as it was another active session in japan overnight. the nikkei actually down by 3.8%. the volatility has been off the charts. this drop today came after a speech from prime minister shinzo abe. he pledged to boost incomes by 3% annually and to set up special economic zones for trying to attract foreign businesses. today's strategy announcement was his third measure aimed at boosting growth in the world's third biggest economy. the first two arrows, as abe calls them, first up was loosening monetary policy and then boosting public spending. investors seemed to be less than impressed by today's announcement, which was expected, but they were looking for some of the details there, and that seemed to be what was the disappointment. we'll have more from kaori enjoji in a few minutes, standing by in tokyo. meantime, if you look at the trading in europe this morning, there are red arrows across the board. weakest numbers coming in london with the ftse 100 down close to 0.9%. we will also check in with ross westgate in london if a few minutes, but if you want to see how it's all impacting things

here, you can see dow futures down by just about 20 points. yesterday was that big disappointment. finally you see that streak broken. 20 tuesdays in a row of the dow ending higher. yesterday, as all good things have to come to an end, and yesterday that streak was ended. let's get over to scott right now for some of the morning's top corporate stories. and scott, thanks for joining us. >> becky, good to be here. thanks so much. apple facing a limited ban on some iphones and ipads in the united states. samsung won a significant legal victory against the company yesterday. u.s. trade agency says apple infringed on a patent owned by samsung. the agency slapped a ban on the import or sale of iphone 4, iphone 3gs, ipad 3g and ipad 23g, distributed by at&t. if president obama doesn't veto the order, it will go into effect. meantime, a blackberry with a keyboard is set to hit u.s. stores this week using the new operating system. t-mobile will start selling the blackberry q-10 today and at&t

will start taking orders. verizon's already taking preorders. toyota's recalling about 242,000 prius and lexus hybrid vehicles. the automaker says brake pressure parts in the vehicles could crack due to vibrations slowing response times. no accidents or injuries have been reported. joseph? >> thanks, scott. and the money doesn't move quite as fast on this show in the morning. it moves, but you know, the market's not trading. you can see the ticker down there. >> free market's working. the free market's going. >> i'll try and get adjusted to all that. >> don't sell us short. >> there's no stocks going by. so you know, you're usually -- >> i'm fixing my shoes. >> return the turntables? >> are the najarians not here? >> they're not here. i can get a ponytail, but it's not 78 speed. i'm not going to say it's 33. what was it, 45? 45s. yeah, it's about 45, but it's not quite as fast, so take a deep breath. >> i'll adjust. i'll try. >> you're sure? all right. >> easing into the mornings, are we? >> yeah. you know, it's early.

>> if he thinks -- >> take that off. what are you doing? >> take the jacket off. >> that's part of the problem here. get comfortable. >> stripping. like mr. rogers. >> now they're playing porn music somehow. i don't really get that. topping the u.s. economic agenda today -- stop there -- is jobs. the may adp report is due out at 8:15 eastern. polled economists are looking for 175,000 private payrolls. mark zandi, who is the new guy at adp, brings the numbers to us personally on cnbc. so, we will get them from him. now, this is interesting. >> wait a second. >> this is very interesting. >> not taking a shot of that. >> they missed the shot of that. becky -- this is what she was just doing. she has a skirt on and she had her leg -- i thought it was mrs. robinson. are you trying to seduce me? >> it was not that. i was going sideways. i'm trying to hook my shoes. i did not buckle my shoes this morning. >> shoe-shoe ka-cuckoo-ca-choo.

>> just stop talking. ♪ >> you really did? you've got your leg up on the -- that was like the publicity shot where you're looking at dustin hoffman through ann bancroft's -- >> stop calling me mrs. robinson. she's old. >> she wasn't. she was like your age. what were we talking about? jarks zandi, maybe? >> no, no, this stuff! this stuff is happening today. this stuff is happening today, the adp report, productivity and costs at 8:30 eastern, ism manufacturing -- nonmanufacturing. the other ism number that was manufacturing in a warped way gave us that big gain because it was weak. i don't know what happened yesterday. it would have been 21 straight days. you knew that that wasn't going to keep going for long. we also have factory orders at 10:00. then at 2:00, we have the -- now what? >> i'm fixing it! i'm just fixing it under the table. i have straps on my shoes that

need to be buckled and they're hard to buckle. >> okay. you just shouldn't try and do that with that -- viewers, we try to bring them in on everything. we try to bring them in on everything. >> never mind. i'll leave them unbuckled. >> we mentioned the global equity markets, but let's look at the broader story and see where oil is. oil. there has been no reason really to even mention it for the last three months. >> it's been shockingly low. >> between $90 and $95, right? i don't know that it's low, but no volatility. >> well, it keeps falling to low measures. i think it was like the lowest level in over six weeks -- >> you mean volatility or the level? >> no, it was below $93. i mean, when you talk about $92, the bottom -- >> $90? >> that's my point. especially with all the fracking, you know. i think oil is a thing of the past. >> every time we ask an oil guy that, they say it's because the economy really is picking up around the globe. >> i think it's because those guys know how to do it. >> opec? >> yeah, pretty good at that. let's look at the ten-year, which has been kind of

interesting. but given the, you know, it has not surged past some of those resistance levels that we hit. and now some of the data is not as strong, and you know, it's kind of stabilized, which i guess people are happy about. what they don't want is a real quick move, even if it is higher. it can go higher, but not like a "fast money" type move. >> definitely don't want a "fast money" move in rates. >> starts moving really fast starting around noon. then the dollar, with the euro, it's been around 1.30, around 100 on the yen. and then gold, someone else say that it's just not even going to stay at these levels. someone else -- >> 1,400? >> i think jimmy rogers at some point might have said something and someone else said something, that the bubble -- it was roubini. >> oh, roubini said it. >> that's right, roubini. >> six reasons why the bubble's going to burst! >> told it was going to drop. >> it's funny that the bubble's going to burst at 1,300, but at

1,900, everyone said it's going, you know to 3,000, isn't it? and you know the other thing we haven't talked about? remember, april 22nd -- or may 22nd, that day where the market hasn't gone up since then, it's kind of gone down. remember the taper day? >> right. >> "usa today" was the next day, too, or the day after. >> right. it was thursday, i think. >> thursday. "bull!" "bull has legs," bull! a lot of strange things seemed to -- where are your guys now on -- like, what do your banners say on "fast money"? or does it only count for the afternoon, the projection? from where the market's going to go. >> where the market's going to be? >> forecast. i mean, is this -- >> the guys are pretty positive, i think. >> long term or intermediate and near term -- >> long-term's next week. >> long term is 4:00 p.m., the intermediate's 3:00 p.m. and -- >> long-term might be 12:45. >> right, i know. >> all right, right now it's time for the "global markets report." ross westgate is standing by in

london, but we're going to start off once again in tokyo with kaori enjoji. kaori, that was interesting comments from abe, not exactly what the market was hoping for, though. >> reporter: yeah, and i think another big sell-off, becky, for the tokyo equity markets, another 500-point drop. this is the big, you know, fifth largest drop -- there's been five large drops we've seen in a period of a very short period of about two weeks, and i think the disappointment is stemming from the fact that some of the plans that shinzo abe, the prime minister, outlined today didn't really have the immediacy that some people had been hoping for. but when you take a step back, i mean, today's announcement is something that addresses more the voters, his public, because it's not going to be like the first arrow, which was fiscal stimulus, which addresses market concerns, or the second arrow which was monetary easing, but this really is leading up to the election, and we are heading into an election here. the voting was probably going to take place in about six weeks' time. and voters here in japan are thinking, okay, so, there is a 2% inflation target and they're

trying to reflate the economy, but there is no sign that salaries are increasing. so, what's in it for me? and i think some of the details that he announced today -- for example, trying to get wrages t increase by 3% annually over the next ten-year period is his way of addressing some of those concerns. the creation of so-called special economic zones, where they're going to incorporate some of the corporate tax incentives, that i think also didn't go down too well with investors, but it was really more of a dollar/yen story today that ignited the equity market. we saw some big losses in the financials yet again. let's toss things over to ross in london. all right, kaori, thanks very much indeed for that. you can see we're weighted to the down side ahead of the u.s. open, nearly, a little bit more than 72 decliners out-pacing advancers at the moment. the ftse yesterday was up around 33 points. we've worked out those gains in today's session. this is where we currently stand for european markets. ftse's been down around 40 points during the course of

today's play. we'll put that up and show you. if we can do that, that would be handy. there we go, currently down 58 points, near a session low. the cac is down 22 points, xetra dax down and the ftse mib is the out-performer, up 0.2% at the moment. there was good news in terms of the eurozone pmis. they stayed where the flash was, 47.7. so, that was good news. some will say they will come down, some improvement, but still in retractionry territory in the likes of spain. much better news for the uk. services pmi came with a really good number today and blew through estimates, 54.9%. 53 is what we were expecting. that effectively means we've had a trifecta of great pmis, all better than expected, pretty much nailed the last nail in the coffin of any expectations we're going to get any more qe out of the bank of england for some time, despite mark carney coming in next month. it's mervyn king's last meeting this month. it will be interesting to see

whether he still votes for more qe at his last meeting. what that's done, boosted sterling against the dollar, 1.5358. gilts not too bad. we had stronger retail sales out as well, as evidence by the brc, but the world's number three retailer, tesco, is still blaming a weak consumer for disappointing numbers today. it's the biggest loser on the ftse 100, off 4% today, posting a drop in quarterly underlying sales. and the main british market. and that's just to raise concerns about where they're going with their current turn-around plan. we know, of course, they've exited the u.s. with a fresh and easy brand. they announced that in april. but there seems to be something of a dichotomy between the likes of what tesco are telling us and maybe some of the economic data is telling us, but certainly, the uk seems, hopefully, to be turning something of a corner. back to you guys. >> all right. thank you, ross.

ross westgate. u.s. open's coming up, ross. you know that. >> yeah, i know. >> did you know we're going? >> yeah, we're going to be there. >> are you? >> yes. >> well, the golf channel, we're between the golf channel and -- >> where is it? >> marion. >> where is it? are you kidding? >> it's marion, right? >> oh, you're again making that contrast. the open that doesn't even need to be called by a country is actually the actual open, your open. so, you're feigning like you don't eve know what course we're playing on this year, ross? >> that's a great track. it's a great track. when are you guys down there? are you down there on the wednesday-thursday? >> next friday. next friday. >> next friday. i may play the course monday. >> oh. >> yeah. >> i'm afraid. all right, you know, it's like the fairways are like this. >> narrow? >> and the straights are like this. i'm worried, ross. you've got to come over some time and bring your clubs. >> bring your sticks? >> sticks.

>> bring your sticks. i've played with this gentleman to my left at the at&t. our guest host this hour is miles nidal, chairman and ceo of nbc partners. and you remember what i told you about the galleries out there, and you said, oh, yeah, you know, i usually don't, i don't really mind. >> well, i felt it most -- >> remember what happened? >> a 2-foot side-hill lie in front of 10,000 people putting. i missed it and -- >> that what your mistake, you tried to make it. you have to lag those. you have to try to get that close. the 2-footer, i try to make it a tap-in. >> but i think your advice that said look, just be careful about when you get into the rough, because you'll feel like you have physical affliction -- >> right, you do. >> and if you make contact with the ball, you've really -- and you move it a foot further, you've really progressed? >> right. >> that was the most difficult of all. >> when the crowd -- >> at least thank. >> i did. but when the crowd separates and you have like that tiger woods

lane and they're all like watching. they're standing right there, like, thinking that they're safe? anyway -- >> why is that fun to you guys, i have no idea. >> it's not. >> i was just afraid i was going to kbeen somebody. >> i know. that's scary, too, and that's not what you want to do. because after you hit someone, you give them your ball, like let me sign the ball. it's like, you hit me! i don't want your ball! you're not tiger woods. anyway, here's what i -- you need to once again go slow with me on the idea of mobile, which is now starting to work. i have weather apps and things, and every once in a while on an app or a stock app or a skiing app, in this little thing comes up at the bottom or the top, i would never click on that. it annoys me, i hit the "x," try to get rid of it. why does anyone think you can monetize things using mobile? how will it ever work? >> first of all, i think there's a big thing about content. for instance, you don't think about this, but if you want to get cnbc and you're traveling internationally, you need to get cnbc plus, you're going to get it on your mobile device. so, people are -- your kids are probably watching shows right

now on a mobile device. >> and then you can advertise how? >> because the advertising interacts with it. and at that point in time, you're so engauged in the contet that you will watch the ads. as technology speeds up and you get bigger screens, you have more opportunity for advertisers to communicate, but it's the engagement, and it's an interactive engagement. you can, at that point in time, you can offer people things to respond to. >> that they might be interested in, too. >> well, because it's very targeted, knows everything about you. it's growing about 25% a year and it's probably the big elephant in the room for all media companies, all advertising firms, all technology firms is how do we utilize mobility as a means of growing share and extending the lifetime value for the customer? >> first it was just trying to figure out the internet as far as advertising. and now the subset is figuring out mobile. >> think about where we were two years ago.

we were talking about will this facebook make sense? is social media really here to st stay? think about what's transpired over -- >> i saw some amazing statistics about how things have changed since 2010. mobile is the biggest winner, just in terms of where people get their information, how much time they spend on internet, on radio, on television, on print. mobile was the biggest winner overall. >> where are you getting your information? i mean, you've walked in with all your newspapers, but where are you getting the instantaneous information you want, joe? you're getting it from your mobile device. and the reality is, you're getting a lot more content. i was traveling in the summer. i wanted to see the last match of the british open, andy murray -- the tennis open with andy murray, a bunch of british -- >> wimbledon. >> i'm sorry, you're right. and how do you watch it? you were watching it on your phone, you know? you can get espn.com. so, the interesting thing,

though, is you're seeing a lot more content being generated. and i think as technology progresses, you'll be using it as a much more mainstream medium, and then you'll be much more engaged for longer periods of time of which advertising will be an integral part of it. and it is the greatest opportunity for growth of ad spend. it is in that space. and every single one of the companies is focused on that. the other area is just overall digital and the growth of social media. i mean, think about where we were six months ago talking about twitter. i mean, twitter -- are you tweeting it? you talked about it, you have an account, but -- >> no, i haven't, but i -- >> @joesquawk, just for -- >> i think i retweeted -- >> you did. >> -- something you did. >> thank you very much. >> see, and think about how much we just -- >> we were going to be on the show. >> no, i did my own tweet on that. >> you did your own tweet? >> yeah. >> i count retweets as tweets and i've tweeted 200 times. i see people with six followers that have tweeted 30,000 times.

i don't ever want to be that. >> well, you'll never be that. but think about it. the last time i was here, you said i will not tweet, i don't agree, don't understand it. >> i don't. i was kind of forced into it by this person who sits over, mary catherine. i mean, we have to here. >> you don't have to. >> you don't? >> no, but you should. >> it's really good grour brand. she does it incredibly well. >> i do. >> you do it well. >> well, i do it a lot. >> have you ever done a number sign and then put something? >> mm-hmm. >> what does that do? >> i don't know, but it's funny. you can use it as a way of highlighting what you're really trying to say. >> what does twitter do for you? >> oh, it's great! honestly, i use it as a newswire service. some of the breaking news i've gotten i've gotten off twitter. some of the recent things that have happened i found out about, even last friday's tornadoes, then i went and watched on television when i saw it on my twitter feed. >> what do you use twitter for? >> i think if one of you guys said buy a stock, he needs to tweet ten minutes later because he might have to sell it, right? on "fast money." >> i think twitter gives me, at

least, a unique ability to communicate and have some sort of dialogue with the people who watch our show. you can reach new people, reach people who watch the show. i think it's valuable. >> and it's very highly valued by all of the loyal followers. >> we've got to go to break. we only have three hours, miles, for this show, so we have no time. >> thanks, joe. coming up, washington scandals, political approval ratings, the latest findings of an nbc news/"wall street journal" poll might surprise you next. but first, president obama will welcome the super bowl champ baltimore ravens to the white house today. baltimore, if you remember, beat the san francisco 49ers in super bowl xlvii.

welcome back, everybody. the u.s. equity futures are weaker this morning. right now the dow futures down by about 45 points below fair value. this comes after some losses yesterday. in fact, breaking that winning streak. we had been 20 tuesdays in a row where the dow had ended higher, the longest time ever on record, and that streak was broken yesterday, and we'll see what happens today. also, a new nbc news/"wall street journal" poll out this morning. john harwood joins us from washington with the highlights from that. hey, john, good morning. >> good morning, becky.

we tried to measure with this poll the impact of the scandals that washington's been dealing with, the obama administration's been dealing with, and we found that it has some impact but not as much as some people might have expected. first of all, let's look at the irs and whether people think that's raised their doubts about the honesty and integrity of the administration. 55% of the american people say, yes, it has raised their doubts about the administration. but if you look at the president's overall approval rating, very stable at 48%. it's actually a tick up from 47% in april. that's statistically insignificant, so the president's holding steady. now, one thing that's also going on at the same time is rising satisfaction about the economy. when we asked people in january, are you satisfied with the state of the economy, 27% said yes. now that figure is bumped up to 36%. you still have 58% of the people saying they believe that we're in a recession, but that number has gone down significantly since late last year.

and so, it's an indication of some of the various forces swirling around the administration and what our pollsters say to keep an eye on is whether or not the doubts that people express in this poll get deeper and get more personal to obama because they haven't substantially eroded his standing yet. >> it's kind of depressing because the first one is, okay, so, less than half the people approve, although it's not that 52% disapprove, but probably 22% or 23% don't know who is president at this point, so they don't know whether they approve or disapprove. and then the other one, one out of three, just over one out of three think the economy's doing a little better. one out of three think the economy -- those are both depressing, aren't they? it shows the polarization and just how cynical everything is -- >> the trend, though, is up, too. >> you raise a good point, joe, about the polarization, because you know, one of the questions people have asked are are those improving economic attitudes what is lifting or improved

economic trends what is lifting the president or protecting him against the impact of these scandals? and what our pollsters say is, no, that's not true. the reason is that he is so locked in with his core groups -- african-americans, hispanics, women, young people -- >> i thought it was 47%. wasn't that the number? >> the approval is 48% now. >> but you said the people who love him. that was the romney 47%, so it's one higher. maybe you're rounding up. >> sorry, right. but what the pollsters say is their attitudes are not dependent on economic fluctuations. they're just simply locked in for him. one other note about attitudes on the economy. when we asked what does it tell you, that the dow keeps setting records and stock prices are so high, you only get about one-fifth of the people saying that's because they think the economy's doing better overall. the majority of people say what that tells them is that corporations and the wealthy are doing better, not everybody else. >> the other thing that's interesting is what happens in

what this means for the midterm elections. i mean, you asked a question about whether people wanted the democrats to take control or the republicans to keep control of the house, and the numbers say 45% to 42% that would like a congress controlled by the democrats, but that's not a very likely situation, at least if you listen to some of the people who really look at the math of the electoral -- of how the votes are going to come out. >> no, congress is not going to be -- the house is not likely at all to be controlled by democrats after the election. that number is pretty stable, becky. it's a three-point advantage for democrats. that is very consistent with what we show. remember, there are more people who identified themselves right now as democrats than republicans, as was the case in the election. >> john, it's miles nadal. don't you think a big part of what's going to have to change in order for consumer sentiment and confidence to change in the next poll is that housing prices have to appreciate? because the reality is, the average american, their major asset is their house, so they

haven't seen house price, significant house price appreciation substantial enough to change their confidence. and if the market goes up, as you articulated, most of the people refer to the fact it's corporations and the affluent who are benefiting from the appreciation of the s&p, not the average person. so, it's house price appreciation that has to happen. don't you think that's key? >> i think it's absolutely key. and what we have not seen yet is majorities of people saying their house is appreciating at the moment. so, you do have some people who say that, and that helps account for some of the wealth effect that we've seen and rising consumer confidence and people being more willing to spend, but i think that is, you know, two things. one, the value of people's i.r.a.s and pension account statements that they get in the mail, that is critical to people's sense of wellbeing and willingness to spend. >> yeah. >> and the other is the value of their house. >> john, i want to talk about

this. we don't have time because that's fascinating. what was the -- >> by the way, on christie, joe, he shows up as the most popular single political figure in the country right now. >> and people criticize stuff he does. you know what? if you're a politician, if you can't learn that -- it's a shock when you do things that might benefit you down the road. if we haven't learned anything in the last 20 years watching the way the successful politicians maneuver. president obama, if you don't play hard ball, you remember who said it first. you don't take power -- or you don't -- no one gives you -- >> christie played some hard ball yesterday that was kind of interesting, you know. >> but you've got to. >> scheduling that election in october -- >> good for him. >> when he has a regularly scheduled election in november -- >> good for him. >> spending $12 million on it -- >> you'd do it, too. and you can also say the people of new jersey need an elected -- it's so important right now in the senate, it needs to be an elected, so -- >> that's a ridiculous argument! >> i think it's a really good argument, if you're going to do it and if you're sort of in the

background knowing it benefits you. >> joe, i don't really understand -- let me just say -- >> we've got to go. >> i don't understand the calculation there, because chris christie, his standing nationally is very robust. >> right. >> he's going to win re-election. that's no question. >> so he didn't have to worry about this. >> why you would spend the money -- >> it's the state's money. >> and expose yourself to the idea that, you know, you didn't mean the fiscal responsibility stuff and -- >> no, no, no, $24 million -- >> i don't know why you do it. >> you do it because, you know, the reasons he did it are well known. i'm surprised no republican really was harping that much. it's kind of muted. i think they're afraid of him. i don't know. anyway, thanks, john. coming up, i thought john would think -- the democrats love this, because it gets the guy to, you know, if you're going to elect a senator, you're not going to have a republican in there for a year and a half helping with the obstruction. and john can't even take that, can't even take that gift horse in the mouth because it's coming from a republican. coming up, jobs, the economy and a fed. we're going to preview today's

adp report and ask what good employment numbers would mean for the fed's next move. then later, zane marley and reggae comes to mind. today we'll be joined by bob's son, rohan marley with a business venture to talk about. smoke some of that coffee, at 6:40 eastern. then at 6:50, the biggest news in sports history, lengthy drug suspensions for a-rod. >> wow. >> ryan braun and about 20 other players linked to the biogenesis antiaging clinic in south florida. >> wow. >> i didn't even know there was a place like that. i'm going to look into that. next hour, two well-known economists in washington, eddie lazear advised president bush and bernstein. first, before the break, a look at yesterday's winners and losers. ♪ [ male announcer ] when gloria and her financial advisor

made a retirement plan, they considered all her assets, even those held elsewhere, giving her the confidence to pursue all her goals. when you want a financial advisor who sees the whole picture, turn to us. wells fargo advisors. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking

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the adp employment report tops today's economic agenda. joining us now, mishl michelle bank of america economist and dick is here on set. michelle, begin with you. adp report critical, and of course, leading up to friday's jobs report. and all of it with all the noise out there about the taper. what are your thoughts? >> i think it is critical and i think all the data coming in in the last few days have been really important, given, as you said, all the speculation around

when and if the fed will start to taper. we're looking for 135,000 for adp, which is, we think, consistent with 150,000 for total payrolls, 165,000. for private payrolls, there's a bit of a residual every month between adp and bls. lately, it's been underpredicting bls private payrolls by anywhere between 20,000 and 50,000, so we're applying that residual. but in our view, this is the overall story and what we think the data is telling us is that the labor market is healing, but it's still healing at a fairly moderate pace. so, we don't think the fed is gearing up to start tapering right now. in fact, we think that tapering won't begin until the beginning of next year. >> yeah, and dick, the ism report earlier this week was a real eye-opener. >> sure. >> to anybody who thought that the economy was perhaps better than it really is. >> yeah. i think the economy's going to accelerate after labor day and in 2014. i've been pretty consistent on that, but not yet. we're in a soft patch. we're probably going to only

grow 1% to 2% in the second quarter. the ism was on the weak side. the orders were weak in the ism. the backlog of orders is dropping. so, we're still in a soft patch. partially, it's the sequester. the sequester's not killing the economy, but it is kicking in right now. and so, i think it's early to expect a strong labor market. and i, frankly, agree with michelle. i think early 2014, maybe the december 2013, if the christmas season's real strong. the one thing is that the fed has a dual mandate -- maximum employment and price stability. they're missing both targets. so, the unemployment rate's too high, which says you ought to have an easing policy. the correlation is running below their target, which means you're supposed to have an easy policy. >> that is easy policy, but they can tie that back and say we're not going to change interest

rates until that point, but we may need to start tapering on the excessive qe. we had bob brusk on yesterday saying maybe they start talking about the numbers differently and interpret differently than they had been up to that point. >> the fed has a theory that the inflation will come back up closer to their target, but there's no evidence for that. so, in such a vulnerable economy, wouldn't that lean your decision-making towards let me see if my theory is right? i happen to think their theory is right, but to make a decision on a forecast when the past forecasting record of the fed is no better than private economists, which is a pretty poor benchmark, because we don't often get it that right. so, to do it on a forecast, i think they'll wait until they get significant evidence of labor market strength, and i think that's a couple of months out. that's probably beginning to come through in the fall.

decision, maybe december, maybe january, february. i don't see them making this fast decision to start to taper. >> dick, i have a question for you. you talked about acceleration of the economy, but it's off a very low base. i mean, we were 2.5% growth in gdp last year. >> less than that. >> less than that, but the first half was stronger, and 2011 was way better than 2012. so, we've had a deceleration of growth. so, when you talk about an acceleration in the second half, it's off a low base. 1% to 2% is pretty anemic growth. when do you see 2.5%, 3% kind of gdp growth in the horizon? >> i think we'll probably do 3% in the fourth quarter. i think we'll be doing 3%, maybe 3.5% in 2014. keep in mind what happened in 2012. we had the european financial crisis. looked like the financial system of the western world was under pressure from the panic in the european financial system. draghi calmed it in july of

2012. so, we don't have that drag anymore. and housing is picking up, but the employment in housing hasn't caught up with the strength in housing starts, and there's a lot of purchases that follow after completion of a house. most people buy a window shade or two. most people buy furniture. so, there's an awful lot of housing-related spending that's going to support this economy. so, i think 3% 2014 or better with capital spending kicking in to help housing. >> so, one question for you is, last month you had 10% growth in new housing starts, which was an extraordinary number. do you think that's indicative that there is a profound impact coming on new housing starts going forward on a consistent basis? >> i think it will be consistent. we do have -- i have what i call the rule of 32, which is, when the kid is living at home with his parents, both the parents

and the child agree that the kid should move out to his own place by his 32nd birthday. we have had a stack-up of younger people who are living with their parents as they get better jobs, as their income improves, you're going to have a migration, a catch-up of people moving into homes, moving into rental, displacing rental people, going out and buying homes. this housing recovery is sustainable, it's very, very powerful, and it's very supportive of consumer confidence. the facts that house prices are up is a big reason why consumer confidence has been so strong, and i think that's a real support for a sustainable economy which is not accelerating yet, but it will accelerate after labor day. >> dick, thanks. good to see you. >> thank you. >> michelle as well. good to see you. talk to you soon. >> thanks. >> becks? all right when we come back, if you want a relaxing start to the morning, try this. combine a little bit of reggae with a cup of joe.

we're going to do that with bob marley's son after this. first, as we head to the break, check out the dollar, it's been the story of the morning. you can see right now that the dollar is up against the euro. it's down against the yen at 99.54. "squawk box" will be right back.

welcome back, everybody. a little bit of news just coming into the newsroom from london. former "news international" ceo rebekah brooks has pled not guilty to all charges related to phone hacking. our colleagues in london are at the courthouse and will bring us some news, additional news on this a little later this morning. bob marley loves to sing

about his cup of joe. now shoppers can get real cups of marley java right in their local supermarket. rohan marley of coffee marley joins us now with more on the brand expansion. good morning. >> greetings. >> full running. >> yes, indeed. ♪ >> we found out so much about you. scott is hip to it. you wouldn't know you led the hurricanes in tackles. >> yeah, yeah. it's one of those things, you know? through life you get a chance to do something, you do it to your best. >> how many kids did bob have? >> bob still have. >> yeah. >> 11 of us. >> 11? >> yes. you and ziggy and -- >> seven boys and four girls. there's ziggy, steven, julian, kimmani, there's damian, there's robert and myself and my sisters are sharon, there's sadella, stephanie and there's karen. >> wow. >> and the family, we run our business. you know, it's a family-run business, everything we do, so -- >> and this is, too. >> absolutely, but i'm just a

spokesman for the family business on that side. >> and when did this -- give us how it happened, why it happened. >> well, this is what happened. you know, after i left college, and i look in the mirror and say to myself, you know, being bob marley's son, you know, what is your mission? what are you going to do in life, you know? and i knew i had something inside of me to give, because i'm not a singer, but i knew i had something inside me that i wanted to do just besides help myself, you know? so, i had the opportunity. i went to jamaica. a friend introduced me to a nice, beautiful property. this is in 1999. and at the time, the beauty in the property, i could not believe that i would be the one to have this opportunity to own such a lovely piece of land, you know? because of the river, mainly. so, after i purchase it, i automatically said i want this property. i had the money in my pocket. so, after purchasing the land, walking off the property, i met the people from the community. so, i started to ask people in the community, you know, what's on this property? and they said, mr. marley, green

mountain coffee. and i was like, coffee like oil? because i understand commodities, you know? so, that being said, i said, well, i started to question the community. i said, do you know anything about coffee? they said, well, mr. marley, we've been farming coffee all our lives. i said, all right, we're in the coffee business. so it was my way to build a sustainable business where i'm not only benefiting myself, but i created an opportunity for the community, the farmers, because the farming community, and it was just natural for me and it gave me this exhilarating feeling that, now that i can do something with my spirit that gels inside of me that i want to do where i'm helping people, not just helping myself, but growing a community and build on the sustainable movement. >> so, there's no shortage of coffee brands, but you have come up with a brilliant idea about how to position your brand. talk about what the brand essence is. >> well, first and foremost, i think that quality's a first, you know? and that's why mainly, most of

my product is certified organic, you know, reinforced alliance, and fair trade, of course. and to have a wonderful business -- you know, the marley name, you know, resonates throughout the world, you know? and when i wanted to get into coffee, i thought that, yes, there is all the other greats before myself, the predecessors, the guys that i learned from, but i thought that if i can create a quality product and build an understand the business and find the proper retail outlets, like the whole foods, and they gave me a opportunity when i first started in 2011, i thought it would be a great opportunity to -- >> talk about the names. you have come up with brilliant names. becky says she drinks decaf coffee and you called it laid back or something. >> summimmer down. >> simmer down. >> in the '60s, there is a lot of violence in the community in jamaica, and my father, you know, the whalers, they wrote a song called "simmer down." so, i said, you know, why not

use your own names? because every time a company name, oh, i own that name, i say we own these names. so i chose my decaf to be called simmer down. back way when i got into coffee, i took a pilgrimage to ethiopia to learn about the origin of coffee and why coffee is really important, not just from the tasting perspective, but from the social perspective, from the farmers' perspective and i wanted to create a coffee company, not just a brand, but a coffee company throughout the world, universally. so, i decided to launch a coffee with its european coffee, and i call that one love because ethiopia is the birthplace of civilization. >> i wish you could stay longer. we're going to go to break. i want to talk to you off camera. i mean, there's some things happening in this country that, things legalizing, and i mean, are you going to diversify at all? can i go into -- can i -- let's go to break. >> when that time comes. >> are you going to diversify? you start in colorado.

you start in colorado -- >> it's a great place to be. >> huh? >> great place to be. >> hold on. scott, take us to break. >> thank you so much for coming in, rohan. >> absolutely. >> we really appreciate it. >> thank you so much. coming up, it could be the biggest scandal. and tea parties. . . on my own. i'll worry about the economy more than a few times before they're grown. but it's for them, so i've found a way. who matters most to you says the most about you. at massmutual we're owned by our policyowners, and they matter most to us. ready to plan for your future? we'll help you get there. ♪ ♪

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see, i knew testosterone could affect sex drive, but not energy or even my mood. that's when i talked with my doctor. he gave me some blood tests... showed it was low t. that's it. it was a number. [ male announcer ] today, men with low t have androgel 1.62% testosterone gel. the #1 prescribed topical testosterone replacement therapy increases testosterone when used daily. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or signs in a woman, which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are or may become pregnant or are breast-feeding, should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting.

in a clinical study, over 80% of treated men had their t levels restored to normal. talk to your doctor about all your symptoms. get the blood tests. change your number. turn it up. androgel 1.62%. a major development in the major league baseball steroid investigation. brian shactman joins us now from

new york. nice to see you again buddy. >> this could be big. and i'm sure you and joe and becky know a lot about this. tony bosch who ran the biogenesis company in south florida which allegedly provided performance-enhancing drugs to a bunch of baseball players. he has been sued by major league baseball. he has no money, no job, he's staying in a bunch of different places. now, i guess, according to espn's "outside the lines" has agreed to come to new york and tell major league baseball everything. and this could possibly mean suspensions for alex rodriguez, ryan braun. but there's an issue here. people see this story and all of a sudden we're going to get suspensions in the biggest performance-enhancing drug scandal in american sporting history. but there's a union involved, there'll be a bunch of appeals. and the key issues will be probably won't be any positive tests. and major league baseball most likely will be shown to have paid for some of the information they obtained. this is the first step in a long

process, guys. but if everything comes to bear and alex rodriguez gets 100-game suspension which could end his career, former mvp ryan braun, that could really brutalize the milwaukee franchise and ruin the reputations of one of the game's best players. this is huge, this is lance armstrong type levels in a game that's been smeared for 15 years by drugs. >> braun's reputation already in question. he was already suspended but then that was overturned, i believe, in the courts, right? >> right. it was on a technical based on shipping. a lot of people think that major league baseball is trying to protect ryan braun because he's a former mvp, he had a sterling reputation. but sources tell me inside baseball that ever since this story broke, ever since he got off on the technicality, they've been very focused and very willing to go all the way with all of these players including

ryan braun if they find these documents that tony bosch who ran biogenesis, if they're credible. people are going to go after his credibility and the voracity of all of these documents. a lot of the names of these players were in code names. they have to go through a bunch of evidence. but the bottom line is, if it follows through and baseball seems committed here, this is huge. >> yeah. no doubt. brian, thanks, good to see you again. >> yeah. >> nbc's brian. >> yeah. miles, thank you for joining us today. it's been a pleasure having you here. miles nadal, come back very soon. >> love handling the advertising campaign for marley coffee. the coffee part of it, though. >> exactly what he was talking about. >> food products, candies. >> smart. >> the marley name. when we come back, we're going to talk more about jobs, the economy and the fed. our two guest hosts advise political leaders in washington. now they are helping us.

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all good things eventually come to an end. yesterday's lower close snapped a record 20 straight-up tuesdays. now the focus turns to the jobs number and today's adp numbers to give us clues. what you can expect and how the markets will react is just ahead. >> "squawk box" goes back to school. >> good answer. i like the way you think. >> nobel laureate robert engel on the hidden dangers for the economy and why he's cautious. plus, the portfolio manager of the growth fund which is up 35% over the past year, here's what's working for him in this market. his stock picks and much more are just ahead as the second

hour of "squawk box" begins right now. good morning, everybody. welcome to "squawk box" on cnbc, i'm becky quick along with joe kernan and scott wapner, andrew is out today. and even after yesterday's losses, you'll see om red arrows this morning. the dow futures down by 40% below value. in our headlines this morning, japanese prime minister abe has fired the so-called third arrow of his economic plan. include special zones to attract overseas business. that third step follows the loosening of japan's monetary policy and boosting public spending. this latest arrow fell a little bit short of the target at least in an investors' minds. japan's nikkei average fell nearly 4% after abe's speech closing at a two-month low and it's gotten even worse in the post market activity.

they were down by about another 500 points in some of the trading there. by the way, we are a little over an hour away from adp's latest reading on private sector employment. economists are looking for 170,000 new private sector jobs in may on top of the 119,000 added back in april. and toyota is recalling about 242,000 prius and lexus hybrid models. talking about a potential braking system problem. those cars in question were made back in 2009. there have been no accidents or injuries reported so far, but toyota says that certain parts in the brakes could crack from vibrations slowing the response time. joe? >> and they're just really ugly. >> that's not why they're recalling them. >> that's not why. >> bring them back, we'll repaint them. change the model a little bit. >> the cheese wedge shape of them that screams i'm green, i'm green. >> that's not the recall. >> no, that's not why. may be a future recall. meanwhile, samsung winning the latest round in the long running patent battle with apple.

banned the import and sales of the older models of the iphone and ipad. apple says it's disappointed with the ruling and will appeal this ruling. the order takes effect in 60 days if the white house takes no action to overturn it. do people still buy the older models, scott? >> i don't know. >> other places. >> you can? >> in the united states, you can. this doesn't affect sales in the united states. >> but are they still -- why would anyone buy the old stuff? >> well, they're cheaper. >> what about used ones, you're allowed the buy used ones. >> yeah, you can buy used ones on amazon. >> this is an interesting question, though. if people who are critical of what apple is doing right now and lack of innovation and looking at what the stock has done and a lot of times they say that the high-end part of the market is tapped right now that if the lower end -- >> the low end -- >> you p can't sell some of

these models what that impact would be. the other part of this is if you're already sort of chasing samsung right now -- >> there's been a lot of back and forth and it depends on where the court is -- >> and not even from the patenting. the galaxy is the thing getting all of the headlines. this is just another thing now you're worried about. samsung now has another edge over apple. >> i'm interested to see what the white house does, though. this has been that real back and forth between samsung and apple with each of them accusing each other of ripping off each other's patents. to see how this comes down. will the administration get involved? because a lot of it's been home court advantage on how the decisions come down. >> the former, you know, the left used to love apple until that horrible tax story came out here. we'll be able to talk to jared to get the take on just how -- >> tax avoidance. >> that horrible idea. that's totally within the law and sort of their mandate to do

it. but we'll talk -- >> i don't know if it's their mandate. >> why is it not their mandate to minimize taxes for their businesses. it's taxes they're not paying abroad, not taxes they're not paying here. >> look, if you're asking me, does apple break the law in terms of taxes? >> i'm not asking you if it's a lie. you think morally -- >> no, i don't blame apple at all, i think the tax code -- >> yes, they should change it. >> they should change it. >> you don't feel bad that apple's not funding the entitlement states of europe? >> i feel bad we have big revenue problems. >> create entitlement states and apple's not sending our innovative money over there. >> apple's fine. you don't have to worry. >> i'm not worried about apple. >> the thing i feel bad about vis-a-vis apple and google and the multinationals who avoid tax. if they avoid paying taxes, then the tax burden falls on the

middle class and that's not a good thing. that's all. >> they're the employers of the middle class people. and if they were able to keep the money here, there's some territorial way of doing it, we wouldn't be building plants abroad and middle class people might have jobs. >> by the way, ge has more employees outside of the country than in the country. it's not a bad thing. i'm saying that the question is if they actually paid what i considered their fair share, would they have -- >> to be zero. >> no, that's not true. that is absolutely not true. >> some people don't think that? >> you didn't say some people. >> well, there's some people that think anything. i'm saying if you actually ask people, do you think apple is paying the fair share in taxes? the vast majority will say no. again, apple is not doing anything wrong. the problem is not apple. the problem is a tax code that incentivizes this kind of tax avoidance. >> well, my view is, look, if you're seeing someone hit too many home runs, you don't tell a guy to bunt, you move the fences out.

>> you've got the wrong -- you've got the wrong tax code. and i think what you need to do is obviously not vilify apple for living within the tax code and doing what they should be doing. with respect to their shareholders. >> i have a proxy for the left on how they think about one of the most successful companies that has taken, by the way, the creative destruction from the other industries that have caused job losses and they've added new jobs. >> tim cook himself sat in congress, joe, and said i would be happy to pay more taxes. >> so let's -- >> so let's -- >> tax reform, then. >> we can squabble all morning, i'm happy to do that. >> john chambers at cisco says i will build plants other places if you don't handle this. and you can't figure out -- >> what does handle this mean? to me a much better conversation is how should we reform our tax

code so that essentially moving the factories? >> ed can tell you how to do that. >> well, i think there are two issues here. the first one is the level of the taxation and the second is the structure of taxation. we think about this stuff, what's the level of taxation right now? the big problem we have, of course, is we're taking in 16.7% in revenues when we should be taking in 18.5%, and that's a function in large part of the recession. hopefully that will end as the recovery strengthens. but in terms of the structure of taxes, i don't think anybody that's thought about this seriously, i spent a year of my life actually on a tax commission that president bush appointed me to before i was at the white house. and we went through this and there was no one on either side of the political spectrum that thought we had the right tax code. as we look at this thing, we say, well, look, are there much more efficient ways to raise taxes? almost all economists think we ought to move in the direction of a progressive consumption tax. and that's the way we should go. it's not that difficult to accomplish. the politics of it are obviously very difficult. >> if they hadn't set up a

company in ireland, they would be paying -- the taxes would still not be coming to the u.s. government. they'd be paying taxes to foreign entities. so the guilt that you're assigning it or the immoral behavior you're ascribing -- >> i'm not even -- >> come on. >> i'm saying that they -- >> i read the huffington post, i've seen -- >> i've seen moral outrage expressed about apple and other multinationals. >> you will not find -- this is probably not a nice -- >> can you imagine volunteering and saying, okay, i don't have to but i'm going to. >> i don't think you'll find the word moral in any of the stuff i've been -- >> i see it in your face. >> i see it in your expression. >> and perhaps we should talk about morality. apple is falling -- >> unethical? >> i don't know if they're doing anything unethical. >> that's big of you. >> i would say they're following a set of incentives that are counterproductive for this country. >> that should be changed.

>> that should be changed. >> so when carl levin and other people -- >> president obama has a great idea. president obama -- i think going is a very big ask. something much simpler would be to have a minimum tax on foreign earnings. go ahead and play your double dutch irish sandwiches, apple and google, do your cayman island stuff, but a minimum would come back of your earnings. it's simple -- >> but by bringing that up, that suggests that what they're doing is wrong. you should have to pay a minimum. >> it's not what they're doing is wrong, it's the code is wrong. the code incentivizes a lot of bad stuff. >> but the code shouldn't penalize companies like apple by having a minimum -- >> why is a tax minimum a penalty? >> why shouldn't they just lower the rate? >> that's what tim cook himself said. >> why is it so difficult?

lower the rate. >> because you have to broaden the base. that's the hard part. you're not saying lower the rate the way it is, right? most people say broaden the base, lower the rate. >> i'm saying lower the corporate tax rate so that companies are incentivized to bring money home. >> you run into ed's problem, which is we're not collecting -- >> your idea is lois lerner and the irs put together a tax plan. no? >> i'm not going to nibble on that. >> did you get to visit the white house as much as the irs commissioner over the last four years, do you think? >> since i left the white house? i think it was while he was there. >> did you see him every day as you were going in there? >> i saw him on occasion. >> do you know what was going on? what were they talking about? any idea? >> sometimes there were discussions of tax policy. >> that's what we're worried about. >> let me ask you this, what's the tax? 35% they'd have to pay? to do their dividend and the things they wanted to do. >> 35%. the effective rate, because all

of those big loopholes is something closer to the low 20s. >> but the reason it's the low 20s is because it's a blended rate with what they pay abroad? >> correct. after that, not before that. >> there's a ton of -- >> what they pay here is 35%. >> there's a ton of tax expenditures, appreciation, deferral. >> losses. >> losses. that's true, writing off losses. that's the difference between the statutory and the effective rate and it's big. >> do you support a holiday? >> no, no, no, the repatriation holiday. that's a terrible idea. that worked terribly in 2004 just so our viewers know what we're talking about. back in 2004, you were able to -- actually, ed was there, he can talk about that. >> wasn't quite there. >> at any rate, if you had earnings that you deferred abroad if you were multinational, you could bring them back at a tax rate at 5%. >> a lot of companies did. >> bring them back at 5%. the problem was that when they brought back all that revenue,

they didn't do any of the stuff we hoped they would do. >> it was called the jobs act. >> exactly. instead of investment or jobs, it led to stock dividends and buybacks. >> money's fundable. >> if you look at the pattern of investment in 2003, it turned around. you can attribute it to other things. i would attribute it to the 2003 change in capital gains and dividends taxation which i think was much more important. but, you know, on this issue. these are really complicated tax issues. and most people who have studied and thought seriously about this stuff want to fully integrated tax structure when you have a territorial system that treats the stuff in an appropriate way and brings it into the system. so i guess the thing i don't like about jared's idea of the minimum tax. it's essentially a patchwork on what is already a distorted system. i would rather see a much more radical reform in the system that you want to build progressivity into the system, that's fine, i believe in that

too. but i'd rather see it done in an efficient way. i don't think this would be. >> i don't disagree. >> hold the thought. >> you had a love fest when you were on together. but i wish he would say this. he says you're nuts. he sent this to you too. apple and globally active -- >> i'll deal with tony later. >> they pay their fair share, why do you want to hurt u.s. competitiveness? and the greater burden does not fall on the middle class. it's a credit to you that it's me, lezir, frato and wapner. it's unbelievable. >> no, look, i don't think -- >> we've got to go to break. >> i don't think that listening to tim cook himself who says we will pay higher taxes if you simplify the code is going to hurt apple. >> he also said we're the biggest taxpayer in the united states, as well, at $9 billion, right? you like money to come into the government, right? >> the correct metric. the correct metric.

>> you guys are going to be here for a while. >> the effective tax rate. >> questions, comments, anything you see here on "squawk" and i'm sure there's a lot, e-mail us at squawk@cnbc.com. up next, value plays and as we go to break, take a look at shares of dow component united health group. we're back in a moment. [ electricity crackling ] [ engine revving ] [ electricity crackling ] ♪

welcome back to "squawk." elan musk speaking at a tessla shareholders meeting, saying it would hamper the growth prospects. tessla wants to sell the electric sedan to consumers rather than relying on independent dealers, but these efforts have met resistance around the country. tesla shares have tripled this year and musk said the company's gross margins could approach those of sports car maker porsha over time. >> we had one here. >> i didn't ride in it, no. did you drive it? >> i've driven one, the smaller one, but i've looked on the inside, the back, the trunk of it. the two child seats that are there. you've got two trunks. >> right. >> you like that better than the hybrid you were just dising a

few minutes ago? >> you've got a prius, don't you? >> i've got a pontiac vibe. they don't make them anymore. >> the dow's record tuesday's winning streak is history after investors. joining us now to talk more about markets is tim holland. and, tim, i know you say we don't know exactly where things are going in the short-term, but it does look like things are improving for the economy overall. and as a result, you have some small cap stocks that you think are in a really good position. why don't we talk about some of those stocks. the first is range resources, an exploration company. >> yeah, it's a little bit further up the cap spectrum. but what range is going for really two things, it's an enp company. they really pioneered many of the techniques that have unlocked this fantastic energy bonanza in the lower 48. and they really have a first mover advantage in the

marcellus. they've got fantastic acreage at fantastic prices. and as we move to better take advantage of nat gas, liquids, and crude, they should do very well as we use more of the commodity domestically and even as we get closer to exportations. just a fantastic company, fantastic management team. >> joe and scott were both talking earlier about how it's surprising to see oil prices as high as they are given how much new exploration has taken place in the united states in particular. have you been surprised by that too? >> i'm not that surprised because what we're lacking isn't more of the commodity. what we're lacking is the infrastructure to take advantage of it. we haven't built a new refinery in 30 plus years, we're finally doing that. the crude by rail phenomenon has taken off, but on balance, pipelines are still cheaper and safer. but we don't have the pipeline infrastructure in place to move the crude out of the bakken and other parts of the midwest. so we've got more of it and now we need the infrastructure to refine it, process it, export it, use it.

and as that happens, you should over time see lower energy costs sort of move through the system. >> you also like carmax? >> yeah. we've owned carmax for a long time. because everyone loves buying a used car. and i heard you sort of joking about the prius and the pontiac vibe and all of that. they've taken what's been historically very unpleasant experience, which is selling a car, a used car, buying a used car and made it hassle free, no haggling and very transparent. and the great thing about carmax is they've got several hundred superstores around the country, but they've got a market share in the low to mid single digits. it's a terribly unconsolidated space. and as the economy recovers, their balance sheet, their brand, their business model, they've got a lot of organic growth ahead of them. it's another well run, well capitalized company that we've owned for a long time. >> do you worry at all about consumers as they start to feel healthier buying new cars instead of new cars? and will that hurt carmax's

business in time? >> actually, it should help a little bit in that new car sales had been so depressed for so long. you're getting back to the 15 million number. and carmax didn't have enough inventory. so the sweet spot are sort of used cars three, four years old in terms of the ability to make a nice profit. but people were holding on to their cars so long because they were so concerned about the economy that they had to sell older and older inventory. actually as new car sales pick up, it refreshes the used car inventory, which actually helps their margins at the unit level. >> thank you very much for joining us today. >> sure. >> appreciate your time. >> thank you. when we come back, pandora doing a little bit of damage control. we have that story next. and in today's what's working series, the portfolio manager of the growth fund on the strategies that have helped him register a 35% gain over the last year. we'll have some retail, tech and energy plays that he thinks you should consider. "squawk box" will be right back.

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now the answer to today's aflac trivia question. the four remaining nhl teams are the last four cup champions. when was the last time that happened? the answer, 1945. let's get you set up for the trading day now. take a look at what the futures look like. coming off that streak of tuesdays being broken. we had 20 broken yesterday, but there's a look at the dow. implied open down 45 points, s&p and the nasdaq would also open lower this morning. pandora's chief financial officer doing a bit of damage control shaking off concerns about how the possible entry of apple into the internet radio market speaking at the bank of america merrill lynch 2013 global technology conference. said, quote, we will compete against any imaginary or real

competitor in response to questions about reports that apple will soon launch its own streaming radio service similar to pandora. pandora's shares fell more than 4% yesterday after falling 10% on monday following those reports. when we come back, we're going to talk more about small picks in the small cap space and find out what's working right now. and then "squawk" goes back to school with nobel laureate robert engel. we'll be right back.

welcome back to "squawk box," investors looking ahead to the adp employment report for may. coming up at 8:15 a.m. eastern time. the jobs report is important to the market these days. a consensus forecast for adp called for 170,000 new private sector jobs.

and that follows the addition of the 119,000 jobs back in april. let's take a look at dow component united health group. raised the quarterly dividend by 42%, the company is also renewing the stock buyback program. and mortgage applications fell 11.5% last week with mortgage rates jumping for the first time in a year. the average 30-year mortgage rates rose 17 basis points to 4.07% and rates have risen by nearly half a percent over the last four weeks. >> and we will get to it. but i've got to mention, tom donalin is resigning and susan rice, the u.s. -- replaced by u.s. ambassador to the united nations susan rice. that's a significant shakeup. and i think it's fascinating. it is a manly move given that

benghazi, people still talk about it. and you don't need to be confirmed by the senate to be in the national security adviser -- she gets this job. it's like in your face to critics of benghazi, right? >> well, he brought her in as part of the team. he has not been shy about doing that throughout the administration. when he wants them, he figures out a way to get them. in politics, you should do what benefits, what you want to do. no one gives you power. you've got to take it. >> i think the key point here is the one you made that she doesn't have to be confirmed by the senate. she'll get the job. >> but he doesn't care it's going to -- all these people still carping about benghazi will be recarping. >> he's weighed those different. >> i admired doing what you want to do. sorry, scott, we're going to talk small caps. >> no worries, joe.

the rise in in small caps. one of the themes of our what's working segment today. joining us now the portfolio manager of the growth fund joins us from new york. good to see you. >> good morning, thanks for having me. >> give us your overall view first on what you think small caps are going to do, you know, as the russell 2000 was at record levels along with the other major averages. now we're sort of teetering, wondering where the market's going to go from here. what's the outlook? >> well, i think you have to break it down by segment, and our focus historically has been on the technology space which has lagged the broader index there. what we're seeing is rotation in the last few weeks. i think we're setting up for a pretty good second half. i'd like to get through the summer months where they tend to be little tougher. but stock pickers should be placing their bets. we are seeing activity in mergers and acquisitions in small cap.

we haven't seen that for the last couple of years. i wouldn't say it's crazy at this point, but it's beginning to pick up. seeing some strategic guys beginning to take positions. >> yeah. is it -- is there any concern it's a little bit late in the small cap game? and i think that's what i was trying to get at in my first question. in that small caps generally lead on the way up and they generally lead on the way down. if we're going to have any sort of correction maybe small caps are not the place to be right now today. >> i think you've seen the defense of small caps leading. where i would focus is technology. what we're seeing is product cycles that are about to begin in the second half. apple is planning on launching some of its new products. so we're positioned with companies that provide capital equipment for those capacity ramps. we're also looking at semiconductor capital equipment.

intel, samsung and others are in an arms race to get to smaller nanometers. and those capacity buys need to happen. this is a stock picker's market for us. yes, i understand the overall market is probably at an overextended position. but i would be looking at those opportunities over the summer months to be putting money to work. >> do you see this as small cap in tech or small cap in general? we've had some weak manufacturing numbers over the past couple of days. does that trouble you in terms of small cap in that sector? >> we don't really focus on industrials as much. we would also look at the oil and gas services. >> and i think the capital budgets there over the last nine months have been a little weaker than we had thought. again, the second half in the summer months here, i think you can find good values. >> given all the skittishness in

stock markets right now all the worry about the fed and interest rates, every time i hear you saying picking stocks, i think, boy, the volatility, the underlying skittishness makes me think this isn't the best time to be in there picking stocks, maybe sit out the anxiety part of the market. >> well, we certainly like to keep a cash position on hand to find opportunities of dislocations in the market. we will be coming into the earnings season in july. it's certainly not the strongest period of the year. if you hold your dry powder, you'll find great investment opportunities. >> and along those lines of the great investment opportunities that you see, give us some names. if it is a stock picker's market. you have names that i would think a lot of people watching may not be all that familiar with. >> aside from haliburton. >> yeah, great. one name in the semiconductor capital equipment space is rudolph technologies balanced on the front end and back end of

semicap equipment production. and their positioned very well for the lower nanometer macro inspection as these things get smaller, you've got to continue to inspect and these are very expensive items. so as they move through the supply chain, they provide the opportunity to provide known good dyes, and that's an advantage in the supply chain. another company, electroscientific. they provide micromachining tools. and right now, they're positioned when apple begins to produce ipads and ipods, they should probably begin to see capacity buys and that'll be a great opportunity for them. another name we've really liked all year, superior energy. they're geared more towards the land drilling. of both oil and gas. but there's a renaissance going on out there in the oil patch and they're very well positioned in a well-run company. >> all right, chris, good to talk to you. >> thank you very much for having me.

>> some of the scuttlebutt here, the nsa is just as powerful as the state some people say because you talk to the -- no? >> yes. >> you talk to the president every day. >> anybody who has worked in the white house knows that the white house people are the ones that are doing all the work. it's always the case that the people closest to the president have the most authority. and that's -- nsa is just right central. >> huge. >> yeah. >> absolutely central. >> he's just got -- i admire. there's going to be a lot of talk about this. even all the articles say it's a huge thumb in the eye to senate republicans because they don't have to be confirmed. >> there are many thumbs going in many eyes right now. all thumbs. >> thumbs flying everywhere. >> yeah. >> up next, warning signs you can't ignore. we'll hear from robert engle. he's one of the good ones, though. and tomorrow on "squawk box," chairman and ceo of starwood

capital barry sternlicht. >> always got to get a dig in. >> yeah. i look over at you. >> a little glance there. >> have you won one? >> well, not yet. >> well, we've got to fix that too. >> i don't think he was knocking you, jared. i know where he's going. >> plus the ceo of raymond james financial is going to be here the fun begins at 7:00 a.m. eastern. "squawk box" will be right back, though.

welcome back, everybody, the systemic risk ranking measures global risk to the economy from the financial sector. we take the time to try and figure out which countries could be in the red zone, who is most at risk. joining us right now to talk more about that is robert engle, the professor of finance, director of the volatility institute and a 2003 nobel laureate in economics and professor, thanks for coming in this morning. >> thank you. nice to be here. >> when we talked to you six months ago, you walked us through the countries most at risk. japan was at the top of the list, the u.s. was number two, france was number three. now six months later, japan is still at the top of the list, france is number two.

>> france is number two. >> and china's number three. the u.s. has improved over that course of time. and even though japan's still at number one, you say japan has been improving some too? >> well, if you look at japan, the risk in the financial sector in japan has been growing for a decade. but if you look at the most recent period, you can actually see a turning point, perhaps, in the -- over the few months ago. it's much too early to know why that's a serious improvement. but it's at least going in the right direction. >> does it have to do with shinzo abe? >> you've got to figure that's part of it. >> what about the united states? it's shown market improvement. >> it's extraordinary improvement, actually, we thought it would take about $1 trillion to rescue the financial sector in the middle of the global crisis, in the financial crisis of 2008. three or four years later, it

was about half of that amount in the debt ceiling debate in the summer of '11, and now it's down to half of that again. $350 billion. it really looks like the banks are much stronger than they -- than they were any time in the meantime. >> and what do you credit with? >> there are two things. they've strengthened their balance sheet and stock markets has rewarded them for that by raising the valuations. and they've cut some of their debt, especially the short-te short-term -- short-term rollover problem, i think. >> this debt ceiling debate that we're about to have again some time in the fall, does that score as a negative on the risk index? threatening default? >> absolutely. >> i would expect -- >> as soon as politics gets messed up with economics, you get a lot of uncertainty that -- i think that's, you know, that's what's going to happen.

>> is there much uncertainty, though? i agree with you at least conceptually worrying about the debt ceiling is a problem. is there really a worry about the debt ceiling? if we look at the history negotiations generally go down to the 11th hour and then, you know, they get something settled and that's kind of the nature of the beast. do you actually think there's much of a chance that we won't resolve the debt ceiling issue? >> well, we're living with it right now, right? we had the debt ceiling debate, then a super committee, then we had a fiscal cliff and a failed grand bargain. and now we have sequestration. and sequestration seems like it's the mildest of all of those possibilities. and i think investors and politicians on both sides decided even though they designed it to be the doomsday policy, they've decided it's benign enough so we'll wait and see what happens. >> well, if you look at that. that was actually where i wanted to go with it. and if you look at that and think about sequestration, look at the estimates, upper bound

estimates, sort of the biggest keynesian estimates with the biggest multipliers. the effects are not that great on the economy relative to the size of the recession which was, of course, enormous. >> right. >> if we're thinking about is this a way to get the debt picture back on the right track, you know, the question is, is it worth the investment? obviously we would've liked to go in a different route. but do you think this may be something that is moving us back in the right direction or wrong direction? >> i think that's one of the reasons we're interested in economic performance right now. because we don't know whether the economy is strong enough to survive this expenditure cut at the same time we've had tax increases. is this fiscal drag going to be too much for us or not? you put it in the context of global economy where emerging markets are potentially slowing down, where europe is certainly going in the wrong direction. >> right. >> and it's astonishing that

we're seeing some growth. i think there's some good characteristics of the u.s. economy which are giving it that kind of ability to grow now. but i think if we see weak second quarter numbers when they come out, a few bad jobs repo s reports, we're going to say, oops, this was something we couldn't handle. >> you know, does your risk model -- does it take into account any of the things that the central banks are doing in terms of ben bernanke, how that policy's going to end or how shinzo abe's policy is going to end. how do you measure that? >> well, risk measures taken into account the same way the investment community takes into account. they value banks or financial institutions generally and insurance companies, whatever. based on what they think the future prospects look like. and that's where equity evaluations come from. and that's the key input to our measures. how big the market cap is for these firms relative to their liabilities. so those are in there in the

same sense that we discussed them always on "squawk box," you know. so how are these policies going to end? i don't think that quantitative easing is actually all that different from ordinary countercyclical monetary policy that we've done for years. >> except for it's massive, $85 million a month. >> welm, it's massive. and what's going to happen is when you're wanting interest rates to be higher, you sell the stuff. and it's going to raise interest rates a little more. and so that's the way you manage the interest rate both at the short and long run of the spectrum. so i think unwinding it is actually not going to be a big issue. but, of course, we're going in new territory there. >> robert, thank you very much for coming in today. we appreciate it. >> thank you.

coming up, we'll have more on samsung's big court win over apple, which is, you know, doesn't take much to splice off $3 billion, $4 billion off that market cap for apple. >> 1% after hours when that happens? down now? >> it moves $4 in the blink of an eye. one of your guys twitches on "fast money" halftime. anyway, all about jobs this morning. private payroll data from adp set to be released at 8:15 eastern. i included the "halftime" word there. the numbers in the instant reaction from mark zandy. up next on "squawk box," don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after the break. [ male announcer ] this store knows how to handle a saturday crowd.

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all right. that's nice. so this is not really animal orchestra. this is kind of -- oh, this is good. yeah. you're on to something here. it works with the -- wow. jared, if we ask you, would you do that? can we get a pay per view?

>> this? >> yeah, are you a cnbc contributor? >> yeah. >> then i don't have to ask you. microsoft unveiled the latest version of the windows operating system known as windows 8.1. windows 8.1. they didn't lie, did they, scott? >> you always get upgrades along the way. you introduce it and fix all the bugs and keep introducing. >> i thought that was about my coughing you were pointing at me. >> no. >> the cough button. >> and citrix systems, you may talk about this today. upgraded to buy from neutral citing an attractive risk/reward profile following a selloff in the shares since the april 24th earnings report. >> thank you. again. >> you're welcome. samsung winning the latest round in the long running patent battle with apple. founder and editor in chief of boy genius report joins us on

the phone. welcome. >> thanks for having me. >> how big is this? hello? >> jonathan? >> yeah, i'm here. >> how big is this decision against apple? >> i don't think it's that big. i think if we look at it, you know, apple's publicly commented products for sale right now. it does have to go to a veto board after their appeal. and again, these are older products. iphone 4, ipad 2, these are products that, you know, in the fall apple will most likely be phasing out anyway. >> yeah, but it's not like it's iphone 1, right? there are real questions about whether the upper end of the iphone market has, you know, tapped out at this point. isn't it reasonable to assume that if people are going towards the lower end, the cheaper models this could have a perhaps bigger impact than some people expect? >> no, again, this is apple's iphone 4, it's not the 4s, the oldest model, when apple does

release a new phone in the fall, the four will most likely be discontinued. they could introduce a brand new phone, as well, which would completely make up for something that would affect this. i don't think this is that big. i think, you know, the most amazing thing i've heard today and it's early is samsung's case. and that just proves apple's had such a history of, you know, technical innovations and apple's not suing samsung because of technical patents. apple's suing because they claim they're copying the look and feel. i think it's a different type of thing. >> they've gone back and forth. our guest host has something for you. >> wondering, which way do you think this goes in terms of stimulating future innovation? is this going to help because now they've got to invent new stuff to get around this? or is it going to hurt knowing that in the future they can have this stuff stolen away from them? >> that's a really good point. i think like the order says, it doesn't affect apple's new product, they obviously did

something to make sure they didn't even come close to these patents going forward. but, yeah, it's more probably innovation just for the sake of trying to not get caught up in a patent lawsuit which is kind of crazy. >> hey, jonathan, quickly before we let you go, worldwide developers conference on monday, what are your expectations for what we really get out of that? >> definitely new operating systems for, you know, ipad, iphone, and for the mac. i think we'll start to see apple focus more on services. so kind of google like letting you use the services and on the cloud. not kind of getting lost in it. and i think we'll also start to see them slowly introducing new hardware, maybe a couple of little updates to the macbook pro. >> got ya. thanks. jonathan gellar, the boy genius. coming up, private sector payroll data from adp. just one piece of the jobs puzzle as we get ready for jobs friday. that's tomorrow. the futures right now, not looking all that great. picking up where we left off yesterday. the dow is down 44 off the open.

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the markets taper tantrum continues, this time spoiling the 20 straight tuesdays in positive territory. friday's employment numbers should provide some clarity. first an early read on the jobs report, adp private payrolls hit the tape at 8:15 eastern. and the price of gold dropping more than 10% in the last two months. we'll talk to the ceo of the world investment arm. the third hour of "squawk box" starts right now. >> welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernan. andrew will be back tomorrow. >> i think so. >> right now, let's get to steve liesman with some breaking news. steve? >> joe, thanks. treasury announcing its plans to

sell 30 million shares of gm stock at the close of business tomorrow in conjunction with gm's inclusion in the s&p 500. as of may, the treasury held 241 million shares, but it's been selling some of those shares. so ultimately this brings it down to 200 million shares. treasury's gm sales in conjunction with the 500. the uaw retiree medical benefits trust will also sell 20 million shares for a total sale of 50 million shares. the government originally invested about $50 billion in gm so far and have recovered 30.5 million as of the may t.a.r.p. report. treasury announced plans in december to sell the remaining gm stake in 12 to 15 months. this should not take the market by surprise. treasury saying it recovered about 95% of funds dispersed through t.a.r.p. it does seem to be on track to book a loss, the $50 billion it

put out versus the 30 billion recovered so far. maybe it has another $9 billion or $10 billion total of stock. looks on track to lose about $10 billion on this investment. however, the government has maintained all along its job was not to make money on this investment. back to you. >> it's back quite a bit. it was the ipo of 38? >> i thought it was 38 was my recollection. >> it wasn't that long ago, mid last year. like a year ago. in the summer, it was in the teens. 34 1/2 is pretty good. this is what you thought it was going to be, isn't it liesman? >> treasury's been transparent about this. the last thing they wanted to do was take market by surprise. they kind of lay out a broad plan and kind of tell you in may they had an announcement of this. and they're going to do it and you can expect every now and then. i don't know if we'll break in news any longer.

but 30, 40, 50 million, it's what the market can bear. this is an underwritten offering. citi is in there, jpmorgan's in there, and morgan stanley, as well. >> i'm glad we're talking about the markets. but as a former member of the autos team under president obama -- >> you did that? >> yeah. we're actually talking about two auto companies that are alive and well that otherwise wouldn't be. so let's not forget. >> an opportunity. >> let's not forget the bigger picture. >> which started under ed's regime. >> as i recall the auto bailout happened on december 18th when bush was still in office. >> he had to bring that up. >> this was a close call. the issue at the time was we figured we were going to lose 1.1 million jobs. and the reason for that was that when people look back at this and say why don't you put these guys in chapter 11. why couldn't you do that? and the answer was at that point there was no dip financing. so the money was going to have to come from the government if that company was going to

survive. >> and it was going to the ripple effects of the rest of the supply chain shutting down. >> that's right. >> which is why al malali of ford testified they would like to have seen their competitors helped out at that point. >> yeah, they did say that. >> and it will forever, though, be controversial because of what happened to some of the senior bondholders, et cetera, et cetera. >> when that omelet got made, serious eggs got broken. but the fact is we now have three auto companies and we wouldn't if we had -- >> and i know gm wants out. definitely, we've had him on and i think they'd like to be -- it's a stigma they don't love. and ford uses -- >> well, they want to sell those shares like steve said. >> yeah. this companies seems a little better, gm, too. they've learned something. the malibu wasn't working. i saw a new malibu. did you see it? pretty nice? >> yeah. >> i'm still thanking steve. i don't know -- he's probably gone. >> no, he's there, i see him.

>> still there. just waiting -- he waited there until he got thanks, although this is his job. >> well, he was probably waiting until -- >> it's not a thankless job, is it? >> well, it is sometimes. but we proved that wrong. let's get to you that says here for some of our top stories. >> thank you. a limited ban on some iphones and ipads in the united states. samsung winning a significant legal victory against the company yesterday. the u.s. trade agency says apple infringed on a patent owned by samsung. the agency slapped a ban on the import or sale of the iphone 4. iphone 3gs, ipad 3g and ipad 23g. president obama has 60 days to review that ruling. if he doesn't veto the order, it will go into effect. and earlier this morning in london, former news international ceo rebecca brooks pled not guilty to charges related to phone hacking. that court case is expected to proceed to trial.

let's get a check on our markets. you're talking about what i'm doing off camera. >> we do it when you're on. and you just ignore her. >> read it completely ignoring he the whole time. >> i was trying not to crack up. >> the whole time joe was going like this. >> no, i was playing bongos. >> you must have really annoyed your teachers. >> i wasn't that person. >> that's the person you've become. >> let's take a look at the markets. there are some red arrows this morning. dow futures down by about 42 points. overseas in asia, there was significant movement there, as well. the nikkei down by 3.8%, even worse in the aftermarket for the nikkei. so, again, there's been a lot of volatility. and this has been the market that we've been watching every morning when we come in. it came after that speech from prime minister shinzo abe where he pledged to boost incomes by 3% annually and set up special economic zones to attract foreign businesses. not enough if you see what's happening in europe.

they've got weakness. in fact, that weakness is extended in europe. the ftse is down the cac down by 1% and the dax in germany is very close to it. the dow finally snapping its tuesday winning streak on fears about the fed tapering its stimulus. joining us right now is the head of trading strategy within the equity sales and trading division of wells fargo securities. and also the chief financial economist, our guest host, of course, ed lezier and jared bernstein. rick, why don't we talk about what you think is happening with the market. you point out that we're talking about correction all the time, but you're obviously going to get that talk. >> at some point, the correction that everybody's been waiting for for months is actually going to occur. i think what most investors want in it was how deep is the correction? is it a few percent? or is it significant? >> is it a head fake? or is this for real? >> right. well, we finally had bernanke

give a little whiff of what could be changing. since then, the peak in the market. only off about 3% or 4%. but my guess is we'll still go down. if i had to guess where we stop, it's probably between 1,590 and 1,560. that's kind of where we have targeted as a downside area here where we suspect people who have been waiting for a pullback will start coming back. >> but you think the big thing really driving all this now is what we're hearing from bernanke and the fed. the talk of tapering, at least the immediate market reaction, even if it's coming because of better economic news, you think it's something that scares people. >> i do. i think despite the fact there's mainly people on the fundamental side of the market who think it's been a great earnings story and that's propelled the market for the last several years. i think if you take qes out of the picture, you would see a very different story and talk to any investor on the street or any trader who has got money in

the game and ask them how they feel if qe disappeared, you're going to have a lot of the bullishness that's been there walk away. >> it makes people rethink things. the big question, chris, whether it's coming for the right reason or wrong reason. and the next big look we get at this is going to be the jobs report on friday where people are watching that number particularly closely. what do you think is coming? >> yeah. we pretty much live or die off of that number. i think, you know, remember what happened to the summer swoon. all the press now is saying how good the economy's doing. but, you know, sometimes i've always been optimistic on the economy the last couple of years. but now i'm kind of thinking -- but we're really we could get a sub100 k payroll jobs number. some point over the next four months. and yields are going to come back down. and maybe the stock market will come back down, as well.

so i don't have a lot to go on right now. i advise traders. i'm pretty much in line with the consensus. >> your point is that the 165 kind of stinks. if it's under 200,000 -- >> well, i'm very afraid that we're overly enthusiastic after last month's number, which was better than the adp number and now i'm looking at, oh, no, what can go wrong on this friday? at the moment, i think we're okay as far as the economy. but two months from now, i don't know. >> i don't think anybody remembers what last month's number was, right? they're looking at the ism two days ago which stunk and some of the more recent data in the so-called spring swoon in thinking that the economy is still not well in the hiring -- >> car sales just went back to 15.2 million, so there's no swoon there. there's something going on with manufacturing, it's not just the u.s., it's around the world.

the manufacturing numbers haven't looked as good, i want to see industrial production in the fed. >> when you looked at last month and see 165,000, the big number there people seemed to ignore was the fact we lost .2 of an hour in the workweek. that's the equivalent of 167,000 jobs in terms of actual hours worked. that's enormous. and it surprises me people focus on the number of heads, the number of people and not the hours worked. if i'm trying to predict what's happening in the labor market, i want to know what's happening to hours not just number of people. do you ever look at that? my take was the same as yours, actually. and this was not a great number. >> bernanke has talked about it before, the fed has a chart on it. sometimes we look at hours worked versus gdp. it doesn't work. you know, you're right, your point's well taken. that's more of a manufacturing

source. >> where is housing in your mix? >> it's very good. housing permits hurdled the 1 million annual rate level. it's adding as much to gdp as it did during the housing bubble. right now. >> thank you both for coming in. we have to go because we have this adp number coming up. jim also reminds us -- i should have thought of this earlier, gm was $33. [ male announcer ] my client gloria

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welcome back to "squawk box." we're seconds a i way from the adp employment report. why steve liesman gives us the numbers standing right here. i don't know. >> let me give you the number. 135,000, market had been looking for quite a bit more. let's take a look. april was revised down 6,000 to 113,000. good sector minus 3,000. services 138, and the nonfarm payrolls estimate is 169. so i think we're talking about probably a 50,000 difference here. there's the numbers we were looking for. and the estimate was 171 for adp. i want to show you something that's happened here. just as we were praising adp under zandy it's widened to the

bls. there's the dow futures which, i guess, where was that relative to the morning? looks like it's about where it was before. but take a look at these charts here. take a look. you can see it had been hugging the bls private sector is how i compare it, by the way, other people compare it to the broader one. i don't see why you would do that. it's widened. take a quick look at the three-month average difference. it's also widened out. not incredibly so. it's been there before. but we're up towards the high over the past say year or so where it's about a 50,000 or 60,000 job difference. let's bring in mark zandy. >> i appreciate that. you're very kind. >> we raised you for a couple of months and just as we did so, you began to widen -- is there something going on. you think you feel like your number's too low relative to the economy? >> well, we're low relative to bls. >> right. >> and we're low in two sectors, leisure and hospitality and professional services. we're coming in lower there.

everywhere else, pretty much dead spot on. the question is why those two sectors? i'm not really sure. >> it's a huge slice of the economy. >> well. there's a boat load of job creation occurs, right? a lot of part-time jobs created. >> is your bias about obama care entering into your number? >> well, i brought this up the last couple of months. >> and i asked jack lew the treasury secretary about it. rejected it, but go on. >> well, two months ago, i saw it creeping in the data. i thought by now i'd see it more clearly in the data and i'm not seeing it. >> you say less job creation. part-time -- >> part-time. >> so leisure and hospitality and small businesses. if you listen to folks in that industry, they're saying this is going to hurt me. the health care reform is going to hurt me. >> even with the 50-job cutoff. >> we had the guy from choice hotels yesterday and his hotels were run by franchisees and he says that's the biggest concern. >> so if you look at the growth in jobs by size of company in

leisure and hospitality, it's much weaker in that threshold. my numbers are coming in weak and professional services, same deal. there's a lot of small companies. so it's suggestive. but the suggestion isn't any stronger today than it was months ago. >> the 50 to 500. it did go up from 45,000. >> into the sectors that would be affected by health care reform. >> you might be trying a little too hard -- >> i agree with you. i agree with you. i would have thought -- i brought this up two months ago. by now i should see it more clearly, i'm not seeing it more clearly. there's a lot of cross currents in the data. the other thing health care reform will do is push people, companies from full-time to part-time. that may actually juice up the numbers. we have to look at hours worked. and last month hours worked declined significantly. we've got to watch that this month to see. so i don't want to -- >> that's a failure of the health care. if it causes employers to change

from part-time -- full-time to part-time. if it has any effect on hiring, it should be deemed a failure. >> health care reform has lots of macro cross currents. some negative, some positive. it's not all positive. some negative. you add it all up. >> the health care law would be if a lot more people didn't get a lot more affordable coverage. >> what steve's saying, it's a distortion of the labor market. no doubt about that. >> there is that incentive and it could be problematic. >> it's a cost. cost of the law. >> it should be fixed. >> there are costs and benefits and you add it all up on a macro economic basis. >> and loses badly. >> here's the other thing i'll say -- >> let's talk about jobs. go ahead. >> the big companies, over 1,000, so the moody's of the world, they're doing fabulous. no problems whatsoever, no slowing whatsoever in job creation. >> their marginal cost for adhering to the new law is less. >> everyone's got insurance. >> i don't want to -- >> the only thing out there is health care reform which kicks

in next year. >> the sequester and spending cuts, i think that's having an impact. you can see that in manufacturing. if you look at our data, we're seeing the coastlideclines. one of the things is the cuts in the defense. and that's filtering. >> i think we would be wrong to jump to this and not the broader labor market. looks like a sequential weakening come out from at least your data and also it's in the bls data. what's going on in the market right now? >> okay. >> in the economy right now that jobs are weakened? >> so underlying job growth is about 175,000 per month. you take an average per month over the last year's 175,000. is it going north to 200,000 or is it going south to 150,000? at the moment, the risks are it's going to 150,000. a lot of it's the fiscal issues. >> somebody tweeted in no easing this month. if we were -- thought we were in a position where the stock market was going to look at good news as a bad thing because it meant the fed would pull back. numbers like this is not going to get a pullback from the fed.

>> i think you have to take the fed chairman at his word when he said and the next few meetings. he wants to see more data. we know that members of the federal reserve board are concerned that we could have another dip down and don't want to reverse course only for us to be reversed course again if the economy should weaken. i think they're looking for proof -- i was going to say definitive proof. >> well, the spring swoon. the question now really if you look at april revised downward. this is, you know, negative is the spring swoon going to spill into the summer? and that would be a real disappointment because you'd be definitely going in the wrong direction. >> what's funny, scott, in my opinion. some of what we're going through now is knowable. the previous spring, where is that from kind of thing? >> exactly. >> we know we have this government thing working through the system. a lot of economists are looking through the second quarter to say you know what, i see marked 3% growth? >> in terms of what the fed is

doing and what the fed will do, it's that job number. we need 200,000 on a consistent basis before they start to taper. and i don't think we get that. >> remember -- 6.5% unemployment is what they've signaled. >> that's interest rates. >> not qe tapering. >> if you think about this, there are really two aspects to thinking about fed policy. one is where is the economy right now? and second, how effective is the policy right now? so i think the problem is even if they don't think the economy's getting much stronger, they're also beginning to think their tools are weakening over time. and even ben thinks that. so he doesn't think -- he doesn't think -- >> but argue not more qe. i don't think they're going to end qe more quickly. unless we start seeing clear evidence of bubbles or other distortions in the marketplace which we haven't seen until this point. >> well, i don't know. many people view -- the last guy viewed the stock market as a bubble. >> the first thing they're going to do is not take away the punch bowl or not even ladle away some

juice, they're going to add less in. so tapering doesn't mean that you reverse course. it means you do a bit less. >> convincing the stock market -- >> what tapering means and what tapering means to the stock market. a problem for the fed. >> pay a lot more attention, frankly, to what tapering will mean and what it will -- >> you can try to do that and bang your head against a brick wall. >> david tepper tried to convince people of that. >> we're on the fixed derivative right now. >> no, what really matters is the expectations about future qe, right? >> right. >> in the marketplace is the expectation when you add in all qe-3, it's going to be $1 trillion. you get that number, there's no change. >> may 22nd, when -- >> the fomc. >> what you have is you have the market -- >> that's when the market -- >> is going to price it in the fed is desperate to convince people it's not the flow, it's the stock that we own. >> they're going to roll a brick over our head, but i want to show gm very quickly.

what we were trying to correct before, it was 33 for the ipo, cramer pointed that out that facebook was 38. jim cramer. >> not cosmo. >> no, jim cramer. >> all i do is thank you. >> you don't have to thank me. it's my job. i'm not asking to be thanked. >> thank you. >> thank you. >> let me know on that other thing. >> i will. i'll think about it. >> there's a lot of side effects. >> yeah. that's what i heard. >> thanks. "squawk" will be right back. atu the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. but i see a world bursting with opportunity,ople nervous. with ideas, with ambition.

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that's the market. that's the market after adp was disappointing number. up 135,000 versus the 165 the street was expecting. right now, futures are down by about 34 points. when we come back, we do have some more employment data that's coming. we are a few minutes away from productivity numbers for the first quarter. "squawk box" will be right back. oh this is lame, investors could lose tens of thousands of dollars on their 401(k) to hidden fees. is that what you're looking for, like a hidden fee in your giant mom bag? maybe i have them... oh that's right i don't because i rolled my account over to e-trade where... woah. okay... they don't have hidden fees... hey fern. the junk drawer? why would they... is that my gerbil? you said he moved to a tiny farm. that's it, i'm running away. no, no you can't come! [ male announcer ] e-trade. less for us. more for you.

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welcome back to "squawk box." we have first quarter final nonfarm productivity up .5% on the nose, up .5 in the neighborhood of what we were expecting. some would argue a little light. so what about the unit labor cost side? here's the big surprise down 4.3%. we're looking for anywhere -- keep in mind, it isn't always about expectations. our last look was up .7%. now, of course, we saw the adp number, you know, i'm not getting any tingles on this number, the market isn't either.

but then again, you know, there's a lot of tingles going on looking at something. i think a little bit more substantial. and that's the ongoing issues with the japanese markets. pay attention, now that we've shared our notes for the liquidity exam with so many, it seems as though the game is up in terms of the results or at least a quick game of catch-up on the japanese side. very important to monitor japanese markets in totality will give us probably our best barometer on global leverage in the financial asset community, better than anything else because it's hard to get signals with these programs like quantitative easing. back to you. >> rick, stay right there. we've got steve liesman here. these guys around the table have all went what? negative 4.3% for unit costs. everybody was searching running through the numbers, what happened? >> well, hourly compensation fell and i guess output remained pretty much stable. didn't fall as much. >> yeah. >> unit labor cost is the cost

of per hour of making a widget. >> right, this is a phenomenon that's been pervasive in earlier sessions, as well. but it's much more pronounced here where firms have been able to figure out how to make due with less. if you look at the data from companies which i've done with a couple of colleagues. what you see is that the effort component, the amount of work that each worker is doing has gone up by 3% to 5%. so what's actually been happening is firms are cutting employment and then the remaining workers are actually doing more on the job. we're continuing to see that. it's surprising that we're seeing it that late in the recovery. >> i wouldn't call it deflationary, but it's not inflationary. >> if that's the case, why aren't the productivity number higher? you would expect productivity to go up as unit labor costs go down. >> in fact, they have. what you used to see. if you look back to the 50s, 60s, even 70s. what you saw during the recession was productivity went down, not up. and the reason was, there was something people called labor hoarding. so firms would reduce output but they would tend to keep on more

labor they needed and the workers weren't doing much. in fact, what's been happening more recently is the reverse. so when output falls, labor falls by even more and firms actually figure out how to make due with less. so in some sense, i mean, the good way to put it it's cathartic. they clear out stuff they didn't need initially. the bad way, people are losing jobs. >> the employers are squeezing labor costs. so even with relatively low earnings, you can still have high profit share because these compensation numbers are just really -- >> which explains why stock prices have done so well too. >> exactly. >> i get some grief when i try to talk about productivity. it's just a weird concept. but it's incredibly important, right. it's the other half of the growth story. >> it's the main thing. because if you're talking about increasing per capita income. >> living better. so let's talk about what's going on right now in productivity in this country. 0.5% is not a great number, we want 1.5, 2, 2.5. >> right.

>> what are you seeing in terms of the trend of productivity and what are ways we can increase it? >> well, i think the trend in productivity is just a microcosm of the trend in the whole economy. so what we've seen is, you know, we're essentially -- it's not a bad economy, it's not a good economy. we're muddling along in terms of productivity. if i were to think about what do we do to get the productivity up? the biggy is investment. it's the investment in physical capital and human capital. my, you know, my gripe right now is we don't have an economic environment that's encouraging enough of that. i'd like to see us do more of that and that would mean, you know, reform tax policy that we started the show talking about. some issues on the regulatory side. a big one is trade. and, you know, if we're thinking about what we could do there, opening markets would be a really big one, huge effects on potential gdp. >> rick, before you go, i -- are you there, rick? >> yeah, of course. >> okay. so you scare me because i worry

about japan being a harbinger, as well, and it's an ugly session again today. you made the point that their markets understand that qe is not a panacea and that's what's happening. my question to you is -- and we need to look over there since our markets are basically being manipulated p by the fed is what you're -- it's hard to get price signals from our markets. why would their markets wise up more quickly than our markets that qe is not a panacea? why would they be smarter than our stock market? why would they move first? why would they realize the jig is up with qe? >> well, i think there's a lot of answers, but the quick one in my opinion would be kind of the demographic time bomb. here you have them trying to change pension rules where, of course, they can purchase more equities as many central banks are trying to do in private equity and government equity, but they're also trying to put less in their bond market in the jgb market, which is a hue m

market. i think when you look at how too big to fail banks have had this cozy relationship with some of the fast money and hedge funds, everything is japan. if their interest rates start to roll over, i don't care what size position the fed has, it's going to send ripples. and i just think their game is smaller in current terms but longer over decades in terms of experiment, i think their test tube is going to crack first. >> their test tube cracked. so if it keeps getting worse in japan, you figure there's no way we sit over here and it doesn't get exported to us? >> listen, there's no way the world economy could be much better than it is with what europe's going through. i think the same thing could be said for all the players in the developed economies who central banks have gone off the deep

end. i think that you can't extract -- either it's all going to work in unison and they're going to double or nothing and actually win at the end or one of them is going to show cracks and they're all going to show cracks. at least that's my opinion. >> just want to point out there were huge revisions to the fourth quarter unit labor costs were up near 12%, revised upward of 4.4. >> when they came out. >> what's interesting is how much time you spend thinking about -- estimating. >> you tell me that again. it's unit labor costs were revised up in the last? >> for the fourth quarter by almost triple. >> okay. >> and so jared correctly says look at the year-over-year, it's not deflationary, it is kind of low inflation. >> well, caught everybody by surprise. it was supposed to be up zero. >> but the revisions. the first thing jared said when his number came out was this number moves around a ton. and i don't normally even pay attention to -- >> the capex numbers? >> well, look, year-over-year compensation hourly compensation reel is only up .3%.

so there is something there. >> right. >> but what steve said is correct, we're not talking about, you know, disinflation, we're talking about very slow growth of unit labor costs. i think if you average out. >> rick, steve, guys, thank you very much. >> yeah, i'm just -- you worry about the exit? we're not going to worry about the -- >> no, because we've learned so much more about how much monetary matters with the velocity the way it is right now. >> the key, i think the key thing to remember is that the fed has a tool that they haven't had in the past, which is the ability to pay interest on reserves. and that changes the game completely. what they've really done is they've been borrowing short, lending long and that's, you know, i think as rob engle put earlier, essentially the monetary policy they've engaged in has not been that different from the past. >> the market keeps going up, i don't see a reason to ever end. we should have a permanent $85 billion -- >> that's where it gets

interesting. what the fed thinks about the market and the market thinks about the fed. >> there's no negative effects. i think we should keep doing it. i own a little ge, little comcast. good for me. coming up, the price of gold dropping more than 10% in the last two months. will the end of qe generate more interest in the precious metal? we'll talk to the ceo of the world gold council's investment arm. up next. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪

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the latest report issued by the world gold council offering new insight into the global appetite for physical gold especially in the emerging markets. with us now onset is jason tusante. >> is that right? >> the "t" is almost silent. >> it is, it's french. >> very french. ceo of the world gold trust services managing director of investment for gold for the world gold council. and i quickly hit up this roubini piece. did you see what he's saying? >> yeah, he said similar things

twice in the past. >> he said stuff about the stock market that was so wrong that this makes me want to buy gold. there are still people that think -- that the move from, you know, it was 800 and went back to 300 for years and then went to 2,000 almost. >> yeah, 1,900. just according to the roubini piece-up, we know the gold market is broadly diversified, the story here that we put out in our recent report is the continued demand for the physical metal in a selloff in the financial markets. he's been wrong a couple of times in the past. >> yeah. >> the gold market has rallied. >> the global geopolitical risk seemed to be less than they were a couple of years ago, right? that's not a good thing for gold. >> well, that's i think only one of the reasons that people are buying gold. we can't forget that the gold market globally is dominated by jewelry sales. >> it is. >> that's more discretionary spend than it is worry about geopolitical risk.

we see investors in the u.s. market turning to the physical gold market, as well. we can't forget that etfs overall only represent around 6% of demand over the past two years. >> we thought it was more and we made that point that, you know, when the zombie apocalypse comes and you're trying to get out of the country or something and you -- you're at the border or trying to buy a gun or something you say, hey, i got these etfs, look, i can prove it. if you don't have the actual gold, it's not even worth having. >> well, you know, the etfs are one way to access the gold market. i think what it has done is provided price transparency, it's traded on exchange. so it's easily at the press of a button you own gold rather than buying -- >> did it help inflate the bubble to 1900? it wasn't real. >> well, it certainly expanded the market. i don't know if you'd call it a bubble. >> you don't know if it's a bubble yet? >> how would you know a bubble in gold. that sounds very bubbly to a lot of --

>> from 200 to 1900. >> that sounds awfully bubbly. why not? >> well, it went up steadily over that period of time. there wasn't growth in the price. now, there has been some pullback. i think there was a big rotation out of gold and into equities. a lot of people were caught offguard. we can't forget coming into the first quarter. that rotation has continued somewhat in the western markets. but, you know, again, the real drivers and the underpinning to the gold market is india, china and other emerging markets. >> the gold's biggest problem is the stock market. is it not? is the rally itself. if the rally goes further, why would gold do anything but continue to fall? >> it's not -- well, a couple of things. one, investment is a piece of the overall puzzle, right? so even if you saw, you know, continuing expansion in consumer spending, et cetera, then they could turn to jewelry. so there could be a shift from investment to jewelry. so it's not necessarily an

either/or. our view is that investors are not looking at either gold or equities. it's, you know, what portion of my overall portfolio might i put in gold and our advocacy says a moderate allocation to gold over long periods of time -- >> his point is you're less likely to hedge if the market's been doing what it's been doing. >> there's been a move, absolutely. >> inflation is low, the stock market's high. why buy gold? >> because people are taking a bit longer term view rather than what is the state of the economy now. >> i want to go back to something you said. if jewelry is the main driver of gold prices and if i see gold prices falling, we know that jewelry is very closely linked to income. so does this tell me that people who are buying gold are predicting that income's getting worse in the future? >> well, it depends, yeah. in western markets. we can't forget that if we look

at india and china. again, the two largest consumers of gold on a continued basis over 50% of demand. >> right. >> the vast majority of that in the form of jewelry, they are, you know, undergoing expansion in the economy. so, you know, china's latest number over 7% gdp growth. the difference there is that -- >> if you believe the number. >> the jewelry market is not -- the -- it's not a substitute for louis vitton bag. it is as you take people from farm to city and getting more discretionary money. the first thing they buy is gold. >> yeah. >> so the driver there is different for the jewelry market. here in the west, it's vastly different. it's not viewed as investment, it's adornment. i think that's quite important. >> men don't wear gold anymore. >> wedding rings. >> no, i know, but i'm thinking -- i just saw behind the -- liberace, and men don't

wear these rings. i'm going to start -- >> bring it back? >> yeah, why don't we wear gold? >> it feels good, it's heavy. >> watch that movie, then. >> that's one part of the market. >> he starts selling things one by one, that was bad. >> problem for you guys is fewer cavities. less gold. >> and that's an interesting point. we can't forget 10% of demand for gold is in the technology sector. so wires, internet, semiconductors. and that's been sustainable demand. the other aspect is what central banks are doing. we've talked about this before. and i think that people need to realize not necessarily the aggregate tonnage that particularly eastern central banks are acquiring now, but that is gold that will be off of

the market for a long, long period of time. >> i brought you back in. anyway, lee, his first name was lee, anyway, thank you. >> pleasure. >> thank you. coming up, the stocks on the move ahead of the opening bell, we're going to check in with jim cramer at the new york stock exchange next. we got an early read on jobs with the adp private payroll data. >> market had been looking for quite a bit more. >> tomorrow, we'll get the closely watched weekly jobless claims. and then friday, the may employment report. you better believe the fed will be watching. we'll bring you up to the minute coverage of the reaction in the markets. tune in tomorrow and friday. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting

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welcome back to "squawk box." let's get down to the new york stock exchange. jim cramer joins us now who -- you have a bizarre memory. like a steel trap, that's what it's like. >> you remember things forever, right? it was 33 was gm, right? >> yeah -- they've done a great job putting what i think a floor

on it in the sense that they never break price. this is a smart move. they do things that are really smart now. they think about the idea that there is an s&p balance and they go and they meet it. they don't put $100 million out because that would wreck the imbalance, and they're pretty smart about it. >> is there a stock -- what do you think, jim, really. out of the russell 5,000 do you think you almost know all of them? >> there was a time when with i knew a lot more than i do now, but the limit of what we can talk about on "mad money" is $250 million. beyond that -- >> i was just talking about "watching the candle abra," you know what the stocks are calling in on. they prepare you for those, don't you? it was surreal watching liberace quiz him. was that not surreal? >> well, my greatest moment was

when with kirk douglas told me he liked the show and wanted to know whether i had a prompter or not. kirk douglas is the greatest living actor and it was quite a quick. >> you have the father/son thing. >> and gene hackman. >> yes, and some good people. >> michael douglas looked over me and handed me his glass. okay, fine, and i put on a -- i don't know, he thought i was working there. >> does michael douglas care about tapering? honestly. >> probably not. what do you think of some of these numbers we saw today. adp and put that with the ism, but the market isn't affected by that. are you worried about japan? >> i'm not as worried about japan because it is ungamable. i do believe that what they put out last night was good and it was just that people wanted to do it tomorrow, but there is a july election out there. i do think may is a weak month in this country and it's an odd

thing that we're talking about tapering when may wasn't so hot. this would have been a good discussion in april and not that good of a discussion in may. >> what do you think of what your governor did yesterday? >> i don't know. i think he sort of says a lot of things that he doesn't give a crap about what anybody says. i'm on twitter that i love him and come on the show and say i'm neutral. look, we have other lives, right, joe? we live in a state and we can't just check our feelings at the door. a lot of the stuff that he does makes -- my boardwalk is open, how about that? my boardwalk was closed in april and it is open now and asbury park and he did a great job. >> right. there are very few people, i think that's one of the things that he's been consistent on in the political game that we see almost everyone else play. he doesn't care what he does at any given time. >> no, i met him because i

testified on behalf of the government in a very big case, and it was just incredible -- he's a force. this was when he was a prosecutor and you just don't want to be on the other side of chris christie. >> all right, jim, we'll be watching at 9:00. >> are you okay? >> yeah, i am. >> me, too. >> why do i think of you as -- you're urbane and debonair. >> becky is urbane and debonair. >> not really. we will give them the last word when "squawk box" returns. [ male announcer ] with free package pickup from the united states postal service a small design firm can ship like a big business. just go online to pay, print and have your packages picked up for free. we'll do the rest. ♪

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♪ in other words [ male announcer ] the classic is back. ♪ i love [ male announcer ] the all-new chevrolet impala. chevrolet. find new roads. ♪ you our guest hosts this morn having been ed lazar and eric bernstein. why don't we start with you, ed? >> i'd like to get out of the 2% growth mode and back on track and the only way to do it is to reform taxes, trade policy, regulation and the budget and that's the standard stuff. hard to do, but we need to do it. >> jared? >> i don't manage a zillion dollar hedge fund and it's easy

for me to say and i'd like to bring down the anxiety, the skittishness and volatility about the tapering. it's going to happen, and interest rates do have to rise at some point. >> long-term perspective, that's probably the case. >> i understand. thank you both for joining us and that does it for us today and right now -- thank you and watch "fast money halftime report." see you tomorrow. it's time for "squawk on the street." good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim kramer and david faber. the streak has broken after the dow's 76-point loss after adp did miss. mortgage rates above 4% and hawkish fed speak last night and in europe flash pmis were tepid and marginal growth in germany. the nikkei fell 700 points, and