senate passed a budget. the house passed a budget. people like me were banged on for three years saying pass a budget, we did. no one wants to do it. why? it will be in public. >> thank you very much. >> thank you all very much. >> a lot of fun. gin us tomorrow, "squawk on the street" begins right now. good morning. welcome to "squawk on the street." i'm david faber with jim cramer and scott wapner. the fed is taking center stage this week, and the act this morning indicates investors hope the central bank wasn't pare back on stimulus in the near term. how we'll star the day or a sense how it's going to hope for us. green across the board and a significant rally, at least, at the open, at least indicated thus far by those futures. how did europe do? that would be important. a lot of green on the map.

yeah. a lot of green on the map. let's go overnight in asia. nikkei rose for a second consecutive session. as it likes to do percentage gain has to be 2% 3% one way or the other. >> a buy order there. wouldn't it gets up 1.75, the government comes in, they like to buy high. >> momentum investor. >> exactly right. aggressive growth fund. >> our road map for the morning. of course, it will start with markets. could be a big day for the bulls, as you saw. oils hitting nine-meonth high. what to watch. >> hold the pork. one of smithfield food's largest shareholders asking the pork producer to explore a breakup instead of a degreeing to be taken over. >> characters like shrek and the krugs going to the web. cramer warns crewsers about synthetic cdos.

wall street was listening. we've got the details, coming up. >> he's getting stuff out of his pocket, my buddy, next to me. there it is on the cdos, which we'll talk about. futures are on the rise. investors looking to what's tomorrow's two-day fed meeting. the watch is on to see if pol y policymakers provide some clarity when the fed might wind down its bond-buying program or whether they won't. you may hear the words tapering, of course contributing to a lot of volatility. we did see the stock market decline for the third week in the last four as the last week, i'm hoping, jim, we can stop the conversation about tapering entirely and start talking about the economic fundamentals, get way from looking at that ten-year at the rose in the emerging markets, what's going on in credit but i don't think it's the case. >> the st. louis federal reserve put up numbers this weekend, there's loan growth in business loans for the month of may. now that means that this is the kind of thing that you need to see. you need to see actual business

being done, which is better, by the way, than life support from the fed. there's a group of people who came up in the era where all we wanted was the fed to help. i remember eras where the fed didn't need to help because business was good, and then you had employment which led to a stable growth, not a bubble. that's what i'm looking for. >> part of the issue here is the fed is ahead of consensus when it comes to growth and that has skewed perhaps their view and the talk of taper and why other people have looked at the economy and said, wait a minute, we're not nearly to the point where the fed can take its foot off the gas. but if you look at their forecast for not only this year, but even moving forward, they are a little bit ahead of where consensus is and that's key to what they. >> 2.6. i want to see loan growth. you don't have new splurge in housing, obviously, because the people are kind of caught up by the rates. but, yes, the stocks that acted well last week, i used again

mills and bristol meyers, imminent recession in 8 to 12 months. they bottomed. you don't want to see that. in other words, this is the fed step as way and people believe that there's nothing there. i'd like to think the fed stays in, until we get more than one month of good loan growth. >> to that point, you are talking about my multiple stocks there. they had something to be taken out of them given what were, what multiples -- >> 18, 20. >> higher than some of the peers in the biotechnology sphere which is hard to believe because they're going at a good rate faster. >> i don't want to get caught in the trees, but this is what's go on internally. a camp says, you know what? we are going to go into recession. go back to what we were hiding in, eli lilly, another camp says we're starting to get better, let's get aggressive with the banks. that -- that group started

losing at the end of last week. >> some of the stocks that you guys were talking about where there's a hit bottom, you want i guess when stocks are at that level, if the balloon isful of air you want it to be a slow bleed rather than a pop and stocks go down to the bottom. that's the scary scenario. >> the scenario is everything's bad, you shouldn't be buying high multiple pseudogrowth stocks like general mills, they're too expensive. housing stocks down for the year. the developers hideous action. and then you've got the banks tailing off because they're not going to bake as many loans and loan losses, reserves have to stop going down. then situations look a big industrial that says, this is as weak across the board. what do you buy? >> right. >> and at answer is treasuries. >> three of the last four we've been down, we've been introduced to the idea of risk in equities. risk across the board in every

asset class, the most disturbing aspect of what we've seen over the last month, whether it's credit, whether it's emerging market equities or domestic equities or go down the reits, income. >> reits horrendous. oh my! >> here we are, we're going to start hearing again tomorrow from the fed, what do you tell investors to do? you've been giving them -- get more cautious, you have. >> right. the mechanics of the market will play a role. the fed does its meeting. there's a big bad event factored. that's going to be passed. thursday beginning of the markup period by the aggressive growth funds. mark up from wednesday to thursday. they can't mark up further because the government listens to phone calls. you have to accept the fact that there can be a trough and then a rally despite what the fed says because it's really important for firms to preserve their year. i say this -- by the way not facetiously at all -- there are moments at the end of a quarter where this rational trumps the

fundamentals. but in the end, i don't like the market as much because i do believe that the quarters aren't going to than great. i just don't think they're going to be blowout. and we're going to start hearing about it. >> the volatility that's come back to the market, jim, has made people cautious anyway. >> right. >> look what happened last week. the first three-day losing streak all year for the dow and then a big comeback, the vix spike 13% in one week. that makes people scared. >> there's not enough business activity to just justify a backup in rates. i'm calling for a market which doesn't do anything. that has not been the case for a long time. it has done something. it's gone up. we are -- look, i looked at charts over the weekend -- >> looking at charts? that's -- >> father's day, break the charts out. and i saw this kind of incredible reverse head and shoulders that ends and i'm thinking to myself, you know

what? the chart gained up on the market last week. everyone's looking for direction. thursday unemployment numbers, the weekly claims. does that make it so that the fed if they say something, listen, we can be a little less -- we don't have to be so tight. to people, the bond vigilantes come back. too many players no. there's bond vigilantes, guys who don't like the growth stocks, guys say the stocks are too expensive and core people huddled with big gains who have to preserve them at all costs. this is a nightmare scenario for bulls and bears which means battleground. >> battleground. let's talk about another potential battleground, shares of smithfield foods are moving higher in the premarket. the u.s. pork producer should be broken up, rather than sold as a whole, of course they already have a deal to be sold. starboard owns 5.7% of smithfield. the company worth $45 to $55 a share, if it were broken up

compared with the $34 a share deal that they already have with shuanghui. what the ceo had to say on "squawk box" a little while ago. >> our letter isn't meant to get the company to stop the transaction in and of itself and we're necessarily against the transaction. we just believe that the company didn't necessarily look at the alternative of selling the company in pieces as opposed to selling as a whole. >> all right. if you're going to try and actually get more value, those are not strongest words you might want to use, saying we're not necessarily against the transaction. a smart guy, a lot of success, jeff smith. i spoke to him a couple of months ago. act the activist investor summit in new york. success in aol, they didn't get board seats there, but office depot. this one, i'm dubious. not because there might not be value. continental grain had a 13 d, pushing for a breakup of the company said the value was 40

bucks. paul free borg, they're out entirely, they sold into the rise and stock prior to and into the announcement of the chinese deal. he's coming up with a bigger number. but you've got taxes to wonder about, if you're to actually be able to do this. you can't always get the tax advantage rate for selling different pieces. >> right. >> breakup fee that's going to go up, 30 days after, i think that 30 days, that will be higher. you'll have a shareholder vote. not sure what the play book is here. i haven't had a chance to speak to mr. smith directly. i listened to the interview this morning on "squawk box." but it would seem to be he's got to get different potential bids in hand for units and then have the deal voted down, maybe start to drum up again some of the security concerns that we first heard about in days one and two that have died down. they've died down because there has been no overbid. we thought we might see one from brazilians, didn't happen, not going to happen. they're on the sideline as to

those companies, jbs and the other one. you know, not sure how you work it here. interesting thought, whether in fact in practice anything happens, hard to say. >> why do you comment now, presumably the smithfield people must have thought about this and realized the easy value, way to get it is to sell. i don't think the smithfield people wake up and say i want to work for the people's republic of china. i think this company wanted to stay independent would have chosen rather than work for a group -- for the tiananmen square guy. >> one important element the smithfield gang, which, by the way, take a look at their proxy, they make a lot of money. >> yes. >> a lot of money. and they keep their jobs with the chinese deal. that was the criticism that i was hearing from potential bidders before they decided to pull back this idea that there was sort of an auction but then it seemed to go away before perhaps you got your final bids or opportunity to even see if you can get above 34, because

these guys were given a deal under which they were able to keep their jobs. now, that is the criticism and that is why you could say, well, that's why they didn't want to look at piecemeal selling everything across the board because they would have been out of work. >> you think china thing is going to happen? >> yeah. i don't know, does starboard have the votes? you need the votes. >> i think this is a tough one. i thought the quote from him during the interview is interesting. nary not necessarily against the transaction. you got to find other bidders who will come forward. >> right. >> you can still deliver more to shareholders, you've got to get over the break fee and vote the deal down in order to have deals happen. that's a lot. that's a lot. >> out there for a long time and all that's going on is that we've come to accept it. does he go to washington? >> i don't know. >> i don't know what washington is. >> mr. smith goes to washington. >> senator plat may veto that. telegrams come in. one of the things that bothers

me about this starboard thing, it's become so fashionable for people to send out a letter, now they're not even against the transaction, at least step forward and say it's a bad transaction i want to stop it. >> they do very good work at starboard. it's a long letter. if you're an -- you should read it. the analysis is an interesting one but it may be too late. >> yeah. i mean this is not charlie urgen stepping up with guns, comes in with machine guns. >> i wish he'd come in. i can't figure out what he comes in with. >> he likes ham? >> clock is ticking on that, too? >> a big knife fight. >> we're out of time. >> i love him. >> makes our job worth doing! >> how about telephonic? >> that's not happening. don't worry about that. >> that's aan illusion. it's journalism. >> right. >> remember journalism, you had to check it out? >> i still try to do that

occasionally. >> they issue a journalism card to everyone. licenses to kids who are 18 so they can drink, that's what journalism has evolved to. >> cramer's fired up. he sounded the alarm on synthetic cdos and investors apparently have listened. the story we're talking about plus jim's warning, in his own word. the showdown between boeing and airbus. a live interview with the ceo of a company that leases jets around the world. another look at futures. it's a positive open here on monday on the street. there it is, the dow, implied open of 105 points. more "squawk on the street" when we come back. i'm a careful investor. when you do what i do, you think about risk. i don't like the ups and downs of the market,

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it appears a move to revive securities blamed in part for enormous losses during the financial crisis has failed. jpmorgan and morgan stanley have scrapped a plan to sell synthetic cdos. investors are balked at buying derivatives on offer. jim cramer earlier this month on "squawk on the street." >> hit us with morons buying that stuff, i hope every penny is taken way from you.

list listen, you're buying the cdo, okay. >> it's synthetic cdo. >> buying synthetic cdo. talk to jamie dimon. people loss fortunes. you're fools. now when the people whose money you're running say, holy cow, i listened to "squawk on the street," and we told -- they said, you're idiots. you're idiots! probably -- you're morons. you're killing the system. i hope every one of you gets every penny taken away. i said it. i'm on record. >> i'm not sure i get your point. >> for now. >> not me, i am not on the sell side. brokers jam them because you can put as much gross credit in. what's so funny, elizabeth warren, my old friend, senator from massachusetts now, i think that the people who run bags should recognize she's looking for an issue. give her an issue like cdo, hall the big bank guys down, do a big

investigation, banks are back on the hot seat, they look horrible, there will be legislation to outlaw this. warren will have a grand old time destroying everybody who is there and bankers and guys who buy this, you won't want to go to the supermarket because we'll know, we'll know you did it because you'll be on the stand, you morons! crazy. >> old habits die hard on the street. >> so much money. >> ooh never underestimate the creativity of bankers. they are, some, rocket scientists who decided to go into the construction of cdos. never underestimate continued attempts to create new products that will meet the demand of their investor base. >> never underestimate elizabeth warren having a nice solid hearing i intend to cover myself. >> not smade up of mortgage-bac securities. i travelled to norway for the --

>> glorious. >> those people did not, even when i got there they thought they had synthetic cdos based on mortgages. they weren't. they were based on loans to corporations. it shows you, jim, to your overall point, buyers were sold them way back by citi, this norway, theyed that no idea. no idea what they had bought. that's unfortunately what occurs here. >> this is quizling ii. our banks can. elizabeth warren, who watches the show, and happens to be a very bright woman, would look at this and say, listen, let's call some banks in and it starts over again. the banks ought to give up and brokers ought to give up the big gross credit they get on the stuff and say, you know what? we don't want to be brought down in front of the senate again. that didn't go that well. >> i agree. >> that was an ugly thing. this time they take the fifth. i have found -- i went to law -- one of the things i found

incredible, you take the fifth. the vast majority of the people taking fifth they may have been involved in the situation. shocker. >> listen to what you said. >> they should. >> right. >> at the end of the day, that's what matters most. people balked at buying these things because of the risk. >> they're not coming after people who bought them. i don't mean to come after nice people who quizling ii won. i'm talking about brokers, big bankers, i'm calling after you and i'm calling elizabeth warren. see if she wants to have a hear, come on "mad money." senator warren, professor warren, always welcome to talk about cdos on "mad money." >> mad dash after this. out there owning it.

the ones getting involved and staying engaged. they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives.

there it is, six minutes before the opening bell time. cramer's "mad dash" ahead of the monday open. where are we? still june. the month of june. >> i know. >> i like to set my stage here. >> we don't want to get too close. >> nyse, correct? >> right. netflix, when you said that disney deal was good for netflix, i was shocked. like, why? and it was the stock was between 60 and 70. >> incredible. >> it started the run that gave you more than a triple. this morning, david, dream works comes in with a gigantic deal with netflix, does this propel

it again? >> i don't think it will propel about nearly as much. you could make an argument this is more important for dream works than netflixes in some way giving this outlet. but that being said, it is just another example, i think, of the power of netflixes. we went back to the disney deal. that was a stamp of approval. remember, the exclusivity as part of the deal, first run after that was so key for netflix, hasn't all happened yet. but it starts, i think, 14, i forgot, disney deal. this is important. >> the breadth of what dreamworks turned out to have, you know when you go and look at what netflix has done, they lock up companies, they lock up this business, and they then become more valuable versus itunes and then when you get the next generation, dreamworks has younger generation product, this next generation, netflix, hastings speaking 10, 15 years out. he gets kids hooked on netflix and cut the cord, these kids,

they watch it on all sorts of devices. >> and know exactly what you want. they know better than the nsa what you want. >> well, they know -- >> what you're watching. so, they can keep delivering it to you. >> does the nsa know when talking about binging we're not talking about binge drinking where they wreck people's lives. >> there's been a lot of binge buying in netflixes. >> stock goes higher. >> a lot of others as we open monday of tradingen the opening bell next. ♪

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futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. you're watching cnbc quack on the street live from the financial capital of the world where the opening bell is set to ring in about, oh, call it 45 seconds or so. key to the market, my friend, key to the market, come on, get up to me. >> it's tracker supply if you want to go there. the gross stocks -- by the way, one of the keys. salesforce.com one of the biggest losers this quarter. they did a deal. watch that stock. growth has to come to the fore.

if you do have a slowdown in the economy that is mandated by the bears. >> impact of oil prices is what on the market? >> i think they should come down. if there really is such a thing -- not hostile to the rest of the world. we're awash in oil worldwide. there is no reason why oil shouldn't come down. and i've got to tell you, we had an actual energy policy, we would be calling hearings why oil is so high given the fact we are awash in oil in this country. >> take a look there. of course you can see the real-time exchange back at cnbc's headquarters, almost all green aside from the lower right-hand corner. a strong opening for the s&p. big board, ampio celebrating its transfer to nyse. had been at the nasdaq. at the nasdaq, associated press did the honors. >> associated press, the bell. >> still around. >> yeah, i know. i'm saying when i was a daily

reporter, i was a reporter in newsprint, the a.p. was the most underrated force you could ever believe how they had something on everything. you always had to try to match it, that meant you showed them reverence always. >> taking a look at stocks across the board as you might expect, up. s&p looks like it's going to open with a gain of .7% at the point, jim. trying to look for big movers. netflix ump everybody 5%. >> hate the up openings, david. >> carl icahn, made a billion dollars. >> he has. >> minimum. it's gone up another 6%. >> investment has been incredble. does he move it over to herbalife after the survey came out which showed that herbalife -- survey i think that was showed nothing. but you know, herbalife is out there. >> stock's been going up too. >> yeah. >> started -- well, look, why did i mention hash about life? i've got the judge right here. >> he's here.

>> he's got jurisdiction over herbalife. >> hits the cash register every time you say the word. he pat ended some relationship with herbalife. >> it's worth the call. ask about netflix. you have the in with icon. >> it's my understanding he hasn't sold any. >> what a home run. >> yu why would he? friday i was reporting on dell, another holding he has not made any money. >> right. >> quoting sources who were indicating he might bow out of his pursuit of a recapitalization. >> right. right. >> that has yet to happen. he's got a joint proxy with southeastern. obviously also jointly involved in trying to fund that recapitalization for dell, shares are up, 2 cents, at 13.41 below the 13.65 bid. we'll hear. yet to hear on the decision. they've got to firm up financing

to show they can get there in terms how to pay $12 dividend. they have to have meetings with iss. i hate to say it. they shouldn't have the influence they do. but in this voting they will and that why time is of the essence here. >> one more things about netflix as you were talk about it in the "mad dash" and talking in relationship to what carl icahn has made in this stock. is that the one thing that's out there that could trip up the stock if it becomes known or if he decides to sell some of the position then it gets known that he has? what else could cause this stock to go down? the market would probably react negatively if it was found out that they decided to unload some of the position, right? >> i think people are in wonderment at the -- his ability to pick that up. almost the exact low. and in such size. >> prudent. >> incredible. >> the other side -- >> i don't know it would necessarily impact the psychology on it because it's the operating performance of the business. >> yes, operating performance is strong. one of the best stocks of the

half. those tend to be marked up. people at home, that means people want to show they had brilliance, fund managers, to own netflix. i continue to think the market capsize is way too small versus opportunity, even as people try to judge it on a per subscriber basis. that's not what works to a growth guide. they're saying total addressable market could be $50 for netflix and they're going take it up here. >> maybe people are riding in part the carl wave and if he does trim some, maybe it becomes excuse for others to take profits in a stock that has risen so much, too. >> i don't know. >> tesla and netflix are two stocks that people fought all the way, last week there was a bare rons, a story about teslte i'm told, supposed to be negative, and the stock did well. netflix to me a positive story given the fact they could refinance. put it this way they could issue 20 million shares, refinance the balance sheet and growth guys

would be hungry. if a secondary could work, icahn can dribble it out. i've got to buy herbalife, i like to keep that thing going and carl says that's an opportunity, i think you ought to find out. >> what's the most important sector this week to watch, jim? financials? >> all bank. the banks started rolling over at the end of last week. i watched cd rates, they have come down. the same time banks are making a lot more money. we saw the commercial loans that i mentioned earl yes, the st. louis fed, at the same time there's an out and out belief this group must die on higher rates even though that is totally counterintuitive to what jamie dimon came out in that great speech he gave at the morgan stanley conference where he once normalized rates in order to make $2 billion more than people think you can. >> i did want to revisit something we reported here on friday. time warner cable shares are down a bit, after an enormous run-up friday, if you did not see it, we reported at the time

that there was a meeting a few weeks ago but between great lakes mcfaye, ceo of liberty media which owns 27% of charter communications, has right to go up to 40%, by the way, not yet, but in time. there was a meeting as charter looks at potential acquisition opportunities between mr. mcfaye, glenn gritt outgoing ceo of time warner cable, i said there was a discussion brought by mr. mcfaye of the yidea of m. i did the story after reporting in order to pour cold water on what were rumors out there, a lot of speculation. >> right. >> to indicate that the far smaller charter, you know, the hurdles in terms of itting able to pull off a deal of this size given their respective sizes would be extraordinarily difficult. time warner, for its part, cable, had absolutely no interest in pursuing conversations about that transaction.

that said, time warner cable shares were up sharply. charter shares up this morning. cablevision, another name you expect to hear, controlled by the dolan family, unclear what if any motives they have in terms of selling, but john malone, chairman of liberty, and chuck dolan, are close and have been in constant contact for many years. and there's cox, privately held. there's sudden link, run by ply friend jerry kent. there are a number of options to go. >> the original charter. >> the original charter. they built that up. >> nice man. >> a great operator. you know, we'll see. but very interesting, charter shares positive. time warner shares are down. our parent company, by the way, comcast, mayby think of the threshold of how many homes, in a positive take. >> people if you want to see, cnbc.com, david's story, charter communications, reviewing acquisition targets, thorough analysis versus chatter we heard today. great piece. >> thanks. again, time warner shares up

enormously, perhaps more than we anticipated they might be. >> anybody know the media landscape or have as many connections within in as the gentleman to your left? >> pretty good. i did that just to get you. >> a good analyst. >> ford motor had some commentary about europe. david and i go back and forth about europe. ebva, my bank in mexico, had positive comments saying europe is turning. and that it's more of an american bank. ford motor says sales are stableizing, next year's going to be up this is positive charter that makes an up opening feel like it's deserved. >> let's go to another voice, see if this up opening is deserved. bob pisani on the floor. more on what's moving. >> nice open for the day. i wanted to bring you a little bit of news. reuters is reporting that the eu, european union, will approve the merger between the new york stock exchange and ice. the eu's going to formally make a statement june 24th, date's

been known for a long time, one week from now. it's the last hurdle that's up there. remember, what happened last time in the merger with deutsche boards, the eu scuttled that on the grounds that the combination would create too much of a monopoly in derivatives business. this has moved through the regulatory process fairly quickly. u.s. regulators essentially approved the deal. a few minor things that have to abproved. key hurdles have been overcome in the united states. the fact that there is no overlap in the derivatives area makes it more likely it be approved. reuters citing sources saying eu will approve. we'll know one week from now. great rally going on. you see here in the united states, energy stocks, financials on the upside. technology stocks on the upside. perhaps more importantly, emerging marks are up. eem, emerging market etf on the

up side, in the stock sector it's been beaten up the most in the last couple of weeks. last night markets open, why are we rallying strongly? japan's up, oversold conditions, maybe talk of buying more reits from the bank of japan. everybody said it's about bernanke. the feeling that mr. bernanke will do a lot to calm the markets down. speculation, he's fairly pleased, half a point increase in yields, maybe deflating a few asset bubbles that are out there. but it's a delicate moment. he's got to move very cautiously here because it goes too far, suddenly you're up at 3% in the ten-year. you don't want that happening. so the feeling is bernanke will try to be very chuting to the market, again, emphasize data dependency but perhaps push that more heavily. overall, another 4% correction. that's all we've had. at the very worst. s&p's only down 2.5%. yes, the philippines down 14%, emerging markets hit harder.

here in the u.s., the decline has been fairly gentle. and a lot of people are starting to say, if bernanke handles it right the decline that we've seen, that's it. s&p capital iq came out and basically said decline may already have run its course and will therefore end up as noid. they're the first one i've seen basically before bernanke making a call like this. but, jim, so far, you've have to admit, outside of the turmoil in emerging markets and a backup in bond yields, it's been a gentle correction here in the united states. back to you. >> good description. >> very good description. let's head to the bond pits. rick santelli. >> thank you, jim. if we look at two-day chart of ten-year, a couple of things jump out at you. around 2.15, 2.14 traders look at before they reverse out recent buying. around 2.05, 2.08 more of a zone. if we open it up, back to the

may 1st fed meeting to see how much the market's moved. but may 1st fed meet, wednesday, friday you had the big revision on all of the jobs numbers. might be better to go in front of the joint economic committee when bernanke testified on the 22nd. let's bring that chart up. you can clearly see that that was a big deal. that's when many of the questions about the involvement of the fed pushed rates higher. let's really open this up. let's open it up to a two-year chart to give you an idea. we know we're at the highest yields since april, 14 months, april of last year. but now let's look at aggressiveness. there's the u.s. now next, let's look at the same two-year from a jgb standpoint. some things should jump tat you. on the left side of the chart a long period of tight ranges at 1%. 1% is the key. the most -- the least intimidating in the fix income markets, you were discussing europe. look at boon, less developed

underscores that marks in terms of sov erns is fixated on issues in europe. three one-year charts, dollar index under pressure, lowest level since february. dollar/yen, two months, since april. next one, it is the ur roer yen, the least intimidating, of course. david faber it is all yours. >> right. i'll take it. thank you mr. santelli. kelly evans joins us here. >> good morning. >> monday morning i'm want to talk about mortgages for a second. >> great. >> not necessarily, we've talked about what they mean for banks and the refinancing. but to look at mortgage rate, heading into the fed meeting wednesday. because when we look at the backup in rates that's happened over the last, what do we call it, six week, there's more happening in the market than the backup in treasuries. there's the fact that investors in mortgage-backed securities

have been on strike because they're unclear where the fed's going. when we talk about wednesday, we talk about a fed that's obsessed with mortgage rates what can they do to calm the market? the chart, counterintuitive. the bottom line is that the spread between the 30-year mortgage rate and ten-year treasury is approaching historical highs. over two percentage points in late 2011 because that was the europe crisis happening in the treasury bid. what's happening now, again, is that people are waiting for clarity and what's unclear, is if the federal reserve comes out on wednesday and talks about, you know, status quo or maybe pulling in their horns with regard to the taper talk, fine. but is it enough now that the genie's out of the bottle in the mortgage into the get the rate back down? what are their options if they decide, well, we want to do more to specifically target this rate. >> is this a fed that could try and come out and talk about a rate and say here's where i want

the rate to glb mobe? >> even more than already? are there any other buyers other than the fed in the market. >> they've scared buyers out of the market. >> that's the whole idea. >> yes and no. yes, you want people to move of the risks spectrum. but people should have some degree of confidence they'll be able to sell to the fed. the trouble is the taper talk has take than certainty away. and what's unclear now between that and the fact that the fed's constrained because they're buying so much of the mortgage supply already. you've got this widening happening, so what more can they really do? i mean there's not much more of the market they can buy. >> how about the american capital agncs? they've been usually weaker in buying mortgages. are they absent? >> where are they? great question. what's it going to take for players to get back into the space? does the fed have to be extremely specific how long it's going to stay involved? can it even? there are variables at play beyond their desire to bring

rates down. my point is this, it has more to do -- there's more involved than what the ten-year's doing. >> more involved. we do not follow mortgages enough. >> no. >> because the fed owns them all, so there's not a market. that's quite wrong. >> now it's undermined the market so that worked well up until a couple of months ago. now it's coming apart. >> where are all the fannie mae secures they're still pumping out? the fed just buying? fannie mae issues, fed buys? >> they have mortgages, higher yield, relatively high quality mortgages go back to the first round of quantitative easing. what if they started to sell those? it might take a little bit more certainty of how long the fed stays involved in the market but they have to do something more, i think if they want to bring the spread back. >> great report. >> smoking alternative gets a spark. e-cigarette market.

we'll talk to the ceo. let's take a look at markets. we're at highs of the early morning up nearly 170 points on the dow. s&p 1%. that's where the nasdaq sits as well. back in a moment. ♪ [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪ the 2013 lexus gs, with a dynamically tuned suspension

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welcome back to stock on the street. above $98 a barrel, looking to climb to $ 00 a barrel mark. watching prices as traders are watching the situation in syria. and of course the tension there's escalating is a big reason why we are seeing higher prices. almost traders looking ahead to the fed meeting over the next two day. keeping our eye on supply issues and on some analysts' forecast we could see tighter supplies this summer, because of stronger

demand as well. keep your eye on natural gas, the biggest gainer in the energy complex in the session, after hitting three-month low last week. now we're seeing hotter weather than earlier forecast. that is helping natural gas prices. it's all about the fed in terms of metals and waiting to see what the fomc does over the next two days. that is something that is going to definitely fuel the direction of what we see in gold market. >> thanks very much, sharon epperson. google launched giant balloons carrying computer equipment to create a high-speed internet infrastructure for remote areas. look at one of them. code name, project lioon, flyin over new zealand, picking up power from solar panels below. i think i see them. cool video. this morning's squawk on the tweet. what other world problems could google solve with balloons? tweet us. we'll air your responses throughout the morning.

say this, the company continues to come up with stuff that you wouldn't otherwise -- >> whether it's a self-driving car, which has a real future. >> right there or importantly, this business in a sense broadband, what they're doing with google fiber, keep an eye on it. it's important. as important as wealth of the competitive poths fsition provi for broadband companies. they're trying to come up with stuff. >> recruit the single smartest group of people in the world, younger people out of college, first in your class, from a major university in order to be in the door there. reminds me of what used to happen, investment banks. >> yes. >> my son saw the internship and he wants to work at google, that's good. >> versus superman. >> i did not like "superman". have not seen "internship." and just give them the basics, you know. i got this. [thinking] is it that time? the son picks up the check?

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>> already. time for 6 stocked in 60 seconds. "6 in 60." >> terrible preannouncement from the construction saying europe is weak, asia's weak, bad story. >> europe is weak.

>> i know. mu, micron. >> everyone's jumping all over it. i do this quarterly. i want to be careful. >> aluminum inventories are way up. what does that mean or aa? >> i use them, alcoa reports first, i can't say alcoa having a great quarter. >> bad for alcoa. >> i think so. >> directional hamilton raises cit. >> analyst saying a lot of liquidity. hot stock. >> hilder's been around a long time. >> yes. >> morgan stanley on groupon? >> saying, it's come back. this is for real. start buying it. i know. i think it's rich. >> boeing. >> listen, we haven't mentioned boeing at all. bringing up boeing, united technologies an qua"squawk box, aerospace cycle fabulous. >> look at the move. >> fabulous. there's noise telestrator. but this is where we're worried about the dreamliner.

dream on, shorts. >> yeah. right on the backs of the shorts. >> dream on. coming up on "mad money"? >> doing a square-off. miami versus san antonio all week. we've got a two big men going at it two under $10 stocks i'm pairing san antonio versus miami. and then a lot of people keep asking about the restaurant chains. they're not asking the mcdonald's. they're asking about smaller ones. we do a face-off, which are best. >> 6:00 and 11:00 tonight. >> great one on the charter. >> it's fine. it's funny, you troo to y to dos to tamp things down. it is what it is. >> thank you. >> simon hobbs, looking what's next hour on "squawk on the street." >> you have broad shoulders, david. next hour of the program, the fed's going to sort everything out wednesday and calm the markets. really? a deep look at what happens going on at fomc. a look how the deal with

dreamworks will boost subscriber growth at netflix. also ahead in the program, the ceo of njoy will join us up electronic cigarettes may be the smartest thing in tech. monday morning on cnbc. summer event is here. now get the unmistakable thrill and the incredible rush of the mercedes-benz you've always wanted. ♪ [ tires screech ] but you better get here fast. [ girl ] hey, daddy's here. here you go, honey. thank you. [ male announcer ] because a good thing like this won't last forever. mmm. [ male announcer ] see your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. but hurry. offers end soon. incredible offer on the exhilarating c250 sport sedan. so you can capture your receipts, ink for all business purchases. and manage them online with jot,

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welcome to the second hour of "squawk on the street." road map starts with markets. we're in rally mode ahead of tomorrow's fed meeting. can you trust? one money manager staying bearish. netflix betting big on children. dreamworks, original content using famous characters like shrek and kung fu panda. what it means for netflix stock and if you should invest now. e-cigarettes, shawn parking investing in njoy. we'll talk to the ceo of njoy live later on. we'll ask him about the future of the electronic cigarette business. talking housing this morning as well. new data crossing the wires about the very topic just now.

diana has the sentiment number. >> that's right. home builders sentiment hits seven-year high in june, soaring eight point on the national association of home builders monthly index to 52, first time in positive territory above 50 on the index since april 2006. the eight-point jump the biggest one-month gain since 2002. home builder's site low inventory of existing homes and relief in the headwinds holding back a robust recovery, that is land, labor, building supplies and credit availability. no mention of riding mortgage rates in the report. all three components saw gains, surnt sal current sales conditions up eight points, buyer traffic up seven points. buyer traffic is in negative territory, or under 50 on the index. confidence rose in the country, strong in south. it did slip in the west.

several reasons first that supplies of existing homes is rising in some western markets. and prices are particularly strong in california. confidence is clearly gaining but will construction match in? we get may housing starts tomorrow 8:30 eastern time. for more, always more online. realtycheck.cnbc.com. >> quite a number. thanks for that. markets are surging across the board as we get ready for the big fed meeting this week. on that note, the president of yardeny research. good morning. >> good morning. >> can you react to the data this morning? we're talking about rising mortgage rates earlier. now a strong confidence data from nahb. is the housing market recovery for real? >> yeah, i think it's probably the one part of the economic recovery i believe a little bit in. i wouldn't be throwing parties yet and it is one piece of data and just turned positive. but my sense is that housing is

the strongest part of the u.s. economy now. >> that said, you're not necessarily bullish on the outlook for stocks here. what's the disconnect? >> i think the problems the market's priced for perfection. we've gone straight up 5 1/2 jeer years and the a factor of the feds pumping liquidity into the market. they have to stop pushing on the string some time soon. while the market claims to say okay we know that, i think when it happens it's going to be rude awakening for the market. we'll see a substantial correction downward. >> okay. ed, how does the fed -- how do marks climb this wall of worry, if you want to call it that, get past the event risk associated with the fed? why do we end the year higher from here? >> well, looking i think we're in a secular bull market. the market's going to rally into next year, maybe beyond that. you know, i've talked to my institutional accounts and i said, you can have two choices here, you can have a normal

old-normal recovery and expansion, lasts about four years, or you can have a new normal, slow-growing economy but you get an extra four years out of that an eight-year expansion. that's kind of what we have. hands down, all of them would prefer a long, slow, expansion and think that that would be very positive for the bull market. >> ed, let's cut to the chase. the reason that we're probably rallying today is because of the -- it tens to refrain what the fed's going to do now and belief that it could be more dovish than it has been. in your view, ed, does the federal reserve have a major communications problem as some surveys of private economists suggest, or do you think it is doing the right thing by nailing its colors to the mast tapering will come? >> there's way too much chattering coming out of what we have started to call the federal

open mouth committee. too many speeches, too many interviews. i like the way mario draghi does it at ecb, a press conference once a month, you don't get too much chattering from other members of the government rping council. he recently did a victory lap and said, you know, the ecb's created less volatility in markets and other central banks and i agree with him. >> uri, are you saying the market's only good as long as the fed nids the game? what real difference is going from 85 to 60 mean for the stock market? >> i am definitely saying that. and the difference is much more psychological than practical. there is this belief right now, i believe, that there is no reason to sell stocks because uncle ben will just pitch the safety net under you. once they ease back on purchases, especially when they're completely done, that has no direct impact on the

stock market, the feeling is going to be, my god, this market has to stand on its own legs, and i don't think things are good enough to warrant a 1600-plus s&p. >> can i jump? >> yeah, go ahead. >> the only thing i point out is the fed, as messy as its communication has been, it's clear they intend to keep short-term rates near zero beyond the point they phase out qe. so you know, or it could be, there could be a correction. we're probably overdue for one. but you know if you get out of stocks, where are you putting your money? money market instruments earning near zero or bonds that have become extremely volatile? >> in that -- that is what people have been doing for the last couple of weeks. i was agoing to ask, where do yu invest? >> that's the dilemma ma ben bernanke is trying to create for investors and i agree with uri.

it's not the healthiest situation around. you don't want people buying stocks because there's nothing else to do. i'm optimistic about the underlying fundamentals of the economy. >> all right. the data will tell. thank you both. >> a good rally to kick the week off 156 high on the dow, moving on the paris air show. good morning. >> good morning. embraer airs announcing that it received a sizable order from skywest for its new e-jet. contract could be worth $9.4 billion at list price. united exto united technology shares moving higher. you can see the stock up 1.4% on the day. scott? >> thanks so much. thousand of companies from around the world are gathering in paris for the first day of the annual paris air show. phil lebeau is there with ceo of air lease corporation.

good to see you. >> thank you, scott. i am joined by the chairman and ceo of air lease corp. this is one of those shows with a lot of optimism, particularly for that plane that's above you right now, the a-380 and large wide bodies. >> tremendous resurgence in the twin wide body sector and to a lesser extent on the 747-8 and a-380 a huge replacement mark under way by asian airlines, european airline, latin american carriers, demand for wide-body aircraft. >> is it appreciated by the investment community just how great that replacement cycle is, because this is not just something that's going end next year. this has a long ways to go, so to speak? >> absolutely. over 21,000 commercial jets in operation worldwide and if you assume 25-year life, every year 700, 800, 900 aircraft have to

be replaced and wide bodies represent 30% of the zplashmark >> you're leasing to airlines flying them. able of the aircraft is a huge issue, particularly north america and regions around the world. how old the planes are in the u.s. versus other parts of the world. >> many u.s. airlines have an average age of 14 years. so they're over the half point in the life cycle of the aircraft. asia, we're looking at nine years, as an average age. middle east is younger, if you take airlines like qatar, we're look eight huge replacement cycle in the last five years. >> you talked with airline ceos around the world. where do you see the most innovative things being done when it comes to taking care of the customer and changing the airline business? >> low-cost carriers introduced a whole new dimension into airline travel. where the -- not only middle class but people below that

level economically are flying. once they fly, they fly frequently. many of the asian airlines are setting up like franchise carriers in various parts of asia, regional subsidiaries and branding the product. also, we have airlines that have introduced new levels of business class which used to be like first class. so the whole customer experience is being upgraded to a different level completely on inter contend continental flights. >> has his pulse on the industry. you've got more news over the next couple of days here. chairman and ceo of air lease corp joining us here in paris. guys, back to you. >> thanks so much. phil lebeau. netflix may have lost dora but it's gaining shrek. what the new deal with dreamworks could mean for netflix's bottom line. [ shapiro ] at legalzoom, you can take care of virtually all your important legal matters in just minutes.

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look at that. it's a little faber report. i didn't know i had one. we'll talk about smithfield. >> strikes when you least expect it. >> never know when drums start to beat. can't be easy being with me. starboard value, typically a activist fund that has had great success but has oftentimes focused on mid and even small cap companies given its size, is going after bigger prey in a

high degree of difficult deal it would seem to me, coming ought wit a letter and 5.7% position. a lot of the position is through options but in a 13-d, 5.7% position saying, smithfield, you sold out to or in the process of selling out to shuanghui in china, at $34 a share. we think you can get a lot more if you were to split the company up and sell the respective divisions of the company. that, by the way, was a tact take be sometime back by continental grain a large shareholder in smithfield, which has since sold all of its shares before and after the deal on the run-up in the stock price and then in fact into that $34 a share bid that they have accepted. they were also arguing, they were getting 40 bucks a share. here saying $45 to $55. i've got a lot of questions. one, talking about businesses there aren't doing well. i'm wonder about the valuations. they appear to be high.

there's leakage only taxes if you were to pursue something like that. in other words, cost base, how much actually you have to pay in capital gains. there's capital structure breakage, debt on different part of the business. you've got refinancing that adds cost. $175 million breakup fee. a shareholder vote, that's what it will come down to, 50.1% have to vote in favor of the deal. if you have to argue for national security concerns, we haven't seen an overbid from any other companies. so a lot of questions, although not much downside for starboard to say, hey, why not? think about this. here what happens jeff smith had to say earlier when interviewed on "squawk box." >> if from our standpoint the only way we believe you can get to a superior proposal here is if there's some way to piece together the buyers of the pieces. so, someone has to be able to stand out and say, hey, we own a large stake in the company, if you have interest in pieces of the business, contact us, and if

we can put you together, if we can marry the components together and that collectively creates more value for shareholders, thens that something the company would have to consider. >> well, sounds like an awfully difficult thing to achieve. but we shall see. at the very least, nice marketing opportunity for starboard. journal gets exclusive on the letter, they put it up, we talk about it, it doesn't hurt he's kept his fund relatively small. his returns have been good. >> speaking of which, up 165 points on the dow. we've also got a news alert for you. federal agents raiding nearly a dozen 7-elevens on long island as part of an investigation on human smuggling. live from brooklyn, good morning. >> reporter: good morning. yeah it happened early those morning in long island. investors going into a dozen 7-elevens and taking owners out in cuffs.

investigators telling us owners helped smuggle works are illegally from pakistan. the workers forced to live in housing that in many cases was far below standard, small apartments and terrible housing. owners now expected to be charged with identity theft, money laundering and more. investigators telling us at cnbc more than a dozen them were taken into states illegally, forced to do jobs. u.s. attorney loretta lynch upstairs at moment, getting ready to hold a major press conference all of us this and tell us details. we'll bring them right to you, as soon as we get back from the press conferences. scott, back to you. >> appreciate that very much. meantime, we want to het hed do head to the nation's capitol and hampton pearson with the supreme court. >> reporter: among the four decisions that we've heard from the high court today, one was in the case of ftc versus activists. this was about the so-called pay for delay patent agreements

between drug manufacturers and generic firms going forward. the ftc, among others, argued this was anti-consumer and costing consumers something in the neighborhood of $3.5 billion a year in the form of higher drug prices. the supreme court is saying, not so fast. they say, the supreme court ruling in a 5-3 ruling, says these kinds of pay for delay agreements, if you will, we do not hold they are unconstitutional or unlawful under antitrust. but they do say the ftc has a case, that case should be made in lower court, going forward. so again, a bit of a ruling of interest of the pharmaceutical industry. we've got more decisions on the way. so we could be back to you very shortly. >> hampton, thank you very much. hampton pearson in our d.c. bureau? if your kids are missing dora and sponge bob on netflix, don't worry. shrek and poe the panda are

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netflix is announcing its largest ever deal for original content. the service striking a multiyear pact with dereamworks animation known nor shrek. the deal will provide more than 300 hours original programming based on dreamworks character. is this a smart strategy for net flix? the stock is higher today. manager director of equity research and dennis bowman marketplace editor and kcolumnit for the "wall street journal." the children's programming is really a growth area in terms of streaming, particularly because you're able to stream it without ads outside the united states, in particular. is that do you think therefore a wise move by them today to do this? >> well, the market certainly seems to think so, simon. if you look at stock price, both for dream works and netflix a few things missing from the

announcement. one is the price. we are seeing right now a real sort of arms race among content distributors for these programs. vinnesters might cheer the dear now. overall it makes sense as netflix bills out its platform. at a certain point, throws investors want to know what are you paying for this opportunity? >> i imagine that will be a note you should strike, michael. we should mention they are replacing nickelodeon as a supplier, which went off to amazon. this is not a totally new stream of viewers that they're attempting to get a hold of here. >> that's right. you know the 300 hour is the number that jumped out at me. most of the content initially is catalog content. dreamworks bought classic media back in july. they picked up the rights to mr. mcgoo and rocky and bull

winkle, the good content for people our age, not great content for young kids now. but that's probably the bulk of the catalog content. that's how netflix is able to count up to 300 hours. dreamworks yet to produce tv content other than holiday specials. it's very popular in nickelodeon, appears not to be part of the deal, and as you pointed out, simon, trying to replace immensely popular spongbob. i think it's the right move. i think what netflix is doing, replacing high quality content with similarly high quality content. i think they'll fall short. they're not pay as much as they paid viacom. i'm not sure it appeals to young kids. >> it's new content. let's be clear about that. you are saying 300 hours? >> some will be. i don't think you can measure 300 hours of content that has

yet to be produced. i think they're probably talking about cataloging because thes classic media deal. i love to hear a clarification from netflix on that. if it's 300 hours of new content it's going to take several years before dreamworks is able to produce that content. i think it's probably a mikts. >> michael, this is scott. your position, you know, at this point is well-known on the stock. an underperform, $65 price target. looking at a chart on right side of the screen that shows just how far and how fast this stock has gotten to where it is. wall street continues to bet against your thesis. why is it so hard to look at positives of a deal like this and the others that the company has done rather than try and spin it in a negative way that better fits your overall p picture? you may have to reach the realation that you may be wrong. >> scott, then i will. keep in mind, scott, that dreamworks paid $15 million for

the rights to all of this content and netflix shares up $600 million as we speak. the market gives netflix a lot of credit for a piece of some intellectual property, they give them more man four times total value of the content. i think the market is overal viewing netflix. i said exactly what they need to do, i think they are taking the right steps to replace content that's gotten too expensive. they're just not going to be successful. we'll see. i may be wrong. if i'm wrong, i promise i will come on and apologize to you, viewers, netflix shareholders. >> michael's always been a stand-up guy. >> good stuff. >> dennis, i wander if this reflexes on dreamworks as it does on netflix the extent to which this company, when we heard george lucas and spielberg last week talking about how hollywood faces an implosion next time the megabudget film

fails to make 1 billion around the world. are they trying to broaden themselves out and protect against the risk of that happening? what's the new movie coming out july 17th? >> i don't know the name of the title but dreamworks is in an interesting position. it's a smaller company than netflix. it's $2 billion company. and cattenburg has been heartful and creating magic around his company and stock. he's close right now to china. he's trying to play the chinese distribution angle the best he can. he's trying to strike as many of these ex-cable dealed. dreamworks animation is a tiny company. however, a company like that is in a good spot given the bidding war for all programming from amazon and netflix and others. >> we'll leave it there. dennis berman and michael

pachtner. david faber didn't like the new "superman" movie. you haven't explained why. >> i t was indecipherable. >> this is the risk spielberg and lucas were talking about. >> a lot of things blown up. >> warning sign, calling atop for hollywood, president obama speak agent g-8 summit in morn ireland kicks off today. steve sedgwick live in ireland with more. great to see you, steve. >> i've got to make the point, northern ireland. part of great britain as well. that's important. dave cameron setting the agenda. it's not every day that three presidents and a prime minister walk past your camera point but that's what just happened. president obama, president ebroso and david cameron, going to a press conference. one of the key ideas, don't overreach, let's try to go for

ideas that we can get something really tenable on. one of the ideas is an eu-u.s. trade agreement. apparently the deal could be worth 100 u.s. billion. if we can get a trade deal breaking down tariffs as well. that's what barroso said earlier. but there is a fly in the ointment, so to speak, the french, looking for some form of extreme culture exceptionism as barroso's been saying. a concern the french want the audio visual industries put aside from any deal. when we started the negotiations, that would be an issue. that press conference starting any moment now. else where, big deals potentially on tax evasion and on transparency of accounts for global companies, three of the things that we're looking for from david cameron, trade, taxation, transparency. this could be overshadowed by the dispute over syria,

escalating violence is a real talking point. tonight is the bilateral of all bilaterals. he haven't had a kfrths between president putin and president obama in the last year. that could be very, very important for that crisis in syria and what the international reaction is because at the moment it's putin versus the rest of the g-8. >> steve, can i briefly follow up? with the release from the guardian over the weekend about snooping, has that had -- that is what everyone's talking about there at these meetings, extent to which en's snooping on each other? >> yeah, i was at april 2009 meeting, we were there, it was gordon brown, a previous prime minister, and i the unwritten rule is, if you snoop on allies or enemies, don't get caught as well. we know and understand these things go on on a regular basis. but it's incredibly embarrassing for gordon brown and embarrassing for the british g-8

presidency and security services. it's quite a bombshell. but i have to say, that's something that the press corps have been talking about, something that's not on the official agenda here. >> call me naive, but it amazes me the extent to which this was going on. steve sedgwick, thank you. >> the question whether bob kraft will get his super bowl ring, delivered back to him after the summit. given all of the talk of late between bob kraft and what happen with putin and kraft after a super bowl win a number of years ago. that's the real news you want to keep an eye on. >> i will watch closely. >> what is the president going to come home with? oil, up 2%, touching nine-month highs. we'll talk to an oil trader what this means. that's just after the break.

volume might be lacking but the price action impressive, up and 169 points on the dow. the week in which ben bernanke, according to many, likely to strike a more dovish tone. >> and on that note, crude oils. sharon epperson on the floor of the nymex with more on that story, pushing almost $100. >> we did see, scott, crude oil really on a tear $98 a barrel earlier in the session. we're right around those levels now. is it the highest price we've seen since middle of september of last year and could oil prices get to $100 a barrel in a lot of traders and analysts

looking at tightness in the oil market that they see ahead for the summer with some of the supply disruptions possible with the tensions we're seeing in the middle east as supply outages weave seen in the north sea. i'm joined by a seasoned trader on the floor with grz energy and a contributor to cnbc futures now. anthony, you are saying that you think definitely we could see $100 barrel by the summer. what are factors you're looking? >> geopolitical is number one, for two or three months we were quiet on the front. now last week you have the issues in syria, wrapping up support to the rebels, and also the election in iran. what will that bring? that's very important to see what the new president will say about the nuclear program over there. so what these things have done, broke us through the 97.5, which was good resistance and range we were trading in. now we're above that. what you mentioned about north sea production, demand in crude oil increases in summertime, and strong equities market we can touch $100 in the next month.

>> look where crude prices have been in the last two months in the u.s. we're up $10, 13%. and brent crude prices have paled in comparison in terms of their rise. talking about major global events that are occurring. why do you see support in u.s. oil prices? what is happening in oklahoma which inventories that might be leading to that. >> first thing i've seen over the last four, five energy supply reports that come out every wednesday, we're drawing from curbing. we haven't seen that in a few months. 1 million to 2 million barrels every week is significant at this point. and the other thing is, strong equities market. strong equities equal stronger crude oil. >> look what we're seeing in materials of elsewhere in the energy complex and looking at what happens happening with refined fuels. some people happy they've come down a bit but we've seen high prices over the last several weeks in the middle east. i mean midwest everybody i

should say. where do you see gasoline prices this summer? >> i look, in all good scenarios, ways to trade, without geopolitical, 5 to 10 cents higher from where we are now. after that, we are in hurricane season, so there's a lot of uncertainty. >> there you have you it, simon. focus this year on the gulf coast region refineries to see where gasoline prices will be this summer. >> the view from the nymex. up next, we'll be live from chicago. rick santelli will help you get prepared for tomorrow's big fed meeting. >> and late, famous names like bruno mars and shawn parker, putting big bucks behind the e-cigarette craze. will investment go up in smoke? the ceo will join us live when "squawk on the street" returns.

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highs of the early morning. we're 165 in the green for the dow. the beginning of what is a huge week for the markets given the fed meeting going on, taking a look at rates as well. with that, the cme group. rick santelli with the santelli exchange. it's all about the fed and rates this week, isn't it? >> well, you know, the discussions are all about the fed and rates and stocks. but, of course, many would prefer the discussion was about growth and jobs and tax policy and reforms and fiscal policies. but it isn't. and actually, judge, that's exactly where i want to go. you know when it comes to the programs, quantitative easing, buybacks, pomo, most of the discussion's about the taper seem to revolve around, you know, traders are tired of talking about the taper, okay? tired of talking about interest rates and the taper. but is it really an equitable form of discussion? i'll tell you why. because the taper in low rates

affect both markets. they affect treasuries and affect stocks. and it seems to me that everybody wants to try to dismiss the notion that a taper is going to have a dramatic affect on interest rates. they'd rather talk about the economy. but the effects of the operations make stocks more buoyant. it's an equitable discussion to have really about both markets. why is this important? because in many ways, actually, the treasuries are the most important market when it comes to capital which moves stocks. give you an example. let's say that the permanent open market operations, the buybacks, do get tapered off from in the 80s to 60s or the 50s or they float. the issue is, yes, that's important and psychologically the markets will probably make judgment calls on that in the here and now and not necessarily accurate ones because it's an all or none many times when it comes to the markets. but consider this. when it comes to treasuries,

it's not only about what they're buying but it's all about also what's in the garage stored behind the door? the amount of treasuries there isn't going anywhere soon. it's a supply subsidy so to speak. but it's a subsidy for both marketplaces. the real issue, maybe how it affects the middle class. i'll give you an example. if we continue to monitor corporate america, the low interest rates, managed low interest rates, to some extent have made it so balance sheets are pristine and that's an interesting factor because instead of having to deal with banks, many of these companies deal in the capital markets. and they're able to get very low rates, even on some junk and corporate securities, albeit some of that has changed as of late and the date of the change was around may 21, 22, when the question marks about the future of the fed programs was put into a giant question mark when ben bernanke was in front of the jec, joint economic committee. the other issue that's very

important, and it goes back to rates what we learned today with today's housing number. national association of home builders marking sentiment index popping up to 52. wonderful thing. going from a headwind to a tailwind in housing and it's positive effects on potential jobs and construction and potential for numbers like gdp is huge. maybe less is more. i've advocated this. why do you think these numbers from the naahb moved up dramatically? i say it's the sit on the fence mentality. if many out there contemplating getting in the housing c-rates moving to. upside behavior is affected to jump into the marketplace. that could be true in a number of industries. we are not in crisis. remove crisis programs and trust that the economy can start to build some momentum on its own and that 52 number might be the first real evidence of that dynamic. back to you, kelly. >> that's one to watch, rick. try saying that three times

fast. a deal for a company focused on cancer treatment, takes us to the market desk. >> johnson and jon announcing acquisition of aragon pharmaceuticals. in response, shares of a prostate cancer player are moving sharply lower on the day. however a jpmorgan analyst says he continues to believe the medivation drug in good standing. down 9.5%. >> wow. quite a move. thank you. now it's the hot, new trend we've been talking about this morning. electronic cigarettes. also sparking major controversy. one of the big of the players in the industry is njoy. the ceo will join us live next. we'll be right back. [ male announcer ] the mercedes-benz summer event is here. now get the mercedes-benz you've always dreamed of. but hurry, because a good thing like this won't last forever. [ tires screech ] here you go, honey. thank you. [ male announcer ] see your authorized dealer for an incredible offer on the exhilarating c250 sport sedan.

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the street." an eye on markets today airing triple digit rally for the dow, up almost 170. volume here is light. it's picking up a little bit throughout the morning. but there's a sense that which stocks are gapping up, not a ton of underlying conviction. e-cigarettes electronic inhalers that vaporize a liquid

solution into aerosol mist gaining popularity among traditional smokers and celebrity as like. joined by craig weiss, ceo of njoy cigarettes. njoy cigarettes the largest e-cigarette company in the industry. e-cigarette company in the industry. good morning. >> good morning. thanks for having me. >> they kind of smell like cigarettes. what's in them? >> we have the nicotine that smokers crave and then we have flavorings. and our flavorings were designed by one of the best tobacco flavorists in the world to provide that familiarity for a smoker and give them something that is familiar to them and satisfying. >> remind us what the flavors are. >> so we only use traditional and menthol flavors in njoy's products. many of our competitors have pehave strawberry and thick things like

that. we've stayed away from that. >> so are you saying that various flavorings may be encouraging young people to smoke? >> well that's what some regulators believe. they believe that those flavors attract youth. i don't think there is any evidence to support that, but that's a concern among different regulators. and so in an abundance of caution, we've just offered traditional tobacco flavors. >> you have wibig investors normally associated with technology. i don't understand how guys like you can be investing in putting your money on the line here when you actually don't know what the health risks of these are and therefore what the potential liability is. >> well, in terms of the technologyists involved, we think of ourselves as a technology company. it has quite a bit of technology packed into a small device. so we've always thought of

ourselves as attack knowledge company. i'm a patent attorney by training. and the health risks, njoy has undergone quite a few significant third party testing of our products. we've helped sponsor and fund studies of our products by institutions like the mayo clinic and national institutes of health and we're absolutely committed to having not just the best product, but the best science. and it's that commitment that attracted the 17th circuit general of the united states to join our board of directors. and once we get the studies finalized for peer reviewed scientific journals in the next few months, we'll be able to ask you more publicly the findings which we're very pleased with. >> so are you trying to draw a clear distinction between your e-cigarettes which look exactly like a real cigarette and say blue cigs? theirs are black with a blue lighting at the end. meant to look completely different. why the distinction?

and why do you think your approach is superior? >> so blue and now rj reynolds, they're all doing the 15isame thing, trying to create a product that doesn't look like a cigarette. we're trying to go after the adult committed smokers, nearly 20% of the adult population. and the best way do that is offer themselves something that is familiar to them. it looks the same, has a paper feel, has the flavor of tobacco. and when you narrow the bridge of familiarity, you're making it as easy as possible to transition themselves from the product they're currently using to our product which is in our view a far superior product. with the tobacco companies, that's a challenge for them because they don't want to cannibalize their core product, and i don't suffer from that handicap of not wanting to necessarily convert committed smokers, that's exactly who my target audience is.

>> you said these contain nicotine and the warning label clearly states it. i'm curious as to how much if any is actually inhaled and what health risks if any these could contain. >> well, nicotine of course is found in fda approved drugs like the patch and the gum. and so nicotine itself is not linked to carcinogen in any study i'm familiar with. so it's similar to caffeine, it's a stimulant that provides energy and has a relaxing calming effect which caffeine tends to stimulate people andage at a time them a bit. so we're delivering the nicotine smokes crave. >> as a smoker, i adore the fact that you're prepared to say that nicotine is better for you than caffeine. come on. >> well, i'd love to see a study that suggests otherwise. but in terms of what we've seen, again, fda -- nicotine is an fda approved drugs like the patch

and gum, i'm not sure caffeine can say the same thing. >> okay. it's an interesting business. come up and join us. good to see you. >> i'll be happy to. thank you so much. google launching giant balloons carrying computer equipment to create a high speed internet infrastructure for remote areas. code name project loon. the 30 balloons are currently flying over new zealand. what other world problems could google solve with balloons? tweet us. [ male announcer ] i've seen incredible things.

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google has launched giant balloons carrying computer equipment to create a high speed internet infrastructure in remote areas. that brings us to the squawk on the tweet. what other world problems could google solve with balloons? john tweets inflation. mills tweets sky high about aen looks, google can monitor the nsa in utah as it monitors us. and google balloons could check the correct height of the qe induced market bubble. speaking of which, we're up 178 points on the dow.

which is a small announcement, exactly the loss that we had more th more or less that we had last week. >> people didn't even read the article all the way through. it was based on a survey the journal does periodically making the point that the private sector is more pessimistic than the fed. >> and suddenly comfortable with the projections. >> and also said the unemployment rate is expected to drop more quickly. the last line of the piece is this is the rate the fed cares most about. so my point is only this, ib investigators are reading in to that what they want to read into it. and stocks are rallying. >> you can't pre-commit. so whoever is briefing him, and we assume they brief at the highest level, they won't pre-commit on a monday article for what they will discuss tuesday and wednesday. >> i don't think they would. but it's going to be the most important event of this week. after what we saw in the

volatility that's been back, maybe the fed, if they are able to speak more clearly this week, can cut down on some of the volatility that we've seen. because arguably that's why we've seen as much as we have. >> i think they communicate much more effectively through hills than they do in public. >> the word on the street is talking about the mess of communication. economists never give a high grade from everyone. here's what you might have missed if you're just tuning in. welcome to "squawk on the street". here's what's happened so far. >> i think there is a necessity for more consolidation in the industry. we invest for it in technology readiness and new product for our customers and you need to have scale to do that properly in the future. >> our letter isn't meant to get the company to stop the transaction and we're not necessarily against the transaction. we just believe that the company

didn't necessarily look at the alternative of selling the company in pieces as opposed to selling the whole. >> there are too many players right now. bottom vigilante, guys who don't like the growth stock, guys who say stocks are too expensive. and then core people huddled with big gains who have to preserve them at all costs. this is a nightmare scenario for both bulls and bears. the banks should give up and brokers should give up the big gross credit they get and say we don't want to be brought down in front of the senate again. that didn't go that well. >> there are over 21,000 commercial jets in operation worldwide and if you assume about a 25 year life, every year 700, 800 have to be replaced. >> my overarching thesis is that they're just not going to be successful. we'll see. i may be wrong. and if i'm wrong, i promise you i will come on here and apologize to you, all your

viewers, all netflix shareholders. good morning if you're just joining us before we're live from post 9 of the new york stock exchange. kicking off the week with a rally, dow now up 176 points, essentially make up the losses we had last week on a volatile fed driven market. take a look at smithfield foods. activist investors saying smithfield should be broken up rather than sold to a chinese firm whole. embedded value at $44 to $55 a share, higher than the offer from china. good news on housing this morning sending home builders in to the green. confidence in june surged to the highest level in seven years. and shares of those companies are up on the news. >> now there's a lot of green on the screen today. stocks are rallying ahead of this week's key fed decision. the two day meeting kicks off

tomorrow. the statement in a press conference wednesday will tell you what you need to know. and how is this for a headline. china's credit bubble is in unprecedented in modern world history. yeah, we'll tell you who said it and what it means for your money. and never wait at a parking garage again. we'll tell you about a new app that says it could make your, bag problems a thing of the past. but first, markets and the fed much of the volatility in stocks and raise in the ten year treasury yield can be attributed to confusion over when the fed will begin to taper. let's bring in our economists. good morning, guys. michelle, let's start with you. we were just having this discussion about the survey of economists and the journal overnight. their forecasts are notably more pessimistic than the fed's. so are we going to see a down grade in growth prospects or is it the unemployment rate that matters? >> i think we will see a downgrade to growth.

the latest forecasts central tendency was 2.3% to 2.8% for real gdp growth. to get that forecast, we would need to see almost 3% gdp growth in both q3 and q4 of this year. that's fairly robust. and that means a real acceleration in growth. i also think the fed is likely to take down their core inflation forecasts. they have penciled in a bit strong relative to consensus and the trend. but as you know, unemployment is really the primary objective and that's what the fed has been focusing most heavily on. and they're unlikely to change that very much. so it will be a bit of a balance. obviously the fed is not just looking at the unemployment rate. they're looking at a broad range of indicators. where is momentum, where is inflation. so i think on balance the forecast change will be a bit dovish. >> it's interesting because if what the fed is saying is that economic conditions broadly are not where they had hoped, it would seem a bit bizarre for them to say the unemployment

rate isn't moving so we'll sit back. >> i think the number to focus on is the fourth quarter of next year's unemployment rate. because that's the range where the decline we've seen in unemployment because of fallen labor force participation and job growth that has generally been decent but close to 200,000, that's where that rate could come down. there have been a number of fed studies, suggesting it could get down to 6.5% sooner than the may 2015. so i'm not so convinced we're going to get the dovish tone out of the fed. i think what they will do is set themselves up for throttling back on purchases probably beginning in september. >> there are others who think they could -- let's be clear. are you talking about tlolgting back, what do you mean, reducing from 85 to some nominal 75 or, i don't know, some kind of

indication that it's not as strong as it was but still injecting huge amounts of cash into the economy? >> i think the first move they will make is to slow purchase by 15 billion or 20 billion. so slowing purchases from 75 billion to 60 billion a month in september. probably more heavily weighted to cutting back to the mortgage purchases. >> so let me get this straight. you think that the more important factor here is where the unemployment rate is trending and the fact that it's come down so quickly means this is what the fed will react to and that you expect this to continue into next year because a lot of people are saying look at what happened last month. people came back into the labor force, the rate ticked back up again, how are we to know whether that's actually the trend here. >> that was one month's observation on a volatile report. sample for the unemployment rate is about 50,000 people. the trend has been heavily downwards for three years. so maybe not as fast as we'd like to see, but the trend has been downwards. and as gdp has disappointed, the

decline in the unemployment rate has exceeded expectations. it may well be that those two trends continue. >> you've raced a really good point which is that it depend abouts on what the fed assumes the participation rate.ed a rea point which is that it depend abouts on what the fed assumes the participation rate.aied a r point which is that it depend abouts on what the fed assumes the participation rate.sed a re point which is that it depend abouts on what the fed assumes the participation rate.ed a rea point which is that it depend abouts on what the fed assumes the participation rate.ed a rea point which is that it depend abouts on what the fed assumes the participation rate.ed a rea point which is that it depend abouts on what the fed assumes the participation rate.ised a r point which is that it depend abouts on what the fed assumes the participation rate. if they think the labor force participation rate will head higher or move sideways, they're assuming a hidden slack in the economy and they may not move even if we get to that 6.5% unemployment rate. >> wow. that's something to think about. michelle, john, thank you very much. netflix announcing its biggest original deal yet. dream works animation agreeing to create original programming for the streaming service. netflix has had a great open on that news as you can see. dreamworks animation also trading substantially higher.

jul jul jul julia boorstin has more. >> reporter: dream works oig animation builds out its television studio and netflix has struck a deal for 300 hours of new original shows based on dreamworks big franchises like shrek and country few panda. the shows will launch starting in 2014 and available to all of netflix's globalrssubscribers. it's in contrast to the nickelodeon kid shows that netflix lost when it did not renew its deal with viacom. in an interview, the c empeo sae was frustrated with the restrictions. >> it's a real problem with some of the shows when they come off like blues qulu s clues. if your child is used to that show and there is nothing we can do about it because some shows come out a window, some come on. it's this whole windowing system that hollywood has and we're

doing our best because we know what the consumer wants which is to be able to get everything and to be able to rely on it. so we're definitely working towards that. >> this is a big move to dreamworks, becoming a true tv studio rather than licensing its characters to other tv producers. it will help diversify its revenues away from the few films it produces each year. and we don't know how much the deal is worth, but with 300 hours of exclusive content over many years, it could be a game changer for dreamworks animation. back over to you at post 9. julia, thanks. now we have a huge development in the nsa scandal. the whistleblower edward snowden is speaking live. but first, rick santelli, you're watching japan today, sir. >> absolutely. i think the whole world is watching japan. and we are going to discuss everything from when they fire up their nuclear reactor, what's the public trust in abe going to be, from their tax policy, their jump in gdp, we'll cover all that ground with tobias harris.

not the basketball player on the magic, a different tobias harris. all in ten minutes. out there owning it. the ones getting involved and staying engaged. they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives.

up 187 on the dow. so the dow currently experiencing a triple digit move for the fifth straight day. two up, three down. thes last time we had that was

over a year and a half ago back this october of 2011. let's have a look at the dow heat map to give you further indication of the degree, the depth or the breadth, rather, to correct myself, as we count down to what the federal reserve will say in its news conference on wednesday. >> the trouble of course taking crude with it. we'll keep an eye on both of those. but in the meantime, big developments in the nsa scandal. edward snowden doing a live q&a right now online. eamon javers joining us. this is yet another unprecedented development in this kind of case. the likes of which we just aren't accustomed to seeing. any headlines yet? >> we're told this interview has just started online. it's on the guardian's website, the london news paper that broke the story initially. glenn greenwald the reporter is moderating the q&a style discussion. and you have to imagine that just about every single intelligence agency in the united states is trying to try anxious gu late this thing right

now to try to figure out where edward though den is physically in the world. here is a guy who is one of the most wanted people on the planet right now giving a live q&a online. we'll monitor that for developments for you to find out what exactly he's saying now and whether or not he's leaking any new information today about the nsa and its spying programs. meanwhile, u.s. technology companies stung perhaps by criticism that they have been cooperating too spently have started to push back releasing statements about exactly how often they have cooperated with american law enforcement. they say they have gone to the u.s. government, asked them for permission to release some of the details on exactly how often they are cooperating. here is a couple of the companies' responses starting with facebook. facebook saying that over the six months that ended on december 31st, 2012, the total number of year data requests from the u.s. government entities was between 9,000 and 10,000. facebook saying the requests

here run the gamut from things like a local sheriff trying to find a missing child to investigating a terror threat. also, microsoft putting out some data saying that they received between 6,000 and 7,000 criminal and national security warrants, subpoenas and orders. microsoft saying that they have only been permitted here by the u.s. government to publish data on national security orders if it's aggregated with law enforcement. so that is they are not allowed to break out the number of national security intelligence surveillance type orders from the law enforcement stuff where they're looking for a missing child and that sort of thing. so that sort of masks the total amount of activity there. apple also releasing its information saying that from december 1st, 2012 to may 31st, 2013, a different time period, apple received between 4,000 and 5,000 requests from u.s. law enforcement. apple saying the most common form of request comes from police investigating robberies and other crimes searching for missing children, trying to locat a patient with alzheimer's disease, or hoping to prevent a

suicide. so obviously the tech companies trying to do what they can to so he that they are being as transparent as possible here and it's the u.s. government preventing them from releasing this information. but because of the constrictions on the information, they're putting out these numbers, but we don't have any information on how much of that is intelligence and surveillance related as opposed to local law enforcement chasing a lead. >> or more importantly, to suggest to the rest of the world that big american tech is not effectively an extension of the security operators here in the united states. >> that has to be the brand threat to a lot of these companies. that's what they're worried about. >> and i just -- so the people understand what's happening here, it's not a video interview with show den. almost like a live blog. people are submitting question, glenn greenwald is putting questions to him and then his te textual responses are posted.

so for people wondering how this can happen, you they must assume there is a certain level of protection in lays. but after revealing to us the extent of which we're being watched, it seems strange. >> it's a live internet chat and because of snowden's concerns, he might have to go dark at certain points during the chat. but they have said that he'll answer any questions that members of the public put to him. we'll see which questions glenn greenwald allows to be put to snowden. he's filtering the questions, so you'd imagine that he'll be presenting certain questions and not others to snowden. and then at some point if he goes dark, the whole world will be wondering where he is. and you have to imagine that just every single intelligence agency in the world is trying to triangulate that website right now. >> exactly. yeah, one of the questions up there now is asking why he went to hong kong instead of island. fitch is warning china's

credit bubble is at an unprecedented level. the shadow banking system is out of control and the scaled of credit is so extreme that the country will find it hard to grow its way out of those excesses. joining us now on the phone morning is david r iched el. would yyou agree with that assessment? >> it's certainly grown a lot in recent years. you've seen a tremendous investment in infrastructure. i'm not sure about out of control, but certainly has grown into an unprecedented level. >> why? >> because they have been trying to build their way through periods of uncertainty. they survived the southeast az i don't know crisis in the late '90s, the global financial meltdown by mustering their resources and investing in infrastructure and capacity. and a lot of that has been credit fueled. >> it's very difficult for investors here in the united states in particular to work out

exactly what is going on and when something is important coming from china and when something can broadly be put to one's side for the moment. how critical is this assessment from fitch to an american investor, just going about their normal investing business, not picking stocks in shanghai or anything. >> >> the two most important figures is the reserve requirement ratio is currently 20%. highest of any large economy around the world. more than double the reserve requirement for example here in the u.s.. also remember that they have $3 trillion of foreign reserves. so we need to worry about the health of the banking sector, we need to worry about the level of nonperforming loans, but understand that they have those two very strong pillars of support. 20% reserve requirement and this $3 billion of foreign exchange reserves that they have built up

over recent years. so i think this crisis today is something you can put to the side in terms of nonperforming loans. i think we need to make sure that they get through the currently liquidity crisis there, but i'm confident that they will. >> david, thank you for the frank advice. this is the fifth straight day as simon was saying of triple digit moves for the dow. we'll bring in art cashin to help make sense of it for you. migraines mean powerful pain, and when you have a migraine bayer migraine formula, means powerful relief. its triple action formula targets migraines for relief of the tough pain, and symptoms that come with it. try targeted relief with the power of bayer.

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we're just off the highs of the session. dow did touch about 190 points. currently at 170. broad rallies for the market the nasdaq is up 1.2%, 1 p1.1% for s&p. ten year at about 2.1 and yen which we know has been one of the things driving trade so much in the last couple weeks is

weakening again. so for a day at least investors get a reprieve. >> in the meantime it's a big day for the aerospace industry. the paris air show is under way where we now find our own phil lebeau. good afternoon. >> reporter: good afternoon. in a very interesting afternoon here in the paris air show, of course a lot of attention is on the orders that were logged by boeing and airbus, but the overarching story is the battle between airbus and boeing when it comes to the large airplane market, the wide body twin i'll ig planes. boeing has 60% of that market and has long been dominant. today we had a chance to talk with the airbus ceo about the a-350 and prospects for cutting in to boeing's lead. here's what he had to say. >> we have at least 50% of the

market of the air krafaccurate t air skraft over the next 20 years. our family is better positioned. forces boeing to launch it version. so i think i have a lot of respect for our competitor, but we'll no longer -- >> interesting thing to keep in mind is that right now airbus has orders for 613 a-350s. boeing will deliver about 70 dreamliners this year. and when you look at the 777, that has seen increased demand, as well. but with the a-350, airbus will eventually get half, not 40%, but half of the wide body market. and if he's correct, guys, that would be very important change in the aircraft market. back to you. >> if innovation can double

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take a look at what's happening in markets. a triple digit day for the dow.

not a lot of merger news necessarily. really more the fed driving things and by the way the yen might have something to do with it, we're seeing it weakening again. rally in the nikkei overnight. up over 1% on that front. certainly not a rally in treasuries necessarily driving this relief today. >> no. you see it in europe, as well. we're seconds away from the close in western europe. and it is green across the screen. if anything, we've added to our gains during the course of the european session today. the data was actually quite good coming out of europe. hourly wages rising at their fastest pace in four years in germany. good for the germans to be spending around europe this summer getting the towels on the sun lounges before anybody else can get up. exports rebounding quite nicely as well. so 80% of stocks in europe today are higher as a result mainly of course of what's happening with the fed and all that discussion. so you have a global rally on

stocks emerging. and at the helm of that actually the telecom stocks are down particularly well today as a result of a report that at&t might be about to buy telaphonica. we'll have a look at that in a moment. but first europe attempts to launch trade talks that could take years with the united states. and a report out today suggesting that u.s. consumers would benefit more than anybody else. so there you you see tsee the r. we saw they denied it received any bid from at&t here in the united states. there was a rumor in one of the spanish papers of a $93 billion deal. so tel telefonica in focus. now in negative territory.

you've also seen telecom higher today, french governments given an okay to the present ceo who is hired in an investigation on fraud. and new ceo as well from south africa. so a lot going on. i ought to mention the biggest oil services group in europe today, safem which has been crushed on its second profit warning in two year, uninvestment was the judgment from credit suisse. problems with contracts in italy and al i canlegheny gear i can'f [ algeria. big local stock. the greek prime minister yesterday had to say, no, there will not be early essentialecti there is political unrest about his decision to shut down the state broadcaster. we do have within the next half an hour a call from the opposition for there to be protests now in the square focus

of so much activity over previous years. whether the coalition will hold together through this is a debatable point, but we are keeping an eye on what is happening in greece. >> are germans known for being aggressive with the beach towels? >> for my entire life, germans have got up at the crack of dawn when they're internationally with everybody else and put their towel, one of them puts their towels out on all sun loungers and everybody else, like the germans have already taken all sun loungers. >> maybe should you get up sooner. thank you, simon. towel etiquette or how is the trade in play? >> greeks seem to stop working. now of course the tv union is continuing to work. they're refusing to get ouf of the air. things have gone topsy-turvy. what is not is the rers of the markets. talking about europe and how strong it is, the rest of the world is reacting in exactly the same way.

it's back on the risk on. look at the japanese, pummeled the last two weeks up 5% today. china up 2.5%. australia pummeled, too. australian dollar taking a shellacking. that's up 1.5%. all of this on belief that mr. bernanke will be fairly dovish. also if you take a look at our markets here, take a look at the u.s. markets, you'll see once on the risk on situation. volume is very much on the moderate side. one of the things that's helped holding the market up is the housing sentiment indicators, numbers we got from the nahb this morning, they were terrific. and folks, housing is on fire. and participants, the builders themselves, really think things are doing well. 52 first time or over 50 since april 2006. present sales 56. that's aggressive. future sales 61, i don't remember when it was last 61. i have to check on that. but watch this one for many

years. i follow this industry. my wife is a realtor in philadelphia and i can tell you, they're on fire there. they don't have enough listings. they're sending outleters asking people to send in listings. they want people who are actually trying to go out and sell. let me just show you why we care about this, because there is a correlation here. if you look here on the right side here, that nhb housing market index, that's the blue indicator. the green one is housing starts. so there is a very good correlation between home builders and housing starts. my personal feeling is they are getting a little ahead of themselves. they're getting enthusiastic and the starts have on catch up a bit. you see how close the correlation is overall. right now here in the united states if take you a look at the home builders here, we're up today nicely and we have come down. remember, the home building index itself, nice moves on the up side, look at the etf and all these in a single stock, itb is what you want to own here. and that after dropping about 10% has been rebounding nicely

in the last two or three days to the up side. another one that's been rebounding besides the itb is all of the emerging market stocks. e empty m is the big kahuna. that's been rebounding after dropping 10%. there you see coming off the bottom. that was last thursday. so things have stabilized. i'm not saying they're not like a ping-pong ball, but they have stabilized here. finally, i want to talk about the volatility. a lot of people keep writing in saying this volatility is unprecedented. i'm sorry, but it's not. it's true we've been going up about 1.25% on the s&p in the last two, three weeks since mr. bernanke's testimony, but this is not unusual. the historical average on the s&p 500, about a 1.5% move on a daily basis. so i know it seems like we've had -- >> 1.5% move. >> yes, in the last 50 year, typical high to low has been 1.5% a day. we have seen low volatility for ages and ages and ages here.

unusually low in the last couple of years. >> that's a great point. wow. all right. >> a flurry of excitement when she learned you were the son of a builder. >> and also about needing more supply in the market. does it come from people who just won't sell or will this start another building frenzy? >> owners send out a note saying stop hanging out with the sellers so much and get listings. they have been doing it. list with us. >> it's what the market is saying, history recurs first, tragedy second time around. i think we're in that territory. you might have hoped commodities were moving, but, no, sharon epperson is at the nymex. >> some commodities moving a great deal. natural gas leading the gains we're seeing in commodities today. and it's up about 3% or so at the highs of the session. of course we saw natural gas that was down about 1% over the last three week and hit a three month low last week. so some traders say we're just seeing natural gas finally stabilizing here as we're seeing

hotter temperatures and of course we in the mid ths of hurricane season. we've been talking a lot about oil prices touching a nine month high and we did see that earlier in the session. the highest price since september 17th of last year. what is driving it, of course we've been talking about the situation in syria, the u.s. now agreeing to armt syrian rebels seen as another step in the escalation of tensions there. and what that means for elsewhere in the middle east is really what traders are watching. whether we'll see future supply disruptions. and the fact that some analysts are seeing programs that we will see some supply disruptions over the summer in addition to the supply outages in the north sea. that is one of the factors that has driven jpmorgan as well as morgan stanley to talk about the tight oil market that we're likely to see in the coming months. so those are some of the factors that traders are watching today. back to you. >> thank you very much. let's get to rick santelli in chicago for a look at japan. and what it means for us. >> thanks, simon.

i'd like to welcome my guest tobias harris. >> hi, rick. >> there has been a lot of concentration of course on what's going on in japan. so just as we start out this discussion, we've seen a real bump up in their gdp. do you think it's sustainable? >> well, i mean, it might be at least for the course of this year. there is a lot of stimulus going on. and so for the remainder of the year, yeah, we might see high gdp figures. but the question really is what happens after this year and there are a lot of warning signs, a lot of questions i think about the durability of the abe government. >> what do you think the biggest warning sign is? >> well, one, you have this looming question of whether there will be a consumption tax increase in spring of next year, which may in fact drive a bit more consumer spending this year. but if everyone is just preparing for higher taxes on

consumer purchases next year, that can slow growth pretty quickly one would think. >> it seems so strange to me, tobias, that most of the developed economies all seem to be making the same mistake. i don't understand if you're abe and you want coffin assumption to pick up in the country, you want to extend the benefits of your economy from export to consumption more like the u.s., and maybe less like countries like china, it doesn't seem like a great idea to be playing around with consumption tax. do you agree or disagree? >> i mean, yeah, abe is walking a tight rope right now. because on the one hand, he knows the economy has to grow. he knows that his public support, his staying in office depends on the economy growing. but on the other hand, he has people whispering in his ear saying we need more revenue, the debt to gdp ratio is unsustainable. and also you have some concerns among the japanese public that

this did at the time is unsustainable, that japan has to cut down on these deficits and something has to be done. so abe is trying to figure out what exactly the sweet spot is. it's not just abe. previous governments have had the same sort of problem. how do you get the economy growing but find a way to get japan's fiscal house in order. and i don't know if they found the answer to that yet. >> no, i think that they need their version of mr. art laffer because in this country it seems that the same argument goes on, in europe it goes on, in france it goes on. more revenue, more taxes, less economic growth by most of the middle class and all these countries. and it creates i think a negative spiral. all right. trust. so we share that the countries developed economies want to get revenue, they usually raise taxes. just trust in general. we have all these scandals, irs, nsa, but there is a trust issue with abe, as well. he's thinking of firing up the reactors, these quantitative easing programs of his have

caused volatility in energy prices. will that trust issue hurt him politically? >> it really depends on how the economy is doing. if people are seeing that his policies are making their lives better, their wages are rising, they might be willing to forgive things like refiring the reactor. but if this volatility is starting to affect people's household bottom lines, they start wondering if the policies are actually working, then questions about other things like whether abe should restart the reactor has really become prominent. almost 60% in every poll say abe shouldn't restart the reactor, nuclear energy shouldn't be part of an economic growth strategy. so he's walking a really fine line between yes he wants to get the economy started, but by doing something like restarting reactor, will he undercut his overall public support. it's really a risky -- he's probably going to take it, but there is certainly a risk there. >> tobias, thank you for being our guest. seems like volatile energy prices always seem to hit home with the populus. thank you for being our guest.

simon and kelly, back to you. >> rick, thank you, sir. all three indexes here up more than 1%, the one and only art cashin is here and you'll hear from him when we come back. >> and don't forget to tweet us. google launching giant balloons to create an infrastructure for remote areas. what other world problems could google solve with rapidly moving about alone ba alones? tweet us. ent investment objectives, ideas, goals, appetite for risk. you can't say 'one size fits all'. it doesn't. that's crazy. we're all totally different. ishares core. etf building blocks for your personalized portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses.

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tdd#: 1-800-345-2550 call 1-800-308-1280. coming up next, the biggest week of the year for stocks as we wait on the fed temperature steve liesman here to help you handicap mr. bernanke's next move. plus john paulson is making a hugh bet on housing, but is it bullish or bearish. we'll tell you coming up. and netflix closes its biggest content deal ever, but one of our traders is saying sell on that news. simon, we'll see you at the top of the hour. in the meantime markets surging across the board this morning as we get ready for the big fed meeting this week. art cashin is director of floor operations with ubs financial services. art, what's going on here?

>> i think we've got a two step move. the beginning of this i think was further calmness in tokyo and japan that spread into europe. andhe asian markets. that got some of the buy the dippers out since we had sold off on friday. but before they could get rolling, we have a lot of speculation around that bernanke is going to use that press conference to maybe expand or expound upon the targets that the fed has. he probability may say something like while the fed is happy that we've made some progress in one of our targets, which is payrolls and getting people back, we really haven't moved the ball in the inflationary area. we're down very low. wi so probably no tapering until the proper balance. >> don't you think we've seen this movie before?

if you think back to what happened during the last run up, we didn't have a lot of inflation. traditional inflation i should say. but we have assess price inflation, oil price moving up, those are pinching a lot of consumers. stocks rallying. what about this time around? >> i don't think it's necessarily the right scenario, but i'm telling you what the floor kind of thinks he's going to do. and i agree with you wholeheartedly, but i think they're frustrated. money has no velocity. that eelt kind of inflation they want to see. it's a dangerous game, but they do want to see people lending, spending and borrowing and we haven't seen any of that quite yet. >> so bank of america put a note out in which they think there is a risk risk here that what the market hears is not what the fed means to say. in other words, if they basically create a neutral stance where they say, look, we're data driven, we might take a before year end, even if they're not likely to do that, the market will run with that and possibly selloff.

>> this market with the mode that it's in would probably be disappointed in that. again depending on the wording and the phrasing, you know, if he just says, you know, we're still monitoring what's going on, we are data driven. and there is the chance that if the data improves significantly, we may wind up tapering. >> it's incredibly confusing for people watch to go even really know where we are at the moment. on the economy for example. so the "new york times" ran a piece over the weekend, they were basically saying the new normal of sluggish growth now over and we should get much more optimistic about the economy. and then you hear today that the fed is possibly going to down grade its own estimates this week at the meeting and that will become the main focus. >> with all due respect to the people who work at the fed, they are notorious for faulty estimates, if you would.

and so you can't have it there but there is an old anecdote about somebody helping plan d day invasion and he was a meteorologist and he kept say i don't go want to give you anymore reports because i think it's no better than a 50/50 shot and the general said send it in any way, we need it for planning. so even though something is inferior, people keep looking to it. >> and just briefly, i know in the last couple weeks we've been trading off different things. first it was what was happening in japan and the yen, then what was happening here in the treasury market. who is in the driver's seat today? >> today's driver's seat continues to be speculation about what bernanke will do. but should the yen begin to spike again, they will resume taking the wheel immediately. the fact that they're just not out of business but a little retired. and we had earlier strength in oil on king abdullah cutting his holiday short. the market in saudi arabia sold

off. don't forget the middle east. it's still out there. >> great point. and one that we don't cover enough. art cashin, thank you, sir. federal agents are raiding 7-elevens on long island as part of an investigation 7-elevens on allegations of human smuggling. ♪ [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything.

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a fifth straight day of triple-digit gains on the dow

are almost erasing the losses we in the first of the week. cisco and microsoft leading the way. federal agents are raiding nearly a dozen 7-elevens in the long island area as part of a probe into human smuggling. andrea day following the story in brooklyn. hi, andrea. >> hi, kelly. we're talking about illegal immigrants who are forced to work at 7-elevens all across long island for low pay and not only that, they were forced to pay rent to their bosses, sometimes living in deplorable conditions. here's what u.s. attorney, lett loretta lynch had to say. >> i'm here today with our law enforcement partners to announce the results of the largest employer immigration violation conducted today. we're announcing the indictment of nine individuals in two separate indictments. on charges of conspiracy to commit wirefraud, identity theft, harboring and concealing

illegal aliens. 12k3w4r. >> this was no small scheme. lynch telling us the 7-eleven owners made more than $182 million during this period. here's how it all worked. the owners allegedly employed more than 50 illegal immigrants from pakistan and the philippines, used stolen identities from kids, even the dead to cover up the scheme with payroll. 7-eleven owners stole wages, only paying them a small amount. and the workers were forced to pay rent, even live in boarding houses, earlier today, federal agents raided 14 7-eleven stores on long island. arresting eight men, one woman, now facing serious charges. >> these nine defendants created a modern-day plantation system. with themselves as overseers, with the immigrant workers as subjects. living in their version of a company town. >> all right. and i just spoke with the representative from 711, they

would only tell us at cnbc that they're cooperating fully with this federal investigation and it's not stopping. agents are still look into other 7-eleven stores out there, checking to see if they are running the same scheme. simon? i'll send it right back to you. >> $180 million. andrea day thank you very much with that breaking news on long island. google has launched giant balloons carrying computer equipment to create a high-speed internet infrastructure for remote areas. this morning we're asking you what other world problems could google solve with balloons? tweet us @squawkstreet. some of your answers are next. . with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support,

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time to squawk on the tweet. google has launched giant balloons carrying computer equipment to create a high-speed internet infrastructure that travels over remote areas. which brings us to this morning's squawk on the street. what other problems could google solve with balloons. james tweets, google could use balloons to float facebook back up to $38 a share. another tweet, air traffic control -- and david tweets,

attach -- there's a theme here, attach apple stock to the basket to give them a boost as well. >> i like that better than the inflation one last time around. i think when it comes to inflation they're trying to prick the asset bubble. these guys are a lot more clever than i am when it comes to -- >> well you've been busy over the last couple of hours. let's look at where we are on the markets. 162 higher on the dow. off earlier gains, but that's still a phenomenal open. >> right, 162 points, the question going to be volume and follow-through, because when we asked people about it on the floor. you look around, you say we're at triple digits, woo isn't there more excitement? >> it's the first time we've done triple-digits in five days. >> doesn't it feel like there's a frenzy on the down days, we're starting to see volume creep up. but we started out really low this morning. >> i guess so.

obviously it goes without saying that wednesday is key. >> how many people want to put on big positions before that meeting? we know how much is up in the air. we know we're still unfortunately, even though everyone is trying to get to the sense of us getting beyond a fed-driven market. >> that's it for "squawk on the street." let's send it over to scottie and the halftime. all right, guys, thanks so much. welcome to the halftime show, four hours until the close. let's look at where we stand on this monday on the street from post nine. the dow industrials up 162 points, it's a strong start to what is. a very big week. 1% gains across the board. here's what we're following on the half. the greatest trade ever, the man who made it back for more, the inside story of how hedge fund heavy raet john paulson is winning big on housing again. >> a winner for the