed begins to go the other direction, it means the fed is doing better and we can

look at better earnings. until then, it's all about the pes. earnings have done basically nothing for 18 months. it's all about improvement. we will eventually get some recovery. they are just preparing for for the multiyear process that will only begin with the economy is strong enough. >> you're saying -- you read the minutes. you saw what ben had to say. give us your read on all of this. >> you know, one of the most striking things i thought in the minutes was there was a lot of discussion there, but the fact that the market still seemed to think quantitative easing would continue. there's a lot of concern that the market wasn't getting the message that there was going to be a pullback as the economy got better. in fact, the economy had gotten better. i would like to bet that when bernanke was preparing for yesterday's testimony, he had it made up in his mind that the

first answer to the first question was going to heavily push people in the notion that tapering was going to begin. i think they thought it was now or later and better to get that idea through now rather than later. >> what does it mean? does it mean june, july? >> i don't think it actually matters that much. but i think the fact that it had to happen sometime in the second half of this year was important. what's helpful is you think there was a bit of constructive uncertainty. the minutes suggest some want to go in june. i think people are thinking june, july, september. the fact of the matter is they're not thinking 2014 anymore. >> inflation is the other side of everything too. >> he is hesitant to talk about an exit strategy. >> i'm with you. he was here saying there was no difference yesterday. i think that was just the method to the madness. i think it was also civilly done. bernanke absolutely wanted to

compared to the last time, three months ago. probably not staying at 85 for that much longer. >> yeah. i agree. the the other thing i thought was interesting was the relatively upbeat tick he had on the data. all they had in hand was a crummy jobs data from march. we were all pretty worked up about that. it is now off the table. they said, hey, we think the labor market is looking pretty good. yesterday in his testimony bernanke says job growth is 200,000 a month. that's up from the prior six months. no mention at all the last two months have been worse than that. he seems to have a strong bias to read the data as positive. he is not word worried about the drop in inflation. >> i hope all you guys are right. >> he either bugs people -- he's

a little fly on the wall or -- bloomberg terminal, how do you know all the stuff that goes on? >> bernanke calls him directly. that's how this works. >> wait a second. what david said is key. from somebody who hears all this and says i hope you're right but i have to plan for a different scenario. that explains a lot of what's happening. >> you guys are lagging. >> until you start to see orders and sales that you seem to think south there. bob was just out at the business council. i think he would say the same thing. you would never say ceos are walking around saying start investing. good times are coming. >> auto is up. housing is starting to come back. you have mixed news. may is starting to come on.

if you look at the tech center, there's uncertainty there about it. if you have some goes in ands and goes outs. there is a lot of conservatism. one of the big concerns was the concern over china. we saw a drop in the optimism about china. >> and the numbers sank for the first time in seven months. >> this is honeywell from 40 to 82. and that's just in a year and a half. that's all just management. >> that's why he is ceo of the year. >> that's leadership. that's got nothing to do with it. the economy is no better. it sucks. 40 to 82. that's just you. >> multiple expansion. >> talk about the first quarter. industrial sales, we were one of the high guys. ours was zero. >> i'm proud of you. look at that. >> thank you. >> zero growth. he's doing it where he doesn't

need to hire. >> correct. >> everybody is waiting. >> nice to know somebody is listening. >> this is also 85 billion a month. on your way to 160. >> at some point all this has to stop. >> it does. yeah. >> jobs is the best cure. am i right? >> yeah. >> 3% gdp. >> 3% in terms of our deficit helps too. fiscal authorities -- >> i'm worried about our long-term debt. entitles still need to get addressed. >> so here's an important point that bernanke made that has not been picked up enough. he didn't say we're going from 85 billion buying to 85 billion selling. we're going from some big number to slightly less big number. so whatever they do first is going to continue to buy bonds, continue to add to the economy just at a slightly slower pace than before. one of the messages you try to

drive home is we are not going to be some predictable metronome. >> right. >> i think they realize it was a mistake in the mid-2000s to be so predictable. they like to mix it up. >> you hear everything we just talked about around the table. does this make you a buyer of stocks? do you say every time you see a drop like this, which was barely a blip, do you double down or are you a little bit more cautious? >> no, becky. inflation is what kills bull markets. we don't have inflation. the fed can buy less and still have the same effect because of the massive cyclical decline. for me it tells me i want to continue slowly but slowly to ring the cash register on some of the defensive names that have done so well. >> bob doll, thank you very much for joining us. dave cody, bob nardelli will be

with us for the he remainder of the show. >> try to figure cody out. do you want infrastructure stuff? is that something you want? would honey well benefit from that? >> debt is one piece. >> you want the government to spend more money? >> he does. >> and give it to honeywell to build things? >> if you want to give it to me, i'll take it. at the end of the day we need a competitive agenda. we still don't have it. >> it includes infrastructure. i'm looking at all your motives. your comments, questions about anything you see here on "squawk", e-mail us or follow us on twitter. this is a cody story partially too. he's on the board. we'll talk to him about that.

welcome back to "squawk box". our guest hosts noe thing or two about dealing with shareholders in washington. bob nardelli, senior adviser and former chrysler ceo.

david cody of honeywell international is also a jpmorgan board member. one of the big stories this week, jamie dimon coming out on top. i think one of the things that shareholders in jpm want to know is what this whole fight does to the way the board now thinks about the company. obviously jamie had a huge victory in terms of numbers. does everybody beat their chest and say, great, now we're moving on? are there lessons in this? >> we're going to take a look at it and figure it out from there. having spent a significant amount of time in washington now with 59% of the vote, i realize i have a mandate. >> 59% of the vote. that is true. >> that's unheard of.

when is the last time we had that. >> what is the sense over the past couple weeks, i know a lot of board members are talking to investors. this was sort of a tough go. >> i work for honeywell. >> you feel you can't say too much about how things are? >> no. i'm just not going to. >> i think the vote was right. i'm a huge supporter of jamie. i'm a huge supporter that the ceo and chairman should be one and the same. i think the fact that he was able to guide jpm through the financial crisis, he has a vision, he has strategy, he has the board support. that's all critically important. while we have worked through it, we're not through it. and i think to have that retention, capability and his skill set was critically important. and i think it was a good vote for the company and the shareholders. >> that, i would agree with. >> i've made a similar argument,

but i also made the argument where you want the ceo and chairman to be the same person. in certain cases, depending whether there is a transition, i could see in the future jamie dimon becominged chairman as you transition to a new ceo. overall, do you think there should be one? >> i do. i look at enron. the separation didn't seem help them. in europe that is more the style to separate the chair from the ceo. i'm not sure that has had as much financial success. separating the roles in david's case would not have provided any value. clear vision, serving both roles as ceo and chairman. when you go to the boardroom, you have to turn your hat and be critical of the ceo even though you're one and the same person. but i think it's very important

that you retain those two roles. >> do you think at big banks specifically there needs to be more board members with financial experience on them? i'm taking you out of in specific situation. >> yeah. >> i'm implying to rudder and some of the other people out there. there have been a lot of talk about how banks need more experience. >> we have a high quality board. what you're looking for is a different perspective. you don't want a bunch of people who all think the same way. you want different perspectives. i'm trying to do that on our board. jpmorgan has done that on theirs. i think some of this is overblown. how do you think about what a board does, how they work together. there's this feeling that it's like congress and there should be this big adversarial discussion. what you are trying to do is come to the right decision for the company by exchanges insights and talking it through. that doesn't sound as exciting

as yelling and mr. deeds goes to washington. >> has the democracy gone too far? >> yes. >> we want to have the conversation. >> yes. well, there's a feeling sometimes that businesses should be like government. that it's more a democracy, everybody should vote. successful companies are not going to be successful that way. you have to be able to make decisions, and you have to be able to take that risk there's a difference between government. as government trades off efficiency. in exchange, you lose some sustainability. >> when we come back, more from bob and david. still to come this morning, we talk a lot about the global selloff. fixing our tax code. senator ron johnson. heard from apple ceo tim cook. how to get our tax system back in check. "squawk box" returns right after this.

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now the answer to today's of black trivia question. at what age did warren buffett purchase his very first stock, cities service preferred? at age 11. welcome back to "squawk box" this morning. i want to say becky quick got that pretty close to right. we were talking about it. i was very, very wrong. tpaoufpd point to go a sharper open. dow off 66 points. we have the nikkei off 7% overnight. so a lot the to chew on. we are an hour away from the labor department's weekly jobless report. economists are looking for claims to come in 345,000 for last week. that's down from the week before. 10:00 eastern, the government will be out with april new home sales.

2.2% rise, annual rate of 426,000 per unit. also, in this news, a little bit of a wrinkle from yesterday. st. louis fed president saying the qe issue, he was talking about it this morning, he said the central bank should stick with its current program, adjusting asset purchases as necessary. the asset purchase program is the most effective way to provide stimulus when rates are close to zero. if you have comments or questions, shoot us an e-mail or follow us on twitter. coming up next, senator ron johnson on corporate tax rates and what's best for america. he's our guest right after the break.

welcome back, everybody. the stock market is under some pressure this morning but it is not nearly as bad as it was an hour ago. right now dow futures down close to 70 points. they were off by triple digits. s&p futures down 12 points. nasdaq down 22. if you take a look at what's happening in europe, it's a similar situation. red arrows.

the declines are not nearly as bad. the nikkei down 7%, spooked by what it heard from ben bernanke. that translated into red arrows in europe this morning as well. we saw markets down by much more than they are now. ftse is down less than 2%. the dax is down 2.5%. red arrows not nearly as bad as it was earlier. >> joining us to share his views on this hot topic, wisconsin senator ron johnson. they heard testimony from tim cook earlier this week. i watched you and portman that day, senator. i guess i didn't see the early stuff. i didn't see the opponents of doing something with it. but i thought that it almost looked to me like because it was tim cook and because it was

apple, a company everyone admires for innovation and everyone else, if it were exxon and you said exxon didn't pay taxes, i'm not sure it would have been the same way. i think the worm is turning. people realize it's time to do something. am i wrong? >> good morning, guys. no. i think he did a real good job explaining what their benefit is to the world economy. apple is basically responsible for 600,000 jobs. and that was a point that was pretty well made. you know, when you combine not only the tax they paid in america but also their suppliers, probably totals 12 or 13 billion dollars. as an example, just quietly released a report.

2300 jobs. 11.5 million per job. i guess i would put my money behind the private sector versus -- >> senator, how many employees did you have? >> maybe 130. we were a very capital intensive business. >> but you know how that works. and it became very clear to most people watching if they have 60% of profits overseas and they can leave them there, they're not going to bring them back at 35%. they would like to. i would like to have that back here for plant expansion or dividends or for whatever. but it's your fault. it's congress's fault that it's not coming back. >> it's the federal government's fault. when you have 35% corporate tax rate and canada is 15%, if you're a global manager and you want to invest in the north american market, are you going to cite 15% or 35%?

it ends up being unfortunately a pretty easy decision. we need to make sure that our tax environment is competitive. the other point, apple sells 61% of its sales overseas. that's a pretty close allocation. you start getting transfer price and it gets complex. we need to simplify the tax code. i would scrap the entire tax code and treat all corporate as pass through income. that would eliminate all these issues. >> the idea that you brought up has been one that andrew brought up. if you're comparing canada to the united states. what we heard from tim bowl and bowles they think a rate would be in the 20s. what you said about scrapping everything and changing or dropping the tax code on corporate america, that's not going to happen. >> again, what i would say is

you tax all corporate income at the shareholder level. my business was an llc. you also have subchapter s. >> at this point in washington that's not going to happen. >> but, becky, we should start talking bit. senator ron widen is interested in the concept. we're going to run the numbers and see how exactly to institute that. in the end it would be incredibly economically efficient. you wouldn't have to wonder what canada or europe is doing. >> senator, bob nardelli here. question, certainly we would like to re-pa triate that money. more gdp, therefore more jobs, so there is a lot of healing in there. have you given any thought how

to repatriate? >> people talk about a tax holiday. some of the professors, i agree, one-time tax holidays don't work particularly well. so, again, what i would do, if we're going to tinker around the edges, we will end one a byzantine tax, compliance costs. we should get rid of the current tax code and start over with a very basic principle. raise the revenue you need, 18%, 19%, 20%. do no economic harm. it would be incredibly pro growth. all of our efforts needs to be targeted towards economic growth and job creation. that's not what's happening here in washington right now. >> senator, thanks. we appreciate it. you got the word out.

we also covered the part about how low we would have to go. if you only go to 25 and you expect everyone to do the right thing now, they can't. >> that's what i'm saying. >> you recognize the economic reality. >> you would still do 15. even though you say, please, it's for america. >> at chrysler, the challenger, charger and mini van are coming out. more on this morning's global selloff. and later eric cantor will talk the irs, jobs and much more. # 5-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime. tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 open an account with a $50,000 deposit,

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. welcome back, everybody. you're going to be remembering last week david tepper sparked a conversation about the market reaction to central bank's actions. >> if there is a true taper there better be a true taper. you might be in the last half of '99. so guys that are short, they better have a shovel to get themselves out with a grate. alex young of s&p capital

iq. alec, you have seen what's happened this morning. what do you think in terms of whether or not this is a true change in sentiment for the fed? >> well, i mean, i definitely think that we all know that the fed has been a huge driver. it has been a huge driver this rally. there's no more proof than what we have seen in the last 24 hours. as we look at currency, rising bond yields the markets are pricing in that we're running out of road on qe. the tapering is going to happen at some point. i think the consensus is probably a few months out. but the markets are starting to focus on that reality. so obviously that's more of a challenge for equities. >> short-term. is it good news longer term because we are talking about the fed seeing some strength in the economy? >> yeah. it valid 80s the tapering then it is good news. but i think, you know, we need to see good second quarter

earnings. we need a few more decent payroll reports before you can really start to justify the multiples above 15, which is where we are now. the 16, 17 multiples on the s&p. they require double digit profit growth. that's not really in the cards until next year. it's a little early to be pricing that in. we can do that if the economy continues to heal by the fourth quarter. you can justify a lot higher stock prices. for now i don't think investors should expect more upside from the 1685 level we hit yesterday morning for the next couple of months. >> our guest host on set today, bob nardelli, dave cody, gentlemen, you have both been watching the markets. you see the stock. is there a point where you felt things have gotten long in the tooth or were you prepared and waiting for a correction? gentlemen? >> i would say i'm pleased with the way the market has been going. we have benefited from it. there's another phenomenon here

and there is increasing recognition amongst bond investors that there is probably not a lot left to be had out of bonds. there's a shift that's occurring into the stock market. i don't know that it's all bred indicated on just earnings and where that is going. i do think there is a benefit to the stock market wealth effect. just as the stock market goes up, it gets better. i'm hoping that can spark some of the economic recovery. >> i'm a little more conservative on it, becky. i wake up every morning and thinking we're going to have a correction, and it goes up. i've been pleasantly surprised. it's been great for the morale, the psyche of the investors. i think the day of reckoning is close. but, again, i've been overly conservative. >> what are you doing with your money then? >> a lot of it is, you know, in the pillows, under the mattress.

>> he doesn't have to think a whole lot about growth at this point. >> you want return of your principal. >> i get up every morning and go to work like you, joe. >> nothing like me, nardelli. >> we're going to continue this conversation. >> don't act like it didn't happen. >> final thoughts from david cody, bob nardelli is going to stick around for the rest of the show, if you can even hear us. in the next hour, house majority liter eric cantor. changing the world is exhausting business.

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there's no risk-free strategy. unemployment is still high. so we can tighten monetary policy and address some of the issues that you have in mind. i think it would include big market correction if pwe moved very quickly and unexpectedly. >> it might suggest the market is where it is because of -- >> maybe because it is creating more profits and growth. >> that was ben bernanke

yesterday. markets are looking lower after japan sat up and took notice. let's get final thoughts from david cody, chairman and ceo of honeywell international. bob nardelli will be with us the next hour. your final thoughts before we let you escape. in terms of all the things you're looking at today, is it still the issue of the long-term issues with the budget that you will be walking away thinking about? >> i would classify it in two pieces. one is short-term, yeah, we have to be doing these things that will address the budget with the debt. we have a long-term entitles issue we're still not talking about. tax reform. but there's a fundamental change i would like to see focusing on. as you look at these high-growth regions, using usda agreements,

they pretty much agree. we're going to decline from 26% world gdp to 22. others from 47 to 26. big growth will come from high-growth regions like china, india and others who will grow from 26 to 49 over the next 20 years. we need to be doing something differently than we are today. we have gone from a billion active participants in global economy with west europe and japan to 4 billion. when you visit these countries like i do. 55% of our sales are outside the u.s., you see this tremendous awakening. we still act like we did 20 years ago. i keep saying we need an american competitiveness. energy is another.

math, science infrastructure, free trade. don't just focus on the regulation. that's the biggest long-term concern. >> you're a strong ceo. you're ceo of the year according to ceo magazine. all the shareholder groups think it's a no-brainer. i have people tell me all the time it's good governance. do you like being both use you like it? is it about power? >> it gets back to effectiveness. there's a tendency for governance folks to say, well, a company is like a democracy so it ought to work more like a government. and you say, no, that's not the case. they are two very different things. you want sustainability. you're willing to trade off efficiency. >> could you see a powerful

chairman telling you not to do certain things? telling you to do certain things? >> to me, that doesn't make sense. at the end of the day what you want to be able to do as ceo, if you're any good you have interaction with all of your board members, all your directors. they're brought on for a reason be, to be helpful to you, helpful to the economy. they listen to the people and you have this interaction. it's not like mr. deeds goes to washington. somebody is screaming. somebody disagrees. you have a discussion about it. >> the chairman knows the company that well and is that good, he should be the ceo. >> corporate governance people are absolutely sure he's wrong. >> if i'm not getting my job done -- the directors can fire me. >> david would never wait 1700

delays to make a decision on a pipeline. >> if we treat business like business, we start to treat them like they're the government. because big banks, there's this whole view that somehow they are ultimately at risk. that's why you have so much of this conversation. >> in canada i was ceo and had a chairman. if you have a different point of view, it bogs everything down. you come to a grinding halt. so many people are so sure. >> it doesn't mean the rest of the board can't say -- >> it's not power. >> it's the ability to get things done. >> david, thank you very much for joining us. bob nardelli will be with us the rest of the program. >> appreciate it. >> coming up, more on what's

moving the markets this morning. global markets lower. fed in focus as investors get ready for jobless claims at 8:30. and house majority leader eric cantor will talk irs, jobs, and the economy. futures right now, we have red arrows. a little bit worse actually but better than before. "squawk" is coming right back. [ penélope ] i found the best cafe in the world. nespresso. where there is an espresso to match my every mood. ♪ where just one touch creates the perfect coffee. where every cappuccino and latte is made at home. and where i can have exactly what i desire. ♪

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stocks sliding after yesterday's fom minute hinted tapering could come sooner than expected. we'll find out if jim poulsen is still bullish. our news maker of the hour, house majority leader eric cantor is here. he will weigh in on the irs scandal. tim cook's tax testimony and more. >> breaking unkpwhroeupt data. we will get closely watched jobless claims 8:30 eastern time. the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc.

i'm joe kernen. robert nardelli, founder of xlr8. >> say it fast. >> it's like -- yeah. it's like a license plate. former ceo of home depot and chrysler. more from him in a minute. first, becky has your morning headlines. selloff of the global markets. fears of fed tapering. ben bernanke testifying in the morning. >> we're trying to make an assessment whether or not we have seen real and sustainable progress in the labor market outlook. this is a judgment that the committee will have to make. if we see continued improvement, and we have confidence that that is going to be sustained, we could in the next few meetings could take a step down in our pace of purchases. again, if we do that, it would

not mean we are automatically aiming towards a complete winddown, rather, we would be looking beyond that to seeing how the economy evolves. >> that was the first of a one-two punch. in the afternoon we got the minutes. they showed a number of officials are willing to taper as early as the june meeting if there are signs of sufficiently strong and sustained growth. the news sparked a downside swing in equities. equities had been up sharply. they ended the day down sharply. then it's what happened in asia that made people sit up and take notice. nikkei dropping 7% overnight. that is the biggest drop in two years. in europe, we are seeing weaker trade. things are off their worst levels. ftse down 1.8%. cac and dax off 2.5%. here's what david tepper said last week.

>> if there's a true taper, there better be a true taper or else you're back into the last half of '99. and so like guys that are short, they better have a shovel to get themselves out with a grate. >> joining us is jim poulsen. on the squawk news line, former fed governor larry lindsey. why don't i start with you and see what you think, because you have been incredibly positive where this market was headed. was this a change yesterday, does it do anything to diminish your enthusiasm about the market, or is this a sign that the economy is proving strong enough to take over itself? >> well, i've been of the view that the market would touch 1700 this year, becky, since year end. we basically have gotten to that level here. and i'm not inclined to raise that target for the rest of the year. i kind of thing that confidence, becky, has been the driving force here for increasing the stock market. i think people are finally

giving up the armageddon ghost and looking at a slow, slow but sustainable level, and that's allowing them to have higher multiples. and in the gold market it is evidence. and junk bonds yield is in the recovery. and greek bond yields now seven handle as opposed to 40 handle. that's all about confidence. the problem i have for the second half for the stock market is i think it's going to digest its gains because the confidence that we have run through the other markets is going to run through the bond market. i think the hurdle is going to be rising bond yields in the u.s. treasury in the second half. and then, you know, that's also going to bring up the debate we're already having about whether the fed needs to pull back on qe. although i think that's a positive, it will create some

consternation. i think we're going to be a trendless side ways market from the 1700 level. >> jim, that's the first time you have been pulling in since when? >> yep. it certainly is. i've been bullish for the bottom here. it's not so much -- i think, becky, if we keep inflation inform control the next seven years we have recovery ahead of us, another five years's worth. if we do that there's a lot more upside in the out years. i just think this year we're going to have to digest a reprising of the bond market just like we have reprised these other markets. i think we're going to reprise bonds. and i think that's going to take a bit of digesting the rest of this year. maybe then once that happened we can sustain another run. >> i still have a tingle in my leg, poulsen. i'll tell you why. if we're able to stay around here or 1700, that means that this day of reckoning that a lot of people are looking for, it

doesn't come. and that would give us for the year, 21%, which is -- >> very good. >> that's awesome. so even though you're saying we don't double what we had in the first half of the year, we don't continue at that pace, if we hold on to what we have already done at 1700, that's pretty good. and i wouldn't call you getting bearish really, right? >> i wouldn't say so at all. >> that's good. >> what he is saying is the gains have been set at this point. >> but most people think it's going back down. >> you're not saying you missed it. you could still get in the second half of the year? >> i think so. i think, becky, there will be buying opportunities and set yourself up for next year for another run. i really think we're getting the flip side of 2008. we had a trucrushing of confide.

when they revalued for depression. and now what we're starting to see is we're revaluing securities again for a different reality. and that is there isn't going to be an end of the world. and so even a slow growing 2% economy is worth a lot more than a depression. >> will we be able to buy under 1600, jim? will we be able to buy at any point under 1600 between now and the end of the year? >> sure. >> really? >> it might be possible, joe. i don't think we're going to sell off that much. i think growth in this country will stay pretty strong. you're going to have a mexican standoff 3% in the second half better than expected, and rising yield pressures. >> i don't know if you're allowed to say that really, are you? what's a mexican standoff? you better find a new way -- >> you can say mexican standoff.

>> is that like at the alamo? >> i think so it's okay. >> larry, let's get your thoughts about what bernanke said yesterday if this really changes the equation. >> i got very much that the chairman intended to signal a taper. if you read the testimony. if you look to what the president said, it's all clear because it's not expect to go taper. it would take extraordinary conditions for it to happen. i think what happened yesterday with the miscue on selloff, the problem is the fed haslett the genie out of the bottle. liquidity is driving the market. driving the market since qe1. once you let the genie out of the bottle you can't let him back in.

you better hope you get your three wishes. they haven't gotten their three wishes yet, and i think they're going to have to continue doing what they're doing and hope and pray they are able to generate a self sustaining expansion, which we don't have yet. >> we did talk to greg upp this morning. he thinks this is signaling and bernanke was deliberate in trying to get out there and maybe correct the market take from the last time people were looking at the minutes where we realized -- they changed some of the language. they said we could either go up or down. they said, gosh, we might bring more. greg think this was a very direct situation where he was maybe directing that reading of the tea leaves. >> i think that would have been in the written testimony if he intended a correction. and it was not. and i think you can read the testimony. it's hard for me anyway to reach

that conclusion. it just doesn't make sense. they have not achieved their targets yet. they still have inflation falling. one percentage point where they are ultimately shooting for. low twos probably. in that environment you really cannot signal to the market that you're going to cut back. and i think the reason for the dialing story is the fomc wants to give itself flexibility. and the problem was if they do dial down markets were likely to extrapolate that into continuing to dial down. look at the size of the adjustment we got from the chairman saying the answer to a question that they could possibly begin to taper around labor day. that's it. and we got a massive worldwide selloff. imagine if they actually did

taper how big the selloff would be. this is not something they can risk. i think they were afraid if they did actually dial down, they would have to dial back up again. i think that should be a big loss in credibility for them, and i wouldn't recommend it. so i think the end result is they should not touch that dial until they are very confident that they had achieved their objectives. that the genie had given their three wishes. >> what's your take on the market going forward for the balance of the year? do we go side ways as we just heard, or is there still some growth out there? >> i think fed had better hope that the market keeps going up. if we go side ways -- remember, the whole qe story is to drive a weight effect which boosts consumption, gdp going, employment. that is the whole story. has been the whole story from

the beginning. at the moment we have some progress. but just back out the math. if you stop it at this point you will not get what the fed wants. if the market were to stop, i think we will stall out pretty quickly. i think the fed has no choice. it has to hope, pray, do everything it can to get the market higher. >> what if we hit 1800? chances of that are what? 5%? 10%? it's not out of the question, right? >> no, it's not out of the question. we could break 1600. we could run to 1800. we certainly could. i think it's change in direction. i don't agree this is so dependent on the fed. i believe the fed could do more improvement by curtailing qe. i think that would build confidence that even the fed sees some improvement in the

economy. i don't think they're doing anything for fund memories anymore. how does it help the economy? i think what would help is if the fed itself showed confidence by suggesting they need to start adjusting or normalizing. i think that would be more beneficial. >> he's been -- we give him a lot of grief. but jim has been right. >> that's why it is worth noting -- >> absolutely. but i'm just saying holding on to these gains and maybe going to 1700 is pretty dim. >> he's not saying it's collapsing. >> i'm larry. i don't think tapering is going to happen. >> well, it has to happen sooner or later. >> before end of year? >> well, no. at 6:00 a.m. we were talking about june. >> other people started. >> well, at least they're not going to add. >> i think they're going to taper before the year is out.

>> i don't have a beard. his politics are off. >> jim -- >> i think it's going to warm up in minnesota too. >> it's going to be 80 degrees year-round with the co2. >> jim and larry, thank you both very much. coming up, after yesterday's big market swing, u.s. equities futures, take a look, they are turning the opposite direction. dow off 77 points. nasdaq off 20 points. up next, house majority leader eric cantor will join us to talk about the fed, ceos, and the irs scandal when we return.

♪ well, we've all seen it. and that is the fifth from that irs official and what's going to happen. let's talk to someone right in the middle of it, all these congressional investigations. congressman eric cantor, leader.

i always refer to him as leader cantor. you never tell me not to call you leader. >> i always tell you to call me eric. >> okay. but then it looks like we're too cozy. as an objective journalist, i have to maintain my -- but, eric, seriously, we have talked about it, kicked it around this morning. andrew's dad is a really good lawyer, knows all the stuff. >> right. >> can isa call her back to say you have waived -- taken the fifth because you made that statement? people think that that wasn't enough of a statement. >> like andrew's dad, i'm a lawyer. i wouldn't say i'm a good lawyer. all i do know, joe, is if that were to happen in court and a judge were to to make a decision and she waived her right to claim the fifth, then he could compelling her to answer questions. if not, put her in jail.

so obviously we don't have that ability here. and really i think this is something that really reflects the frustration growing about this investigation. she is an employee of the taxpayers. we need the answers. she should be providing them to the people she works for. and we're going to continue to try to get to the bottom of what looks like a growing assistance of an aoe tkpwroepblgous abuse of powe egregious abuse of power. >> i can never imagine anyone freely disgorging all this stuff. it's just the way the world works, isn't it, eric? are you living in a dream world? >> i think what this is, joe -- i mean, look at it. you have elections between political parties.

and the one that wins is able to go and promote its policies through governing. but that does not mean that you should take something neutral like the tax laws. >> right. >> or the authority to enforce it and go after and discriminate against political opponents. >> do you think a special prosecutor is something that -- would you give it 50/50,000? even democrats -- they sort of said if we don't do it the other way, the worst-case scenario will come. so let's do it the other way. >> i'm really proud of the way that chairman isa, camp and others are conducting these hearings. they are being methodical and serious about trying to get to the bottom of what's going on. and obviously there needs to be some finding of criminal wrongdoing in order to call for a prosecutor. and that may come. but right now we're trying to be

very methodical about getting to the facts here. because if you look at it, and each day there's more evidence that comes out, there has been an abuse of power going on at the irs. frankly, there's news in other areas of this government where the obama administration seems to have lost focus of its obligation in governing. and instead we on the hill don't know how to keep the phone us where they try to restore the the faith in the government and our economy. >> there are two issues here. i want to differentiate them and get their view. obviously we're all quite offended by what happened at the irs. there's a secondary issue of what we were told and when we were told by the administration and others who knew about it. clearly the underlying problem is a real problem. the question about what they knew, when they knew it and when they told us, how much of that

is an issue given members of the administration did know about the investigation or knew it was happening as early azodies 2012. but they knew what their responsibilities should have been then to tell the public about it. >> if you have an ongoing ig investigation or audit and there comes to you information about this type of behavior where you are discriminating against political opponents, i do not accept the fact that the white house says we couldn't interfere with that audit or that investigation. that's not true. if they knew that kind of activity was going on, that is clearly a point at which they should have gone in and said don't do that anymore. and that would not have interfered with the continuance of that investigation by the inspector general. so we're trying to get to the

bottom of this to find out who knew what when. but clearly these actions have that come out on the part of the irs and its employees are unacceptable. >> a couple of question questions. what does this do for the agenda for the balance of the year. they were to hire 1800 people. they had an agenda on tax reform. does everything get taken off the table and get consumed with this issue? >> i'm hoping we can maintain our focus on restoring the trust in our government, and the faith in our economy. it's up to this president to come forward and work with us to create the conditions for economic growth. we have long said that this tax code is entirely too complicated. we need to go about tax reform and simplifying this code, bringing down the rate to create growth in this economy. we're staying focused in the house on things like energy this week. we just passed a bill on

keystone pipeline. we're having a bill today to try to make college education more affordable. >> we have a break coming up. i want to talk about tim cook and all that. we will have you back and do that again. thanks. leader cantor, thanks. coming up, breaking unemployment data 8:30 a.m. we're looking for 345 first-time filings. ♪

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. in just a couple of minutes, breaking employment numbers. we are a few minutes away from the closely watched weekly job sls claims, which are more important than ever in the wake of what ben bernanke said yesterday. u.s. equity futures down by 73 points for the dow. "squawk box" will be right back. [ penélope ] i found the best cafe in the world. nespresso. where there is an espresso to match my every mood. ♪ where just one touch creates the perfect coffee.

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welcome back to "squawk box". jim is standing by. bob joins us from new york. let's get the numbers, jim. you got them? >> yes. as becky said, they are more important now. 340. a little bit better than expected. the revision from last week 363. so a little bit worse. two weeks ago the number was good. last week, not so much. today a little bit better. so it's in conclusive. basically what he said that i got out of it, either they're going to stay around forever or then again maybe they're not. to me that didn't seem a clear signal. but the market seemed to be a clear signal. the thing i took away at the most, there's a buzz on the training floor not caused by the

possibility of a correcting stock market but the rates going up. banks unhedged and that's the thing that could make this move even better than it should have been. >> in my own mind there is a little bit of a difference. i thought, uh-oh, that's a really good claims numbers. it means they're tapering. so that's a little different than two weeks ago where we really wanted a good claims number for the the economy. >> no doubt. did he really say it of going to taper? >> some day. it depends whether we have gotten a little closer psychologically than we were. >> no doubt about it. >> are we closer psych lodge kael? we have diametrically opposed opinions all morning long. >> i think when i look at the testimony, the fed chairman made clear the one thing he's most concerned about is the fed not

take its foot off the gas too soon. it's true he talked about how in the next couple meetings they could decide to institute this taper. look how the markets are reacting. if you ever wonder what would happen if the fed tapered, take a look at this as a small sample of what might happen. i think the thing to keep in mind is they hate to get whip sawed. just think. if they use quantitative easing changes like changing the federal funds, they don't change them up one month and down the next. they want to be very, very sure that before they change tapering that it's the right thing to do. >> from 85 to 75 would not be a big deal. >> no. >> you have been consistently -- andrew thinks it is not going up.

you think the economy is so weak there's no reason to taper. >> i'm not a great fan of the impact of quantitative easing. a lot of it is psychological. i don't see many indications that it's getting that much better. >> there's the only one way they can ever taper. you said go from 85 to 75. if they do that they will let the market know it has to be accompanied by strong rhetoric. it has to say something like, yeah, we're going to back off a little bit. but we're going to come back in and slap all the shorts back into place. they can do that for a time and not let rates get particularly out of hand. that's their only option. it has to be strong rhetoric. >> i don't think they can use qe that way. never did it with the federal funds.

i think once they make -- >> i'm not even saying that they necessarily have to do it. look at japan. it's not losing control. they're the biggest qe-er of the whole bunch. the fed doesn't want to risk that. the only option is to walk about with it pointed. that's my only option. >> what jim just suggested sounds right to me. what's wrong with it? >> the fed doesn't like to be whip sawed. they don't like to move policy one way and have to move it back. they could use qe like they did the fed funds rate. the fed never put it up and put it down in adjacent months. think about the fed using this as a real monetary tool. >> people were in shock and awe they were going to do that much. and i remember faber saying qe2,

3, 4, 16, 17, 18. we said no, no. we will never get that addicted. never to the point where we think business as usual. and here we are. the idea they could go down from 85 to all of this is like, oh, my god. to think it is such a big deal is scary that we're in that mind-set. >> when they take that step in that direction they're in a new direction. once they take it, they will be willing to take the next and the next and the next. the problem with the previous qe episodes is they had quantitative limits. that's why we now have steady of qe6 we have qe infinity. this goes on and on until they stop it. >> that makes no sense to me. what i'm hearing is they have to wait to a time where they choose a new direction despite what could be happening all around

them. unless they plan on going a year and a half past when they should have exited gracefully, it doesn't seem to me they can do that. >> they better taper. or there's too much. >> i don't know the tepper would be happen if they went from 85 to 75. i think he wants even more. >> at least a start is a start. >> do you think it was i trial balloon? >> i think it was. someone said it was a miscue. i think it was a trial balloon. >> i think it was a trial balloon. he sees what happens this morning. he will be very cautious of it. >> 100 points isn't the end of the world and now it's 80. >> 7% in what japan. >> there was emotional reaction, as you said. oh, my god, they're talking about tapering.

so i think it's a mixed review. is it really robust enough to handle the tapering and the easing, or is it -- >> is that rhetorical? the answer to that is clearly no, in my opinion. economy is not robust enough to handle them going off. if they aoefd up too much right now, the markets would be a disaster. >> it sounds like everyone at the table -- no, no. you think that. >> i do think that. right before being -- i think it's right before being good enough to taper. >> you think we're there and i think we're not. >> three straight swoons. and i don't think it's going to swoon this time. >> eric fisher -- >> i don't think it's in the next five months but maybe before the end of the year. >> we're close to the end of the year. >> if the survey gate is right, second quarter earnings. >> i think they should. i think it's clear -- i'm with

poulsen. i think the worst-case scenario, the animal spirits are brewing. >> and you don't think the day that they actually -- we were talking about deal making during the commercial break. >> youredi 85 billion? you can't have 85 billion forever. >> we have to get our training wheels. you get the training wheels off and you zoom, zoom. >> don't we have to have a better fiscal policy to turn down the monetary policy? >> what? >> i don't think this is -- >> for entitlements or stimulus? >> get the economy going from that standpoint, joe. get the gdp up. >> he was definitely more negative than i thought. >> i think the viking analogy is a miss. i think it's a drug analogy.

but it's not -- >> not methadone. but you think it's painful to go through. >> i think mayor main lining the whole thing. >> dry heaves. >> nice reference. >> thanks, jimba. are you from the south? more from bob nardelli. plus, markets with marketist and strategist rich steinberg. a programming note, today at 9:05 don't miss hp ceo meg whitman. bny mellon combines investment management & investment servicing, giving us unique insights which help us attract the industry's brightest minds

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welcome back, everybody. in the futures this morning have been weaker throughout this morning. in fact, at this point they're taking a turn for the worst. down 87 points. the lowest is down by 103 points. we had improved to down 50 points in the premarket trading. but right now, as you can see, down 85 points. s&p down 13 points. and let's take a quick look at some of the stocks on the move. hewlett-packard reported quarterly profit six cents better than the street was expecting. it raised its forecast for the

year. meg whitman coming up at the top of the 9:00 hour. ralph lauren is reporting profit of 1.41 a share, excluding certain items, 11 cents better than the street was expecting. revenue, though, did fall a little bit short of consensus. >> as you have been discussing all morning, global markets selling off after yesterday's comments by fed chairman ben bernanke. it september confusing signals on the timeline for tapering. joining us on "squawk" news line, is senior u.s. economist at ubs and president and cio of steinberg global asset management. hopefully, guys, you can read some of the tea leaves. drew, what did you make of ben bernanke's comments and how should we all read it? >> i think what you can make is tapering is a while off. and if you look at the timeline they're working with, they're f they're going to start thinking about it in a few months, you

have to assume they're going to do it in a press conference. they have to explain why they did it. you're really looking at september, december, march. you're still thinking q1. it is confuse to go see the markets behave this way. i don't think anything he said really changed the timeline that much. he just clarified the timeline. >> in that case it seems people are overreacting. rich, where are you on this? >> if drew is right and the messaging does go to q1 time frame, i think you will start to see, even on a pull back, people starting to focus next year's earnings and you will see multiple expansion to the 15, 16 range. i don't care what people say. i care what people are doing with their money. >> what are you doing this

morning? 9:30 rolls around. what's the plan? >> we have been raising a little bit of cash because we have had targets reached. we will let the market settle in under 2%, 3%. our bottom up portfolio managers are finding a lot of values in some propane and value names. some of the dividend names have to come down a bit. we will be starting to redeploy cash on a little bit of a pullback. >> rich, bob nardelli here. i tend to agree with you, we want to take a wait and see. what are the biggest indicators that will trigger a movement from what you just said about cash and your investment. what will you look to to make those decisions? >> well, i think, bob, psychology plays a big role in this when you look at pullbacks. if you look at the hedge fund side, they keep saying we're finally here, we're finally here. they will probably be covering and legging their wounds. the retail investors is a

different story. we always felt rotation from fixed income back into the markets. but actually we think most of the money that's been deployed has been cash on the sideline. so i think, you know, we manage money primarily for high net worth individuals. we're seeing a lot more incremental cash come in. >> joe and i have been talking here. i think some of the shift is the result of people willing to take more risk. you know, they become frustrated with low earnings, low returns. and in fact, they did jump into the market. that has generated some of the lift we see up here. is that what you're hearing? >> absolutely. at the end of the day most people have to eat their cash flow. and if they can only get 1.9 or 2% in a 10-year note but at least 2%, 3% in high dividend paying stocks. and the fed signals they're going to continue a wait and see

or incremental look at the tapering process. you're right, the money has to flow. ultimately people invest so they can live their lifestyle. pensions invest to meet obligations. >> drew, when we -- i was toss to go get the claims number. and when i heard it and it was better than people thought, it was 3.40. just my own feel, right, when it hit was uh-oh. that's a good number. that's going to mean tapering. and the market was down. if we see from here on out -- if the economic numbers are good and it causes the stock market to either not go up or to go down a little, wouldn't that indicate we have sort of shifted and just psychologically? for a while everything was good. bad numbers were good. good numbers were good because the economy was coming back. if it gets to the point where good numbers caused the market

to go down that means we're getting close. >> if the fed is moving, the economy is doing okay. should we be scared if they're buying 5 or 10 billion less a month? no. i think what's going to happen, everyone is understanding the volatility will move back up. they're still not convinced that growth is coming. so you have this kind of lower growth, higher volatility story. no one likes that. bonds don't like it. commodities don't like it. equities don't like it. and so i think that's why you're getting this market response. the simple fact of the matter is bernanke is not in a hurry to do anything. he doesn't want to derail anything. to be blueprint, every time the equity market has gotten nervous, he has blinked. >> i don't know if you saw the conversation earlier, this conversation about the moment the fed decides that they're actually going to taper, going from 85 to 75, what have you, do

they leave open the option that they can then go back? >> they certainly have been trying to do that. and i think, you know, when dudley talked about the exit strategy and said said our old exit strategy we laid out isn't going to work, i thought that was a very healthy administration. because what they need to do to exit is make sure no one can price in the end game. and the problem with asset sales is everyone knows how big the route sheet is and how good it should be. if they try to sell assets it would be an outright disaster because the market would have priced it in. >> no way to get around it. >> there are ways to get around it. the path that they will take. >> yeah, but when you within the what to tried like that, they're going to want to know. >> we can stop. we can go back up. we can do all these things. if you're a market participant, don't just price in 85 to zero, because you could be wrong.

>> drew, rich, thank you. >> who is that calling you? did you say something wrong? >> jeeves. >> your car is here. ready to go? when we come back, more on the with jim cramer at the new york stock exchange right after this. changing the world is exhausting business.

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let's get down to the new york stock exchange. jim cramer joins us now. jim, what do we make of all this overnight? >> i just think it is very difficult. you have "wall street journal," fed leaves market guessing. "new york times" -- fed endorses stimulus but misses china just blew up last nim. japan was up before the chinese news came up. i think that's extraordinary to be up but then down 7% is extraordinary. >> where are you, jim? i think now maybe stocks go down when there is good economic news. >> i thought your analysis was dead right. we are now where good news is bad. you kind of don't want to ever be there because then every time you get a piece of good news, people say, we got to sell the banks.

>> paper! paper! >> i know, it is crazy. it is fun for us though, isn't it? i think if they said we're going down to 84 billion we'd panic because it would be the direction. >> one thing that i've heard -- i started to watch your show for all three hours -- there's no one who thinks you should just buy it right now. then you'll be 3% from the top. there isn't a single guy that wants to buy. >> i want to know what cramer says. >> yeah, we want to hear what you say. >> why not let it come down a percent or two and then take a look? there is no hur prip that's the problem. we're up 16% coming in to today. there is absolutely no hurry to buy in. >> you think bernanke intended to say anything yesterday? >> absolutely not. i thought he intended to say nothing and i thought he did a really good job of it. some people are terribling, they get an employment number like today and i see what he was saying, he was saying he's done. listen, what he was saying was i'm not done. >> like a rorschach. >> did he say nothing or did he

say nothing? >> you and dave cody. dave has a great book of business, 45% domestic, 55% overseas. could you have just heard a guy saying things are weaker target walmart? could you hear two companies say things are weaker? draw your own conclusion on a day like today. >> i'm hoping he's lagging. it is possible that a lot of ceos are sort of -- that they -- things could be getting better before they knew? if not, he said things are awful basically. >> i live next door to david. i was barbecuing other day. i said how you doing? he said things aren't so good. i mean no, like how you doing? i just wanted to know whether he like the turkey burgers i was making. >> i said are you just power hungry? why do you want to be chairman and ceo? he made some great points as to why it might be more effective just to be both instead of having someone -- >> how great was he when he said it is not congress, it's not a democracy. he's so clear-headed. i love it. >> that means this whole shareholder democracy thing has

gone too far. that's a hard thing to say for a lot of people, they don't like to hear that. >> it was pretty candid, wasn't it? it was brilliant discussion, guys. >> who governs those people that are making those issues? who's the checks and balance on those organizations? >> i mean theoretically lee rayman is the toughest guy i know. >> glass lewis, iss, all of these -- >> those guys. they do no homework. they can slag anybody. they slag some of the greatest businessmen in the world. seems really unfair to me. >> jaime cramer, see you in a couple of minutes. when we come back, we will give our guest host the lard word. "squawk box" will be right back. we went out and asked people a simple question: how old is the oldest person you've known?

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you can see 59:15. we have 45 seconds for some really good words of wisdom. how do you fix this country? >> i think it's been great being with you. the differentiation between all of the comments this morning has been something -- >> isn't it great though? is. >> yeah, it is great. trying to navigate our way through it. you guys do a great job. i am with dave though.

i really think we've got to get an underpinning where the economy has much more strength, joe. we talked about it. that's through better job creation. that's through the energy independence we've talked about. andrew, i think we've got to get a better fiscal policy -- or a fiscal policy so the certainty of uncertainty is done. >> perfect! >> right now, it is time for "squawk on the street." >> beautiful. good morning. we are setting up for a choppy open as the nikkei plunges 7% overnight. global markets are in the red. welcome to "squawk on the street." i'm carl quintanilla with david faber. jim cramer at the nyse. only the ninth time in half a century that the nikkei has fallen that much in a single day. reacting to china's pmi which shrank to a seven-month low. european markets moving lower in unison and our own futures are down but the dow will be helped this morning by of course hewlett-packard, the stock is up