>> oh, my. >> yeah. you know what this means, guys? in about four days, the days start getting shorter again. >> yeah. >> anyway that two-day fed meeting is clearly the most important story to the markets this week. investors will listen for details on when the central bank may start scaling back its $85 billion monthly bond purchases, a topic we discussed with former fed chairman alan greenspan just a couple weeks ago. >> tapering, obviously, is the first thing, but tapering, remember, it's still increasing the size of the balance sheet, and that means it's going to be a little bit more difficult to reverse it. and i'm a little concerned that the reversal procedure is a little more difficult than we think. the markets are not going to give us the leeway that we would like. >> tomorrow, the fed is also expected to provide an update on its economic projections for 2013 all the way through 2015. that decision on rates will be announced at 2:00 eastern time. and then chairman bernanke will hold a news conference coming up

at 2:30 p.m. you can't miss complete coverage right here on cnbc. and guys, this is definitely the story of the week for the markets. >> really of the month. >> but i want to get to the story of the day or maybe the year. can i give you the story of the year? >> please do. >> here it is. president obama in an interview -- do you know about this? >> oh, i do. this is great. >> in an interview this week said he might be looking for a replacement for ben bernanke. the president was speaking on pbs to charlie rose. listen to this. >> well, i think ben bernanke's done an outstanding job. ben bernanke's a little bit like bob muller, the head of the fbi, where he's already stayed a lot longer than he wanted or he was supposed to. >> when he was asked whether he would reappoint bernanke if the fed chief wanted to keep the job, obama did not answer the question directly and bernanke's second term as chairman expires at the end of january. >> this has been the guess game. >> this has been part of the parlor game for a long time now, and if that was not an indication of what the answer

is, i don't know what is. >> i can't tell whether it's him or maybe bernanke has said, you know, mr. president, i am -- >> my guess is it's bernanke. >> because by not answering, i mean, bernanke's done a lot for president obama. >> look, i think it's -- the job is bernanke's if he wants to stay and keep it, my guess would be. again -- >> we reported a year ago that he was sort of tired of it. >> that bernanke was. but it was weird -- >> i didn't think he would actually -- >> it was weird when he said longer than he intended to stay and maybe longer than he was supposed to stay. >> supposed to stay. >> that was a weird comment. i don't think he meant that that way. >> i don't think so. >> that way either. and you must not have been paying attention when i told you when you're like maggie smith's age in that interview? she said when you're getting old, it's almost as if you have breakfast every hour, and that's what -- because i wake up in the morning, you know, when i'm first trying to get up, and i really feel like i had just done

it like ten minutes ago. >> is that why you don't eat breakfast during the show? >> no, i'm just telling you that as you get -- but there's hope. i'm reading and there is hope. >> this is for keeping yourself alive forever, your soul. >> this is for hope that the events, the sing lariularities so quickly. like for billions of years, we went like this and technology is taking us like this, and it's breakneck speed, like 1 over x. if you plot that, there is a singularity where it goes to infinite as "x" rises, and we are developing so much so quickly that we may order the whole universe in our lifetime. >> moore's law is sort of over with. >> no, moore's law is fine. we'll do that with individual, with nano technology. we'll do it with individual atoms, little tubes and stuff. anyway, that's neither here nor there. we're going to, like, hammer the fed to death. i think liesman is going to help us with that. no one can do that better than liesman. he's got some fed survey or something. so, strap yourself in. it's a busy day on the economic front. in addition to the fed meeting,

there's a couple other reports of note. at 8:30 eastern, the may cpi, consumer price index, also housing starts. housing starts are something we pay attention to very closely. and headline cpi, nothing's happened for a long time, seen rising 0.2%. it plays into what we're talk beg awith the fed. the core component forecast to rise by the same amount, for real estate. housing starts are expected to rise by 11.4%. >> wow. >> so, we'll see whether we're above or below that. building permits, though, are seen declining. >> is that the monthly numbers it's going up against? down 16.5%? >> must be. >> no, i don't think it's sequential, is it? is it last month? that's weird. all right. >> let's get a check on the markets this morning. yesterday was a big day, dow up by about 109 points by the end of the day. you can see this morning that the green arrows are there once again. dow futures up by about 5 points above fair value this morning. s&p futures are also up just over 5 1/2. in asia overnight, the important

market we've been watching, of course, is the nikkei. it was barely changed overnight, down by about 0.2%. if you're watching in europe this morning, again, we've been taking some of our cues from europe, but look, this morning we are out-performing most of those markets. you can see the ftse is up by about 0.8%, but modest advances in france and germany. if you've been watching oil prices, they were down yesterday after skyrocketing over the weekend. down once again this morning, down another 16 cents to $$97.6, all the concerns about what's happening in the middle east, with syria, with turkey and with iran getting involved in the syrian situation as well, potentially. all of those things did push prices close to $100, but right now wti is at $97.61. look at the ten-year note, the bond market's where we've been taking our cues, as least what people are thinking the fed's doing. yield is down. and the dollar is down against the euro at this point.

euro's at 1.3372, dollar/yen is at 95.30. gold prices also were down yesterday and now people are starting to talk about whether or not you're looking at 1,200 at some point? right now, though, it's down about $6 to $1,377 an an ounce. ecb mayor mario draghi is saying the central bank is "ready to act" if needed to aid the eurozone economy, arguing that recent signs of market stabilization mean that the ecb's interest rates are becoming a more effective tool again. we'll see about that. also, g-8 leaders are wrapping up a summit in northern ireland today. british prime minister david cameron has, of course, been the host. he says the goal of the group is to "fired up our economies and drive growth and prosperity around the world." we're going to have more, of course, from cnbc's steve sedgwick, who's on the ground there in that beautiful live shot in about 20 minutes. meantime, time for "the global markets report." we'll go across the pond not to ireland, but to london, where

ross westgate is standing by this morning amid a sea of green. a little bit of red around. how are you doing, ross? >> yeah, hey, andrew, pretty good. we're actually at the best levels of the session today here for european equities. advances out-pacing decliners by around about, what, 6-2, 7-2 on the dow jones stocks 600. it's been a mixed morning, but the ftse 100 now up 0.8%, despite the that is correct if inflation numbers came in a little bit worse than expected for the month of may, annual cpi put 2.7%, we are looking for 2.6%, had an unexpected drop but producer prices were a little better. it shouldn't matter too much about the next bank of england meeting, which will be mr. carney's first as governor. cac is up, the xetra dax and ftse mib up as well. we had better news out of europe. this is a snapshot of german investor confidence today, came in at 58.5%, a little better

than the 58.1% expected for the month of june and ticking higher again. so, despite all the volatility. in terms of sector breakdowns, this is where we stand, pretty evenly split here. banks and insurance doing fairly well. just to check you in here on autos, which is one of the weaker sectors at the moment. we had new car registrations falling once again during the course of the month. in fact, we are down now at a 20-year low for new car registrations across the eurozone. p peugeot and renault are up. slight uptick fiat went up, but nevertheless, the stock is down about 1% as well. now, we've got bading battle under way for kabel deutschland. i was talking days ago about how vodafone reportedly put in a bid for kabel deutschland, they're up today. they've confirmed they have an approach from john malone's liberty global, looking at a

price tag around $7.5 billion, vodafone looking at $7.2 billion, expectations that vodafone will come back with an indicative offer for kabel deutschland as well, so keeping eyes on that. and i mentioned the data out of the eurozone. it took euro/dollar up to 1.3390, which is worth pointing out, because that is the four-month high on the euro/dollar pair as well. and just keep your eyes on dollar yen, 95.33, a little firmer as we've gone through this morning, still not far away from the 93.75. there is expectation it's bolstered the market a little bit this morning that maybe china will come in with some easing policies as well. they're stuck in a bit of a tight spot between rising high prices and, of course, still a weaker economy, but that's also in the market today ahead of the fed meeting starting today. back to you guys. >> all right, wes, thank you. >> ross. >> ross, ross, ross. >> he was doing this to you yesterday, ross. >> it's interchangeable! >> he wants you to be wes

rossgate. >> what's wrong with that? >> there's nothing wrong with that. it's not who he is. >> he can be whomever he wants to be. >> we can. >> that's like a cowboy name. >> exactly. exactly. you're a spy, you're a cowboy. you're a renaissance man. >> iyee-haw. >> you're a renaissance man. and sedgewick is, i don't know, you're standing near that souped wall again. that's okay. at least it's green. why doesn't he get those gigs? >> he does usually. >> he does sometimes. >> ross is the international. i'll look up and i'll see him in monaco. >> that's true. and it's close! that's the one advantage to living over there in socialism land. thank you. thanks, ross. all right, in corporate news, i wish i owned 7% of sony. >> you do? >> well, i just wish i had that kind of -- >> had that kind of dough? >> spare change? >> it's not a lot if you do the math, about $1.4 billion? hedge fund thirdpoint has raised its stake in sony from 7% to

6.3%. dan loeb's firm is calling it. see, you messed me up because that was the next line. dan loeb's firm, which you already know, as you've already said that, is calling for sony to create an independent board to run a partially spun-off entertainment arm. thirdpoint sent another letter to sony's ceo today. >> quick note. in the letter, dan loeb saying he would, of course, like to be on the board. >> oh! >> he would like to be on the board of sony proper. i'm sure he'd be just as happy if they'd put him on the board of the entertainment business as well. >> right. >> how likely is that? i mean, japanese companies are slow to -- >> i don't know. he sent a -- this was actually a very friendly letter. this was a letter to say we're very happy about everything that's gone on since we first talked you. you've hired financial advisers. we want you to spin this off. the big changes were this idea that he wanted to not just spin off a piece of the entertainment business, but that it should have its own governance, which could be complicated. he wants the ceo of sony to be chairman of both companies. >> uh huh? >> but then he said, and of

course, we would welcome an opportunity to be on the board. >> but you made the point when you first wrote about him doing this, about how the letter was not your typical activist letter, because -- >> yes, this is japan. >> -- japanese companies don't deal well with confrontation like that. >> they dealt better than i think anybody expected. when he talks about -- he likes to talk about the third leg of abe's structural reform, this being that, saying you should be the model. he keeps saying you should be the model for abe's structural reform. >> it is convenient. >> it is convenient for him, but -- >> but it's a nicer letter than you might get from a carl icahn going after a company -- >> and it's a nice letter that you'd get from dan loeb -- >> going after another country's company. >> if you're on the entertainment board, do you get to, like, meet all the movie stars when they make movies? >> i think after the show you should call dan -- >> but remember edgar who had all the money coming in from dupont, saying i'd rather meet the young actor -- >> you're suggesting that dan -- >> i've met him a few times. >> i don't think that's what

this is. >> maturing -- >> it's a money deal. and by the way, he's already made a small fortune because sony really rocketed. he started buying the stuff two, three, four months ago before japan really hit it. >> so, he doesn't need to do that. he's got -- >> i think he will win anyway. >> you do? >> with this deal? i'm saying whether sony actually really transforms itself -- i mean, it's sort of the difference between hitting a double, a triple or a home run. that's sort of what he's up to. >> all right. just wondering. >> you on the casting couch. >> well, to see guys who have everything and they buy a modeling agency -- >> he's got a nice family, though. >> he does. they buy a modeling agency, they buy -- you know. i met him once. i met him at an interesting place where you would not be welcome, by the way. >> you told me about this. >> i know. >> i want to know. whoo! maybe i shouldn't -- >> an american enterprise dinner where dan is very free markets -- >> very active. >> yes, and private sector. which makes me love him, as you

know. >> right. there you go. >> i know. i know it's caused a rift between you and him. >> right. >> much less government activ m activism. >> we're kumbaya. >> can i read about this? >> yes, you can. >> sorry. let me tell you about another story. johnson controls is reportedly speaking to private equity firms about selling its $1 billion automobile electronics unit. the unit was better than expected, so buyout interest from several rival auto parts suppliers actually faltered. johnson controls is now said to be reaching out to a broader group of buyers. and sprint has filed a lawsuit against -- you know, i drank a cup of coffee and everything goes -- >> yogurt, cereal. it gets in the way of your grazing. the show does. a lot of times. like a whale with plankton, your mouth is always open. >> when becky was reading the last part, i went to the coffee and -- >> which, look, i drink the coffee, too. joe is the only one here who's like a monk. no food, no drink. >> you don't touch anything. >> i've got some water back

here. >> okay. sprint and clearwire in an attempt to complete the dish attempt for shares. the suit claims dish repeatedly attempted to fool shareholders. clearwire's urged shareholders to accept an offer from dish. >> look at the script and where your next reads are. try to space the yogurt -- >> i like the whale imagery. >> the plankton. >> okay, i'm -- you read that. i'm going to go get a yogurt. >> i think you've got some time. go ahead. coming up, remember the saliva, though? and then you start -- it's not -- you know, viewers -- >> not good for the viewer. not good for the viewer. >> they can hear it. coming up, a live report from northern ireland, where g-8 leaders are wrapping up two days of meetings. plus, eunice yoon joins us from beijing with a look at china's ghost cities. i love looking at those things. they're scary because they're brand new. first, though, summer's

here. it will be in like a day or two. that means it's time for watermelon. how much would you pay for the popular treat? how much would you pay to smash a watermelon? well, one has sold in northern japan for more than $3,000. it is a famous densuki watermelon with black skin, the variety -- >> $3,000? >> yeah, apparently. the variety's grown only on japan's northern island of hokkaido. it is denser and sweeter than its green cousin, the densuke watermelon. they're often given as a present, but they're hard to send. heavy. [ female announcer ] there's one thing dave's always wanted to do when he retires -- keep working, but for himself. so as his financial advisor, i took a look at everything he has.

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welcome back, everybody. as you can see, the u.s. equity futures are indicated higher this morning, up about 52 points right now. that's looks like where the dow would open. this is coming after a big day for the markets yesterday, where the dow was up about 109 points. here's a statistic, if you're looking for volatility, it looks like we're getting back to that point with five double-digit moves for the dow for the first time since 2011. the s&p 500 has averaged a nearly 1% daily move over those five sessions as well. so, yeah, people are getting a little more active as we get into this fed decision. that meeting starts today. we'll get the decision tomorrow from the fed. in our other headlines this morning, saudi billionaire

prin prince alwaleed bin tallal wants to build the world's largest building. the prince is looking at the world's largest cities to find a possible location, including shanghai, moscow, london and new york. but yeah, guys, this is the other mile high club. >> all right. >> i like that. >> i stole it from a headline i read over the weekend. there's new technology for elevators that will apparently allow them to go more than a kilometer into the air. it's always been a problem because the cables on elevators have been too heavy. now they have carbon fiber -- >> physical constraints. >> there's like some -- >> in the real world. >> there's like a european company that finally figured out how to make elevators go a kilometer. >> new information -- >> the singularity -- >> i think it was from "the ft." >> you doubt the singularity is approaching. lech walesa, tablet computer. checking it out. >> looks like he's taking a picture of it. >> it does, but did you ever think you would see -- and it's just accelerating. it's accelerating when machines

start creating machines with all their knowledge, that's when things are really going to get good. >> i'm going to have some yogurt now. >> all right, while you -- >> always about food with you. >> always about food. do you know how to pronounce this company, by the way? i was thinking about this. >> i don't know. >> this is a real marketing problem for this company. >> whatever happens to your trubani fixation? oh, i forgot, that's free. i got it. i just didn't think about that for a second. i quickly paused -- what? >> we used to get it here. >> they swapped it out. >> now this is it. >> you were willing to change, right? it's what they put in front of you. all right. who's here? mike seidel. >> let's get the national forecast from the weather channel's mike seidel. mike, what can you tell us about what the weather looks like around the country this morning? >> yes, and i can pronounce

dallas-ft. worth for you this morning. storms coming into the big "d," down i-35 towards waco and austin, so the morning rush hour again much like yesterday morning, rocky around dallas-ft. worth and north texas. and what we don't need in north georgia, but we never really complain about the rain because some summers we can't buy a drop. more rain and thunder coming into the atlanta metro area for the morning rush hour here. things will begin to dry up after today, but we've had upwards of 6 to 8 inches of rain and we had all that severe weather last week, and it was just not great around here with all the wind damage on thursday. severe weather today up there in your neck of the woods, around new york city, philadelphia, the d.c. area. could be some gusty thunderstorms. that will impact air travel also across parts of the midwest, along i-70 and out through the high plains, primarily east of denver, down towards amarillo. in this area, we have a chance of a tornado or two. in the northeast, it's mostly a wind and hail threat. so, here's that forecast map for today. there's that storm heading towards the big apple. cold front slicing back. beautiful weather coming into

the upper midwest. once we get this front through the area, it is going to be just gorgeous, although people trying to get to the pool and the beach may complain it's going to be a little bit too cool in the northeast and new england as we get into tomorrow and thursday. 78 today. watch out for the storms. again, the big cities, the hubs will be affected. more storms around atlanta, especially the first part of the day. here's that refreshing air. chicago's high today only 70. southwest deserts, phoenix running about five degrees above average. some showers coming into seattle. and there's the break in the thunderstorms for a lot of the northeast tomorrow, guys. another scrumptious day in chicago as temperatures tomorrow in new york city and boston only get up to around 70 degrees here as we head through the final days of springtime. joe and the gang, back to you. >> thank you, mike seidel. we appreciate it. we're going to go somewhere now from you, not in this country, not of this world. we're going to the g-8 summit, wrapping up that two-day meeting in northern ireland. and steve sedgwick is there again.

we were talking about, that's a little bit different view. when we pan out, i want to check -- no, that is the same. those buildings, steve, they're made to look really quaint, but they look fairly new, aren't they? but they're made to blend in with sort of the irish countryside. beautiful. >> reporter: yeah, there's a great story here, actually. there's a great story about this place, actually. it was a golf course that was completed in 2008. now, 2008, as we all quite remember was actually the start of the financial crisis, and they went bust, basically, straight away. so, this place, which is a beautiful golf course in a beautiful part of the world, has been on sale recently for around 10 million pounds, but it comes with a slight problem, 25 million pounds worth of debt with the bank as well. but it's very interesting. it's getting some use now. but quite baronal, isn't it? we just saw the president walking along by the shores with stephen harper of canada just now, and talking about, well, quite thorny issues today. tax is on the agenda today. yesterday we were talking more about syria, we were talking about trade. now it's tax. i don't want to lose all the

viewers by talking about tax, but talking about multilateral conventions on mutual assistance on tax matters and the article 26 of the oecd convention on tax is a snore fest, but it could be interesting for the amazons and googles of the world. because if it appears they get some coordination on tax on transparency, on beneficial owners of assets of different countries on what the multinational corporations are doing to shift around their tax affairs, then that could be quite interesting for a lot of these corporates as well who could potentially stand to lose, if, indeed, ownership issues and jurisdictions come to the floor. that aside, i'll tell you a little bit about what else has been going on around the perimeter here. we've got an enormous, i think a 7-kilometer, 15-foot-high fence around this area. it's quite remote, but protesters have been getting here in quite small numbers, around about 2,000 protesters. when you're considering we've got 8,000 police and security forces here as well. but some of them got to the fences and it was all well-behaved. having been to various g-8s and g-20s and world economic forums,

they were all beautifully behaved. and after about an hour of protesting, someone withsaid al right, guys, back into the coaches. i guess they went to finish their physics dissertations and go home to their moms. but i think it was quite choreographed and nothing like we've seen globally before. there is one other issue which is dominating the local press, and i think it's an issue that's been dominating press in the united states since mid-april. that's michelle obama's hair. apparently, a fringe in the status called a bang, and the "belfast telegraph" is one who's been looking at michelle obama's fringe. apparently it was getting in her eyst a bit as well. so, despite the world affairs and syria and tax and trade and all kinds of things for the g-8 to discuss, the local press picking up on michelle obama's fringe, which is a key issue for viewers in the united states. >> it is. so, is it mainly the protesters -- it's all rolled up into one thing, mainly, steve?

they don't like fracking, i saw. but they're all there, right? there are different things that they don't like? >> reporter: all of them. >> they're all together. >> reporter: yeah, they don't like g-8 for a start, they don't like capitalism, they don't like globalization. i'm sure they don't like cnbc as well. they don't like fracking. they want more food aid for the emerging world, all kinds of issues. i mean, basically, as you say, i think there's an if campaign, it's called. and talking about how if a certain amount of money that goes into g-8 affairs were to be redistributed to africa and elsewhere, and obviously, there's climate change thrown into this one as well. they're looking at an alternative model as well, but i don't think it's anything particularly new. as i say, a beautifully behaved bunch of protesters, by and large. they flattened one bit of the rolling barbed wire, but they didn't get near the main area. because it was like that scene in "zulu," where the police were all on the horizon and came down on to the protesters and i think they decided, okay, we don't really want to mess with these

guys. we'll be off now. >> i wish i could live for a few days in the 18th century, you know, diet 30, no food, not be able to travel anywhere, walk wherever you need to go, you know, all these horrible things that globalization just spent -- we can't do that yet. that's possible, too. >> that's coming? >> possible. possible with singularitiesingu. anyway -- >> reporter: we don't go anywhere here unless we've got about 20 different passes, you can't get anywhere. >> that's right. >> reporter: i've got one for the uk press event later on. this is a transit one which gets me from the press center to here. what's this one? this is the original where i can get food. this means i can go in certain areas, but i have a blue pass, so i can't get food in certain areas, and there's about 20 of these. i think the british government made this slightly more complicated than it needed to be. >> just be glad. at the u.s. open it was harder to get around, wasn't it, becky? >> reporter: you guys looked good there. i like the jumpers. >> the what? >> the jumpers, the sweaters. >> the jerseys. >> the jumpers, oh!

what i wearing one? if i had known that, i might not have worn it, if i knew i was wearing a jumper. >> the cnbc wind cheaters. >> you had the shirt, the sweater -- >> i had a real jumper on. >> sweater? that's a jumper? >> yeah. >> a sweater is a jumper. >> when you say jumper, i think jail. >> you wear a jumper, take the lift. anyway. thank you. >> you live in a flat? >> stand in a queue. all right. you know, the rubbage collectors. from ireland to china, which is now spending more than $6 trillion to build the equivalent of a u.s. interstate system and millions of new homes are going up in cities, but many lay empty in so-called ghost cities. this is a conversation we've had many times around this table with jim chanos and others, but cnbc's eunice yoon has a new angle and joins us from beijing. eunice? >> reporter: hey, guys. well, china is a property-assessed economy and fears are rising that all of this building could really lead to wasted investment as well as

ghost towns. if you wanted to build a housing project ten times larger than new york's central park, this is what it would look like. in the chinese city of chongqing, authorities are spending billions to erect hundreds of thousands of new apartments. the idea -- if they build it, the masses will come. "we're not worried about a housing bubble," this government official says. "we need more homes." china is constructing new homes as part of its aggressive push to build out its cities. by 2025, china's projected to have 200 cities with over a million people each. compare that to the u.s., which only has nine. the move is meant to raise incomes here and create a bigger consumer class, but the concern is that there's a mismatch in investment, potentially littering china with uninhabited ghost towns. >> in many cases, actually there is no -- there isn't such a huge demand there, and so, you'd build this huge infrastructure

there, but it would be little used. so, that's going to be a huge waste of the public money. >> reporter: only ten years ago, this area used to be all farmland, but today it's part of the largest public housing project in china. this country is constructing 36 million new subsidized homes. even so, new city slickers like this one in beijing still can't afford to buy one. "no matter where you go here," she says, "housing is expensive." with so many empty apartments, concerns are rising all the building could lead to a local debt crisis. yet, many argue, the fears are overblown. >> local officials have a lot of power in their hands. they can look at how cities are growing and how the economy's growing and they can try to build, build, build, build ahead to satisfy demand ahead. >> reporter: a reminder that in this authoritarian state, if you build it, you can force them to come. and no one really doubts that china needs investment, guys, but the question is, is this

country getting the right type of investment? and actually, joe, i thought of you during the reporting of this story, because there is a mall in the south of china that got advice from the same people who built the short hills mall. and it didn't really work out, but the mall was built anyway and it's now this decaying eyesore. and that is not the reason why i thought of you, but the reason why i thought of you is because you're of that short hills connection. if i remember, you're from short hills. >> there's a lot in short hills that's nice, but if you talk to someone who doesn't live there, they go, ah, mall. >> short hills mall. >> isn't that a toutman center? >> reporter: yes, yes, it was, but in the end it wasn't. they didn't take the advice. >> got it. >> reporter: and one of the problems with that particular mall is -- i know, i'm getting a bit into too many details, but basically, they didn't have the anchor malls, the anchor department stores that you'd

need. so, if you walk around that mall, it's completely empty. a lot of the retail outlets are locked up. and so, it's difficult for them to kind of keep that place going or keep it alive. and even though the people who now run it are trying to keep it alive, but it's actually considered a ghost mall. >> wow. because it is interesting, because if i think of my -- how i would design a mall, it would be after that. it's been such a great place. you've been out there once. >> i have. you think new york city is hoyty toity, you go into the parking lot of the short hills mall, you can park your porsche right up next to the bentley and the rolls royce on the other side. >> someone can park it. >> someone, the val yetvalet. right. i know. >> your guy drops you off. he doesn't even park. he just waits with the car idling. but that is sad that it didn't work out. but yeah, you need people. like a ghost mall. then you don't sell anything, then you can't pay the rent, and you know, one thing after another happens. eunice, thank you, and thank you for personalizing it, because you spoke to me.

and she did. we've had tallpin on. he loves when we talk about the short hills mall. only once. >> if bobby's watching -- >> i got a lot of blue ties. i could use -- >> what are you looking for? >> a green or red. >> green or red tie. >> i think you need green. >> i need green? >> bobby, a green tie is on the way. coming up in the meantime, more on the conversation this morning about what we should expect from the fed this week. we've got a few opinions around the table. then later, private equity power player scott sperling will be joining us of thl partners. the dean of harvard business school also joining us to talk jobs and the economy. and then, check this out, "squawk reserve" welcoming the former fed governor ric mishkin, but as we go to break, take a look at yesterday's winners and losers. tdd# 1-800-345-2550 [ trader ] when i'm trading, i'm so into it,

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that two-day fed meeting is set to begin in washington today. joining us right now is tom higgins, chief economist at bny melon standish, and paul schatz, president at heritage capital. and paul, the market has been trying to figure out what direction the fed's going to go. it looks like the conventional wisdom on the street, at least, is that the fed could roll back its economic outlook, make it a little weaker than it had been, and maybe that will signal to the markets that qe is going to be around longer than we think, tapering is further off. what do you expect to hear? >> i do think tapering is

further off, but even if it's not, i think the first taper is going to be so tiny. bernanke already floated the trial balloon. the market didn't react so well. i think he knows that. they've done an incredible job of jaw-boning the market, so i think they'll jaw bone again, he'll give more hints. but my question, what happened to the 6.5% unemployment? they've stepped that back. now it looks like the fed is doing what it's done all along, which is they're really playing games with the equity market, because equities have risen and now they're going to taper back based on high equity prices. so -- >> well, the 6.5% was supposed to be for when they start changing interest rates themselves. they would argue that the qe is something on the side and that that can come back before 6.5%. and they would also argue -- i don't know that the market sees it this way -- they would argue that even if you taper, you are continuing your easy policy because it's just more and more bonds that you're buying every month. i think the market looks at tapering as tightening. i don't know what you think. >> i agree, because if the fed

could have gone to negative rates, they would have. qe's a form of having negative interest rates. once they get to zero, they have to change their tools with qe. i think the market's going to view qe as tapering as a bit of tightening, but listen, i think there will be a delayed reaction. if bernanke comes out and says we're going to taper from 85 to 80 to 70, i think the initial reaction is down, and then i think people calm down. you have some kind of short-term rally. i think the bigger decline is later in the third quarter, early fourth quarter for equities. >> let's talk about what happens immediately on the fed's announcement tomorrow. this is going to be tomorrow afternoon between 2:15 is when we get the announcement, 2:30 is when bernanke starts talking. how do you think the market reacts to what bernanke actually comes out and says? >> yes. >> that is going to be a very closely watched press conference. >> it's going, but they're all closely watched. everyone's looking for the slightest hint the fed's going to change course. as you normally have during a fed announcement, you've got some pretty good volatility,

you'll have a big rally, a big decline in a short period of time, then you're going to get a trending move into the close. i don't think what happens tomorrow between noon and 4:00 is the real tell. i think when the dust settles, you'll see some movement and then you'll have a movement at the close and then the next couple days i think is when you really get a clue as to which sectors are going to step up, which sectors are going to be laggards. they have obliterated the bond funds and anything bond related. telecom and utilities and to a lesser extent staples. so, i think you've got an incredible opportunity to watch. >> telecom was down yesterday. would you buy any of those sectors? telecom was the only sector down yesterday. >> it's an interesting comment. we normally would not chase some of the laggards and losers. this is the first time we've done this in a while. we added some utilities last week, a small position. if they don't get moving quickly, i will have no problem throwing them to the curb. >> okay. >> so, i would not add them right now. i'm happy with my biotech, i'm happy with my financials and i'm

happy with a variety of other securities, including some commodities here. >> okay. tom, let's talk little bit about what economists are looking for. we did mention that the fed is expected to revise its economic outlook. do you think that forecast will get revised lower? >> well, we think that given the inflation outlook recently and the inflation data, inflation expectations backing off a bit. we at standish do believe that the fed will probably revise down its forecast a bit, maybe on the growth front as well. what we're looking for, we do believe that there will be tapering in the second half of this year. we think the fed will take down that $85 billion in asset purchases down closer to $65 billion, and we think they'll signal that today in the press conference after the meeting. >> really? when -- i'm sorry, when did you say, tom? >> joe, we think it's going to be some time in the fall. >> in the fall. >> the latest we think it would be if there's a deterioration in the data, would be toward december. >> wow, so not next year, okay.

>> no, no -- >> huh? i want it. >> you want it yesterday. >> i do. >> you wanted it this month. >> i do. the quicker you get -- >> why do you want it, joe? >> because the quicker you get off the drugs, the faster you can clean up your life and start living, and you know, start your rehab. start your rehab. >> joe, if you look at -- >> go ahead. >> if you look at the data right now, it's already showed a substantial improvement -- >> right! >> -- that the fed chairman says he's been looking for. so, i mean, i think that's what the indication was in his testimony -- >> paul, we lived for 200 years in this country without $85 billion a month. are we that weak? our economy is so frail that every bond that the government issues has to be bought by the government? pathetic! >> joe, i think it's not only us, i think it's the global -- >> yeah, yeah. >> i truly believe the global central bankers -- >> maybe we need a little pain. maybe -- >> that's a whole separate entity. >> huh? >> that's a whole separate

discussion. i don't think the government believes we can handle any more pain. so, i think greenspan and all are there with the bandates and the duct tape and their fingers in the dike hoping that -- >> it's been five years. growing. >> i don't think -- the confusion here -- >> look what happened in the '30s. >> tapering is not tightening. >> what's that, tom? >> tapering is not tightening -- >> it is from a lot of market participants' view. tapering is tightening from a lot of participants' view -- >> when they did qe infinitinfie said oh, my god, do not do it forever! now cutting back $5 billion, we're ready to slit our wrists! it's pathetic. >> i don't think it's ready to slit our wrists. i think the fpeople wants to knw when do the fed begin tapering? once the tapering begins, it's on its way to zero. and i agree, maybe we should have some pain -- >> tom is an economist, says tapering is not tightening.

paul is a market guy and says yeah, it is. >> give me more. i want stocks to go up. >> traders look at it another way. >> gimme, gimme, gimme. >> that's where bernanke has a really tough time trying to manage expectations. >> right, and it will be good for you, paul, eventually, because it's looming. that's what greenspan -- it's looming. it's not allowing us to grow to our potential because we know we've got to get out of it and it's like this barrier to the future for us. quicker we get out of it, the better. >> joe, just like in the '30s, whenever we got off the drugs, off the iv, we'll have some pain. so you want to have your pain in 2010, '11, '12, pick your year, 2018, 2020, whenever we begin to get off the drugs, it's going to hurt the body. >> fair enough. >> that's what the government's trying to prevent. >> we never hit 35% unemployment, never had brother, can you spare a dime? it was not the '30s -- >> it's not, but it's the same with the markets, though. >> we've got all this incredible, you know, government stimulation. we don't need it. we're ready.

>> gentlemen, thank you. >> strong. >> let's go, then. >> we're strong. >> thank you. coming up, learning from the pros. andrew hits the golf course. please, do not miss this.

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it's now time to hit the links and learn from the pros, but not my swing. how important is process? how important is doing the same thing over and over again? >> the only way you're ever going to get better is exactly that. there's a saying practice makes permanent. perfect practice makes perfect. >> you look at the best golfers out there, in eall have a preshot routine. they look at each shot the same

way, they follow the same process. the investment process starts with looking for quality companies. we look for companies with great balance sheets, consistent profitability, consistent cash flow. the market environment is going to change all around you, but you have to be able to stick with what you know, because good times are going to come, bad times are going to come, there's going to be times you're going to be leading the market, trailing the market. >> so, when you've made mistakes, what have they been? >> i've lost all of my money in my very first investment, but i stuck with it and learned from that. in golf, the very first shot i took on the golf course was a shank in a tournament. it was humiliating, but i learned from that and i played on through that. >> come on. come on. there you go. >> hug makes it all better. >> always. >> if you're having a tough hole and you're saying play through, is there ever a time where you just give up and just say, you know what, i'm counting this one out because i've got to get on

to the next thing? because in investing, there are certain trades that aren't working and you've just got to kind of run. >> with each investment, each opportunity you have, you need to be looking at what is the best way to achieve your goal. so, if your goal is a consistent rate of return over time, sometimes the best thing to do is you have nothing better than to punch back out into the fairway in golf. sometimes in investing, you have to be willing to accept the fact that maybe there was a mistake that you made, maybe there was something you overlooked, maybe there was something that you missed, and you have to have the humility to be able to say this is where we're going to get back, make change and get back on course. >> this is one of the games where everything you think you should be doing, it's almost you should be doing the other thing. >> exactly. the markets feel like, a lot like a golf swing. the first time i swung a golf club, i played baseball as a kid, i swung a golf club and it felt completely wrong. it took time to learn to understand that what felt wrong

was actually right. when you look at a bear market, stocks are down, there is a lot of pressure, a lot of stress, you're losing money. it feels awful. but oftentimes, that's where your best opportunities come from. just like golf and a golf swing, which may not always feel so natural when you first try it, it's important to stick with it stay patient. eventually, you will get to the open markets and understand that when markets come in to you, oftentimes, they're giving you your best opportunity. it's an unusual feel but one that's important to learn. >> thank you very much. he said i had a virgin stroke. what does that mean? >> your putting stroke i think looked smooth. if you've done it your whole life, it gets harder and harder to do that. >> also, your small muscles get, as you get older, the ones you've used your whole life. i don't know. >> we've got to go. coming up, we've got a lot going on. private equity power player. scott sperling. [ male announcer ] my client gloria

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>> coming up, the story of the morning, the start of a two-day fomc meeting. we will talk to fed insiders and market watchers. dow right now 55 points. "squawk box" will be right back. .

>> are you ready for another wild ride? investors head towards the fed tapering tunnel. we will tell you what's on the other side with special guest host scott sperling. a cnbc exclusive. leading economists tell us what they think of the fed and it's handling of the economy t. results of our special cnbc fed survey ahead. plus, we hit the campus of harvard. ♪ we talk education, innovation and entrepreneurship. the second hour of "squawk box" begins right now.

good morning, everybody, welcome back to "squawk box" on cnbc. i'm becky quick and the futures are in the green once again this morning. the dow futures are up 52 points. yesterday the dow was up 109 yesterday. in our headlines this morning, boeing has announced a new larger version of its 787 dreamline were known as the 787-10. it's gotten orders from five customers including united airlines. the new jet will seat up to 330 passengers. also, chrysler is expected to reject the request that it recall 2.7 million older jeep suvs. the government says that the jeeps are at risk of catching fire in rear-end collisions. chrysler contends the vehicles meet the safety standards that were in effect when they were built. hmm. as the owner of a jeep, i have to wonder about that. yahoo says it got up to 1,300 requests for data from law enforcement officials in the last few months.

it to the latest company to release this after the leaked program. most of the results involved criminal investigations. >> it's time to talk markets. timing is everything. right now that, remains in question, investors look for clues as to when the fed will taper, temper, tapering, cnbc's steve leisman jones us. >> dialing back the feds on the survey of 60 economists and strategists on wall street. what we have found is they've reduced the amount of quantitative easing they expect this year from $936 billion in the april survey down to $880 billion. now, they're still expecting, not until 2014, about the same as they expect in 90% of our 60 respondents expect some

quantitative easing in 2013ment now, let's take a look at the time line, tell you what the average month is. in april, the taper was supposed to be right around, where is that, right around the end of the year, now, look what's happened. now it's come back here to december. we've dialed it back by four months or three months for the start of the tapering, december, 2013. how about when they'll stop quantitative easing, judgment, 2014, now it's just about the same, july, 2014, how about heek rates still off into the future right now. i want to show you one thing, the average, the top reasons we got the mode of the survey and that was march and now it's september, 2013, that's the no. 1 response for when the fed will start paperering. it's december because there are some well into 2014. i think it won't happen until then. let move on, take a look at what

joe said here, low inflation and sluggish growth make it tough for the fed to taper later rather than sooner, many people have sort of dialed in their expectations. let's look at clarity of fed policy. what you see the market thinks the fed is more unclear than it had been in april. the communication, now, it could be because the economic outlook is more uncertain. also the communications from the fed is seen as more uncertain. david writing in david kotok saying fed communication has been fuzzy and caused an added col title. gizdizy says the fed will likely look to if next meeting to attempt to calm the markets. and the fed is hoping that it can scale back its aggressive path of monetary easing in a

gradual fashion. we are looking for less fed this year. call eight malvo a month of tapering, still continuing until 2014. i think that's one of the things that spooked the federal reserve is this -- expectation. >> seefb steve, we should look for confirmation of that dialing back today? what should we be reyesing through in the tea leaves here? >> i think the idea of tapering being sooner rather than later is something bernanke is likely to confirm in his press conference tomorrow. >> steve, this a direct. have you ever gone back and looked at the prediction to find out whether these are contraryian tools or tools that will indicate what will actually happen, have you ever gone back? >> i do. these guys are very good collectively. it's not contrary, no. >> everyone has opinion. you know what opinions are like. >> and what they're worth. >> opinions are like noses, everyone's got one.

they all smell. i changed that, it works, rite? i changed it. it's cable-friendly. >> right. there's other ways to do. i think of david kotok, you should do the when are you talking about his kail. it makes it sound much smarter if you do this. >> i don't want to kill the joke, i do that a lot of times. >> we are born to do that. >> that's collective wisdom. you put all these guys together, one guy that says they won't taper, with a guy that says they'll taper next month, our survey has ended up being a little more accurate than surveys out there, because we have a bicker pool. >> we are offsetting. >> crazies in, exactly. >> can you give us the collective wisdom on this interview president obama gave about bernanke. >> the collective wisdom is what my wisdom has been all along. i don't think bernanke is sticking around. >> it's his own decision.

because obama owes him. if you saw that interview, he didn't come out and say he's done a great job. it was a very strong answer. >> i heard off puzzling over the word supposed to in the last hour. i think you could sigh that what obama was saying, supposed to, longer than he was going. that's how you can interpret that. >> i think he said he stayed around longer than he thought and longer that he was supposed to. >> it was like the geithner thing. geithner wanted to leave. he kept him there longer. >> wouldn't bite the hand. >> no, i don't think so. >> but they may get to the end of a search process and decide there is no easy way to do this. he may go and ask the president again. the only caveat is you don't know what happens on the end of a phone call with the president asking you to remain in office. i think bernankeps to go. i think he's signaled that. i think that's where we're headed. >> just to get out before the

actual paperwork starts. >> he owes him tichlt at this point. >> stheev, thank you. >> i'll be here next hour. i'll kill more jokes. >> oh, stop. let's talk about more about what to expect from the fed and what the market is thinking. brian oppenheimer, senior economist. do you think the fed taper is going to happen this year? >> i actually don't think it's going to happen this year. i think that what ben bernanke has done and what we have all known is there is the power of the mic. they've started to lay the expectation, lay the groundwork for a tapering to begin in the beginning of 2014. but if you look at economic data, you've seen industrial production generally going sideways. we saw the empire fed, the headline was okay t. under like components were not very strong.

inflation break evens continue to fall. so i do not believe we will see tapering at this point. the question is whether we should view tapering as tightening. what the big worry, what was interesting about steve's results is that the 60 economists view it quite differently. so they have tapering into 2014 the middle of 2014, still have rate hikes well beyond 2014. >> i don't think it matters what the economists expect. just about every person investing the money, they say, yes, tapering is the beginning of a tightening policy. even though you are going to see additional quantitative easing that comes out, because it signals the end of qe infenty the market will read it as that, all the market volatility normally around interest rate hikes will go around this tapering. >> so that's bernanke's biggest challenge because this idea of tapering now means interest rates have to rise very soon in the future or in 2014.

i think what bernanke has for the do over this day is make sure investors recognize these are different things. when we talk about inflation and unemployment rate of 6.5% then we can consider raising interest rates, it's very important bernanke signals that to the market this talk of tapering, we never believed that we were going to see qe infenty. at some point i think joe is right, you do have to come off the drugs, with regard to raising interest rates, that's well off in the future. >> i hadn't even thought about this perspective, but what that into this whole conversation about bernanke leaving at the end of january when his term is up. if that's the case, i had been in the camp that thought we would start to see tapering this year. if he is actually planning on leaving, is he going to start the tapering, leave a month or two or three months later? sore is that something he'd

leave up to his successor? >> i i it's all data dependent. i think it will be on job creation in this country regardless of whether bernanke is going to stay. >> he's not staying at 6.5%. >> he's probably waiting for a few months of at least 200,000 in job creation. we're doing 185 to 195. remember, the successor to bernanke is most likely going to be johnny yell one is likely more dovish than bernanke. so i don't think bernanke leaving the fed will change the tra jekory. i still believe -- >> i look at it as george bush, when george bush was looking at the auto companies and the pailouts, he says, i'm not the o one that's going to make this decision. i will leave it up to him. so i will extend the loan and let the next administration dole wit. because it's going to be their problem for the manage. >> perhaps that's the case. i still believe it will be more data dependent. i believe we need to see over a

couple hundred jobs for at least three months. we need to see expectations rising. although the jobs production is improving. inflation expectations are coming down. >> what will be the market reaction to yellen if he is the choice is? >> i think the continuation of a current path. i think the market is going to continue to act as if we're in a low environment. there will be this need for additional resources of income, the stocks continue to remain attractive to fixed income assets even if interest rates aren't going to rise for the foreseeable future 12k3w4r ryan, thank you very much. you can catch tomorrow's fed decision and the conference tomorrow at 2:00 p.m. eastern time. it's going to be a doozy. up next, where are the deals? scott sperling, the leverage president from thl partners will join frus economic policy to big

deals on wall street. there are a few topics he won't tackle. let's look at the futures right now. a pretty good session. more of the same today. we were up that much yesterday. we closed up 109. so we're getting back the weak inside in the session. "squawk box" will be right back. ♪ norfolk southern what's your function? ♪ .

>> our guest host is a master that receives some of the oldest private equity firms, joining us is scott sperling, thl. thanks. we haven't seen you in a while. >> welcome. >> it's good you are here for a while today thank you. >> lately, things are percolating. never to his satisfaction. on a scale of 21 to ten it is about a six if terms of the environment for pe? >> i think it's a tale of two cities in some ways. it's been a very good time to realize so dividend recaps have come back. worry getting a lot of cash back, too, from the partners across the industry. i think it's been a more difficult environment to buy what you see in the overall mna environment is mimicked in our smaller universe of financial buyer transactions. and it's interesting because the credit markets have been as

good. >> why isn't it? is prices too high? >> i think there's two things, the first is the market has seen and because of the volatility that we've seen, it kind of reflects the fact that there is a lot of uncertainty about the future direction. >> volatility, where, in the stockmarket? it hasn't been that volatile? >> it has gone up. it reflects the fact that there is still a lot of uncertainty about what the outcomes will be. >> it's hard to say you are getting bargains at this price? >> we take that intok. we're looking at the fundamental also of the business. we're trying to value them based on some sense of intrinsic straw value. so we're trying to look at what that company is worth, regardless of the financing available suggests it might be worth. ten we come back, we say we're willing to pay x. if you go back to 2007, i think what happened with the industry is we were able to make a lot of things work based on the availability of a lot of cheap

capital. >> are we back to those levels? >> we're not black to those levels in terms of the quantum of debt being used. we are back to those levels in terms of the cost of debt. in some ways high yield is cheaper today tan it was in 2007. what we're not willing to do is transfer all of that value to the sellers in the business. a lot of that was going on back if 2007. so i think as an industry, there has been learning about. that that's one of the reasons you are seeing a more difficult fuel environment than you might have expected in the credit markets. >> that's learning on the expectation there could be another crash, things could go very badly. >> or not that there is a market crash, when you look for what you are willing to pay for a business, uma tick numbers work mathematically because of the number of leverage available and the cost being very low, you can come out and say i can make a 20% return on that dole if i pay x. however the intrinsic value analysis says that company is

worth .7 x or .8 x. >> this is not clear to me. this not what i i expect you to say. you guys are not contraryian. >> i'm glad i was able to surprise you. >> you better be right, because you have money involved. back in '07 when everyone was tripping themselves to overpay, it wasn't the best time because you couldn't sell anything forrers. now, how do you know it's not a much better time now and you are gun shy from the last experience? the numbers don't make sense? >> i think blah you have to look at is what the analysis tells you about that again the intrensic value of that business. put aside the impact of leverage. leverage can help make the numbers work better on a model, but you have to look at what that business is worth. >> this is as good as it's going to get, andy, it's not going to get better, we're already here. >> i was going to point out, you

said it's not dan -- he was talking about madison dearborn businesses, they were going to refinance their deals, they actually pulled them, they can't do that. >> let me tell you what makes it better, ma makes it better is more certainty in the overall economy the direction we're going in. >> there is uncertainty there. we have to take that uncertainty into account when we look at what we think a business is worth. so the discount rate, if you will, has to be high tore account for the untern e certainty. that is the place that we're in today. now, i will tell you that it doesn't mean that there aren't deals to do. but what it means is you have to spend a lot more time, put a lot more effort into creating transactions at price us that like. you have to go up. >> 0 interest rates, 85 a month. you still don't leak it. >> we are unappreciative of that large asset. we are never happy. >> you did something today, we

can talk about this? >> i don't know what is it? >> i asked you about it. it begins with a krrks ends with an m. >> compucom? >> i want in. i want to be able to buy something for $1.1 billion. anyway, financing it through equity and debt. how come this one made sense? >> this is an industry i think over the course of the last few years, we talked about the fact that we are very interested in companies that can help do things for other companies that is more cost effective and actually better than companies can do thechlss. so take a look at various business processes and physical out how you might be able to do that better than the companies can do it themselves. can range from something low kept, arrowmark, for example, provides food service and management to lots of people. lots of people do it. they do it better.

a. company of ours sms provides on the ground maintenance services to thousands of companies around the world and they're in the data center and they're serving customers, doing things commerce can't do as well as themselves. compucon is a similar sort of situation where we've known of this company for a long time. it provides very valuable services to large corporation fortune 100, fortune 500-type companies in the data center and around to it it infrastructure. there is a growing trend to outsource more and more of that. we see that in a broad range of businesses. and i think we're not alone in this. i think our industry looked at areas where there is better growth tan you can find in the general economy. when you find there is better growth in these areas. many companies, many industries, whether it's in the life science area or to it it area or again

in food facilities management are looking to turn fixed costs into variable costs and to have the benefit of services provided, that can be provided in a better way, in a more cost effective way. this is a company with 11.5 thousand employees that do a good job for large sophisticated companies. >> beautiful. we'll talk more about it. we hear the music. >> we are glad you are here. >> thank you for having me. >> still co come from "squawk box" to the political side of the fed debate, former governor frederick mishkin has been been on and robert kindler, stay tuned. more "squawk box" is ahead. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work,

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>> coming up, ben bernanke is set to rally the troops in washington today. if you think investors are the only ones watching, think again. that's coming up next. squawk goes to the head of the class the dean of harvard business school. he will talk about everything coming up at 7:40 eastern time. we'll come right back. across an ocean in a three-hundred-ton rocket doesn't raise as much as an eyebrow .

>> welcome book to "squawk box," in our headline, two economic reports, the fed begins its two-day meeting. we will get may housing starts, both those numbers at 8:30 eastern time, housing stewarts are expected to gain by 11.4% t.cpi is seen rising by .2 of a percent for the headline number and that exfood and energy the core rate that so many people love so much. fed meeting concludes tomorrow with the latest policy statement at 2:00 eastern time followed by ben bernanke's conference at 2:30 eastern. third point raised its stake

in sony from 7% to 3.6%. they are asking for the opportunity on sony's board on the prooefl proposal they spin off its entertainment unit. third, a move could increase sony's stock place by 60%. joe. a couple stocks as to watch, adobe systems, 34 cents a share last quarter, the software producer beat estimates that provided a cautious outlook. we'll see whether they beat that cautious outlook or don't. also, keep an eye on lazyboy, which will be out with quarterly numbers. raymond james recently upgraded the stock to a strong buy, noting that the recliner maker's opportunity to capitalize on noting that they could capitalize on housing, this is a company we can have a refrigerator in the arm in the chair. when they try to sell that, they use grape soda.

i don't think it's for grape soda, it's for lazy fat beer belly people, nobody drinks grape soda after grape soda, do they? lazyboy is expected to report profits of 28 sent a share for the fiscal fourth quarter. you can got be in that ad. i might be if that ad. >> why? >> because you don't look like a big fat person lounging in a la-z-boy chair. >> you'd have an avant-garde like a hermann miller. >> your knees is down, your back is totally straight, right? >> i think it's an exercise ball. >> yeah. >> and with a bunch of bartels and james, wine coolers. >> let's talk about the fed an politics. investors waiting for the fed's

latest word on quantitative easing. the professor at the university of pennsylvania, boston, a senior fellow at the center for american progress and kevin hasset the director of economic policy studies. i will go to you, kevin, first. we were trying to make head or tails of this interview about what will happen with mr. bernanke, we think he indicated basically come end of january, he is gone. what does that mean to this discussion about when the tapering really begins? >> it's an interesting question, because i think there is a chance bernanke will want to start the transition away from quantitative easing, start the tapering ahead of the next chairman. i think that might be one of the things that started to set the markets off, if you go back to the joint economic hearing that started all the anxiousness about the tapering, it happened because kevin brady asked mr. bernanke, do you think it's

possible you might have to start tapering before the end of the summer? it's a tricky question. bernanke wasn't able to dodgers it. i think these are all playing together, i think there is a chance ber egg anything in will be gone at the end of the summer, a chance he will start this trajectory change. >> you are saying end of the summer? >> yeah, he might serve through to the en, but there is this, you know, statement he wasn't going to be at jackson hole again this year, i think there is a lot of rumor it might happen this summer. >> chris, can you handicap this for us? >> it's unclear what bernanke ever itself wants. we have never been in this situation. at this point he is focused on his legacy to some degree. he has shifted from a real inflation hawk wanting the fed to be tied to inflation targeting to really an emphasis on jop creation and unemployment. i think the legacy and the

politics here matter. the fed is the only policy game in town. i think i can see this sort of, the transition even continuing beyond bernanke, i'm not clear, i don't necessarily afree with kevin that bernanke wants to get out of this this could be very disruptive. i think that would directly contradict what he has been trying to do the last two years. >> on the merit, who should happen? given the markets over the last couple of weeks, since we first heard, may 22nd, if that's the date you want to use, what is your sense of how the feds should approach it? >> well the markets shouldn't deter fed policy. i think at this point it's important to keep in mind that we get contradictory data on the zreng strength of the recovery, one day retail sales is up. production is flat. the next day housing is up. the trade deficit is widening. it's unclear where we are. means the policy make verse to

buffer and support and monetary policy at this point is the only game in town. >> you can turn the argument around and say that easing is necessary. you could say that the fed has allowed washington and the government to do nothing, because of these rates. right? if the rates were higher, it mit force the issue. >> i think washington would have even, would not have acted any differently if interest rates had been any different. this is an ideological path, a stalemate between republicans and democrats. neither side is getting what he wants. >> if your back was up against the wall, that wouldn't change the equation? >> that was the whole point about sequestration. their back was against the wall. they let it happen. so i think it's clear at least this congress seems fob to be unable to act when it comes to economy and the jobs, that means more pressure is on the feds, bernanke knows this, the fair

chairman and fed governess know this they were the game in town that thrives, that helps the economy forward, for better or worse, but i don't think that bernanke, different actions under the fed would have changed anything, any dynamics on congress. >> kevin, help us, my god friend joe here believes we have to get off the drugs, immediate off. >> the quicker we do it, the better. even if it's painful, rip the band aid. >> before the markets bank us. >> i think, again, we're going to have to transition away, in part, because we've seen such good jobs and they are ratcheting up. think about it this way, win change the fed chair the markets will be nervous, what will the new person be like, will they have radical new ideas? >> if it's yellen, literally the day that gets announced, what does the market do? it applauds, it goes up, goes down, what happens?

>> i think change is scary to markets. yellen is someone who has been maybe little more dovish than bernanke so people start to speculate. does this mean inflation is out of control? my point is that change is going to be nervous making. when the fed starts unwinding or tapering, that will make markets nervous. to have both of those going on at the same time is the kind of high level uncertainty. bernanke knows that. i think that muts a clock on when the tapering has to begin. he has to get the first part of the anxiety done with. >> before he lease he's got to start tapering. >> i think he does, yeah. >> the point is, if your honor certainty was that important, it wouldn't be the start of a program t. whole thing is this is all experimental in many ways. we are in sort of this long unprecedented slow recovery blog. i think to some extent the markets will have to accept there will be some uncertainty

the fed will try to communicate as much claritiant his position when he comes to policy-making. but i think we need to take the emphasis on jobs and the unemployment rate very serious from the feds. >> we will leave it there. guy, christian, kevin. we appreciate it this morning. we will sort through some of this. thanks. >> whant this guy? he looks nice, doesn't he? he's a friend of mine what are you talking about? >> isn't he kindly, he's not wearing a bad leisure suit. he is kind of smiling. isn't this possible? >> yes. >> oh, looks friendedly -- friendly, remember those suits he wore. >> am din jad? >> it's good for the world. >> its says nuclear enrimpment will continue. coming up, fuming infoization. we will speak to the dean of the

harvard business school about the next generation of our workers and more. >> they let you in? >> oh, yeah. that was a long time ago. >> good for you. >> good for you. >> futures right now are backed off a little from where they were since they will taper today in my view. anyway, "squawk box" is right back. investment objectives, .

>> a harvard business school has been leading competitiveness and what needs to be done to fuel growth. joining us the dean of the business school and i guess you know our esteemed guest host, too, dean, scott sperling, a star student. >> yes, he's a wonderful alumnist of ours. >> he certainly is. hopefully, he's giving back to the school in that you were so

instrumental in his -- >> that's why he said i was so wonderful. >> what is the development office calling after this? >> exactly. does harvard have the answers for how we become a lot more competitive, ar vard business? >> i think the first thing we have to do is we have to get out of this recession and the recovery that we seem to be seeing in america is something that should be sustained. we're all watching what bernanke does with the fed. there's three numbers everybody should be focused on. 2%. we want to make sure inflation doesn't go above. unemployment below 6%. gdp growth of 6%. if there is certainty this current policy of quantitative easing will continue until the economy finds itself in that state, hopefully, we will get a sustained recovery in the united states, but we shouldn't be satisfied with just a sustained recovery because the problems that we have in the country that

relates to our competitiveness, go well beyond the current recession. they are structural issues. there is systemic issues. there is serious issues and we have to act to address them. we have to at some point think about monetary policy, get to fixing the budget, the debt that we have. it's going to be striking that america may spend more on interest payments than we might on infrastructure or on investing in our future. we have to make sure that we reform the tax code. we have to at some point make washington function as it should. and we have to invest in education because in the end an educated work force that is going to be the most innovative and production work force is the real basis on which america will be competitive. >> i'm thinking about this fed policy as kind of a bridge to where we want to go. if we were to cont the current

path until we got 2% enplation or 6% unemployment, it really could be qe infinity. you could be talking three, four, five years. that's not going to be the case, it can't possibly do that. we need the structural reforms to be nice if this were a breckenridge to get to where we want to go in terms of these structural reforms. but don't you think the market needs to clear itself at some point? don't you think we can't just keep delaying all the maybe the negative things the negative wealth affects that would occur if they were to get out. it seems we are trying to delay any type of pay, as a result, we end up like japan, delayed for 20 years the hard things they need to do. are you saying we should stay this accommodative until we get to 6%, below 6% unemployment and to 2% inflation? >> i don't think we have to not stop tapering off until we get to those numbers, we should have confidence we will get to those

numbers before we engage in very quick moves. so i don't disagree with you that at some point we can't just spend our way out of the troubles we v. there are deep structural issue wes need to address, but it will be a shame if just when we are beginning to see a recovery that we stall it right now. i think a stall on the u.s. economy would not only be a stall on the u.s. economy as we see the policies set be i the fed are being imitated this is what draggy has been doing in europe and in japan. i many own sense is that for a short period of time, probably another two or three quarters. it's important for america to continue to provide the leadership that will allow a global recovery to occur. then we do have to get on with the business of solving structural issues. i don't think it will be easier to solve structural issues if we find ourselves back in the state in the recovery we currently have is going to be questioned.

>> i think that's right nevada the confidence fa we node to keep if economy going seems to be correlated to the market's perception of what the fed is doing. and maybe we're surprised by that a little bit because the fundamentals shouldn't be so checked. but the pact is, they are. the psychology, the canesian animal spirits, if you will, seem to be realed to the market's reactions to where the fed is on the issue. and i think what you have done at hbs and it's been a number of years in the making, is create a pathway with this competitiveness project that says, once we get through this, once the patient is reasonably healthy on a sustainable basis, ear are the things that we need to do to take advantage of the key competitive issues that drive our economy. and maybe even spend a minute or two talking about some of those key findings and where we go

from there. >> i think what we have found is that you you want to think about fixing the long-term issue, after we get past the, to have at least a recovery that feels sustainable, is the single most important issue that everybody seems to be focused on in america is how do we fix our education system? it is just unlike either, we're going to be a competitive nation in the future if we don't have an educative work force. because at a time in which we have to compete. we enevably have to dpeet with low cost reasonably well skilled people entering the labor mark from all over the world, america's hope lies in continuing to be the most productive nation with the best worker, people who are highly skilled, who are able to bring that skill to entrepreneurial companies that can export to the economies around the world that so desperately want american products. so maintaining the engine of entrepreneurship combined with high skilled, high talented

labor with u.s. polys that make doing business in the united states relatively simple, straight forward, which is we node to have regulation. we need to be a country in the which we get our debt and deficit under control because we don't do these things, ten we can be more sure of our long-term competitiveness. >> we appreciate your time today. thank you, you are on the right side of that city i think. you can at least think a little more clearly. you are not inundated. thank you, great to see you. >> thank you. coming up, when the feds start to taper. we will talk about it. up next, former kpmg partner scott london is in court on insider trading. jane wells got his comments right after the break.

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our jane wells caught up with london outside the courthouse. jane, this was fascinating >> becky, it's the first london talked on tape. he insists after 30 years at kpmg, this is the obviously time he crossed the line. he said he quote almost threw up when he found out his friend

bryan shaw made over a million on herbal life and skechers, he london on the right, got about 70-grand in kickbacks, cash, jewelry and a watch. how did this happen? >> it's just through discussions at dinner and so forth and the other individuals you know i might say something casual frustration at a certain client. the other individual traded off of that unbeknownst to me. then he brought it to my attention and started asking questions and said, hey, well, what is this company doing what the that company doing? unfortunately, i gave him the information. i never once asked for any money. never, you know. >> you didn't turn it down? >> that's correct. i regret everything i did. i take full responsibility. full accountably for what i did. i want to make that clear.

but you know this was not about making money or this is about, you know, initially helping out a friend it was, you know, whatever. for the wrong reasons. and i, like i said, i regret it to the day adie. >> london will officially plead guilty in the next few weeks. he could face 20 years. he is hoping a guilty plea will impress the judge. he wanted to turn over the jewelry yesterday, said it was in his car at the courthouse but the agents weren't there to take it. guy, can you see the entire interview on msnbc.com. >> this is amazing to have him come clean and it's a jump from i almost threw up to hey, nice watch. >> exactly. is a jump, too. i didn't know he was trading on the information to i knew he was trading but i never asked for money to well, yeah, i took the money and the watch and all

that. he, nobody in this case, not the prosecutor, not the attorneys have ever seen a case like this where both parties, him and bryan shaw from the beginning once confronted admitted everything. >> wow! >> the funny thing is, becky, you have to go to court four times to plead guilty if a case like this. it goes on and on and on. >> well, i definitely want to see the entire interview. jane, thank you. jane wells. check it out online. by the which, folks, when we come back, we will have more focus on the former fed governor rick mishkin will be joining us. then our disruptor 50 series looking for you to find a last minute hotel room. the ceo of hotels alt tonight will be with us. "squawk box" is back in a minute. . minute.>> the fed continuing,

will they, won't they dance over tapering itsim lus program? >> you always think you got to get the last one. >> ow. >> please, let go. >> we will ask former governor rick mishkin if we request expect more clarity from bernanke tore? let's make a deal. we will talk with robert kindler

the mr. president of mna morgan stanley. the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc. our guest host this morning is scott sperling, co-president at thl partners. we'll have more from scott in just a minute. first, andrew has your morning headlines. we had a couple headlines. we're announcing a new larger version of its 787 dreamliner known as the 787-106789 they have orders for 102 jets from five different customers including you noticed airlines him lit seat up to 330 passengers. also this morning, hedge fund low point raiset its stake from sony to 7% from 6.3%.

i are calling for sony to create an independent board. they sent another letter to sony ceo today ap also in that letter suggesting that they would be opened, welcome even to getting a seat on that board. it was sort of a very passive-aggressive way of saying they would like to -- >> i wouldn't mind fit you offered it. >> i wouldn't mind it. >> i'd be okay about it. let's take a look at the markets this morning. we do have some green arrow, even though the markets were up sharply yesterday. at this point dow futures are up about 3 points. that's off the highs of the morning. still advancing after gains yesterday. overseas in asia, things barely budged t. shanghai composite was up by even less than that. in europe this morning, you do see some modest advances, but again, actually things have turned around in france and joseph cornelius, there are some modest decline the footsy is up

by 47 points. the story of the week the fed kicking off that two-day fed policy today the fed's exit strategy is our very own seve liesman. steve. >> becky, i want to concentrate on fiscal policy. we have been asking this time around, 60 economists, wall street, asking them do we not need to do reduction? is ann it urgent or don't they know? this is the results from april. 52% saying it's urgent. 39% saying we have a little time. the june survey is down 40%. what is interesting is it was double in january. 80% said it was urgent to enact an agency reduction plan. what we don't know from this are people more comfortable with the deficit because it's come down or because there is a feeling we

shouldn't be doing quite as much of it. one way to check is to see what impact it will find. if that number is stable from april the impact from the sequester less than we had thought when we started talking about this in january, a quarter.from the the gdp in tax hikes. 30 basis points from the skweser. add those two up, you get, what do you get? about 55/60% right there is what the expectation is for the gdp about half a basis point. let go on now, take a look at what mark zafdy said, the recovery is getting through the headwinds bhert than i expected. this augurs well for the recovery in the second half. they will permit the fed to ease back on bond purchases without impacting the market supply and demand. that's interesting. there will be less out there, the fed doesn't have to by as much. it will have the same effect with a tapered amount if they choose to do that.

what about inplation? i sort of thought we would have more of a response on this, it's the first time we have queried our respondents on inflation, does it mean easier fed policy, 12% the fed will watch it, not act now, 80% not a concern of the fomc 7%. what about the chance of inflation or deflation, can you see, most people believe there is little chance, at least in the next year of inflation or deflation. i thought they'd be a little more concerned. i was wrong about that. a couple comments, we want to take a look here what people are saying about it. donald luskin says if massive qe-infinity can't even prevent core pce inflation from falling to the lowest level in the history of the data, just what are we to think it can accomplish? jobs? surely you jest. president obama hinted in an interview this week he might be looking for a new fed chief to

replace ben bernanke, the president speaking to pbs' charlie rose. >> well, i think ben bernanke has done an outstanding job. ben bernanke is a little bit like bob mueller the fed of the fbi. >> yes. >> he has stayed a lot longer than he wanted or he was supposed to. >> and when asked whether he would re-appoint ber naepg if the fed chief wanted to keep the job, obama did not answer the question directly. i should say this is not the first time we talked about this. i got a tape for you, steve. you gave me a hard time. >> taper? >> this is a tape from october, 2012. that's how long we have been talking about this issue. >> my column in the new york times talking about the future leadership, treasury in the fed, a couple wires picking up a piece of it which is in this great parlor game of who may take over the treasury position and the fed position that it is unlike will i that ben bernanke stays in his position even if obama wins i. it's not to say he is leaving a

tf election. this is to suggest he would likely leave in january, 2014, frankly, no matter who is elected. >> i gave you a hard time. i have been saying that longer than you have. >> i gave you a little bit of a hard time. because i thought that he would want to stick around and manage his legacy. >> i thought you -- i remember you coming over to the set. remember, there was a column that day. we had a whole long column. you told me i lost my mievend. >> certainly right about. thank you. >> so what's your take now? >> i have some comments. maybe the october 2012 was more important than now. >> you should have him disagreeing with you. not just your comments. >> here's me, here's more of me. >> now, this is important. >> can we run more of that type i tape? okay. the white house looks like they're walking back a bit the president's comments, not necessarily that bernanke, the impression that bernanke is leaving, mo tr idea that maybe

obum dissed him in this. >> accidently. >> he reflected his admiration for his systems. making the obvious point bernanke may have endured more than he may have wanted. the president believes bernanke has been an excellent partner and believes he helped. >> to stay longer than he was supposed to. if he said he served for longer than he has been effective. >> that's not what he meant a. >> that's not what he was saying. >> we -- >> you can probably write some good -- >> he didn't mean it. when he signed on, he stayed longer than he initially signed on. >> remember alan greenspan was there 19 years, bernanke since 2006. >> i when to the russia for six months, i stayed six years. you end up doing things -- >> he found a home, idea

logically. >> because of you, my kids think i'm a spy. they watch. >> they probably think are you cool because of that, cooler than an economics reporter at a cable channel, a spy, right? >> but the senior economics adviser. >> i forgot about that. >> rick mishkin is going to join us now who knows a lot about the stuff. she a professor at banking institutions at columbia school of business, also a former federal reserve board governor. rick, as a not a caveat, but you respect the fed a lot. in the past, i've tried to get you to kind of criticize what they're doing. i don't expect you to ever really do that. are you a team player. so that's just a caveat. i'd like you to. and say, qe2 is insane. but i don't expect you to do that. >> not quite correct. you know, i have written some op-eds. i had question marks about qe2. >> still?

>> i had discussion in the op-eds still fairly critical. >> you did it in a nice way? >> well, a ima nice guy, what can i tell you? >> you are. >> is bernanke a short-timer at this point do you think? you heard what we were talking about. we love to talk about things. >> i actually have to el -- tell you, obama said it exactly, ben is not a lover of the power type things in washington. he is really somebody who cares about public service and he spent eight years in the trenches with people beating the crap out of him. he deserves a break. he hasn't done everything the way i would have done it. i don't think every decision he has made has been perfect. given the circumstance what he was hand, it is quite extraordinary what he did do. we did avoid another great depression not just a recession. he did what he had to do, did what it took, make tough

decisions. you have to give him respect for that. >> the timing will not work in his favor, i think he would have hoped by now he wouldn't have been the fed wouldn't be so intimately involved in our future. so at this point whenever he tries to leave, it will be like you made this mess, now, nrdz the, trying to get out out of this a benefits sheet five times the size, all of this accommodation, you are leaving this for someone else to klein, take the negative. you had the punch bowl going to whole time, whohoo, now you will take away the party. someone else will have to do it? >> there is always an issue of tiej. one of the things that's important here, there is a natural time leave when your term is up. you have to go through re-appointment. you are saying i'm not leaving because of circumstances, it's the appropriate time. eight here's e years is long enough for a cramer. i think ben importantly does not want to stay too long. i think that was a serious

mistake on greenspan's part. he loved the job. he could have fixed out a way to say he would have. >> i think something to add that bernanke believes he was concerned about the idea the fed becomes associated with a fengle personality. that undermines the institution. bernanke has been all about the fed as an stulgs and i think -- >> absolutely. >> i don't know what he believes personally. i do know he does things that are better for monetary policy. i don't think he talks to the press and does the press conference out of the goodness of his heart. i think he does so because he thinks that communication leads to better monetary poimpls i think he believings his leaving after a certain amount of time would probably result in better monetary policy. >> i don't is right the timing is crazy this is happening right as you start to unwind. >> yes. he's got tot at least start taping before he leaves. >> i tell you, ben -- they will do, look, i have been inside the

organization several times that ben is not going to do policy in terms of how it looks for him personally. if, in fact, he thinks it's appropriate to keep on, onot taper, that's what he will do. if he thinks it's appropriate to taper faster. that's what he will do. it will not be affected. you can stay too long in your job. that's what i call the fujimori problem. he did a lot for perper rue, stayed too long an it was a disaster for him and the country. i think ben understands. that he is not in love with his job. he cares about doing good public policy. that's exactly what his focus is. there is a natural time to leave. he's put in his eight years. it's been exhausting for him. and i think he knows he did the best job he possibly could. it's not you can't leave because nobody else can do the job. the organization is a very strong one. ben works on the basis of having the organization work well.

the move to target inflation in january 2012 is very much a part of that program. in all of these things, i think this is a natural time. >> rick, scott sperling is here, too. we have heard from market investor after investor who said they would not feel as comfortable if it were somebody other than bernanke at the helm? >> i think a part of it is bernanke has been the steady hand in terms of supporting the economy at times when it needed support. i wasn't necessarily with him at qe in the beginning, but as i said, i think that qe has been reresponsible for the strength of the marks, both the equity and credit market. has a real impact on main street. >> that has a steady influence. >> a steady influence. the only kwi question i have back to your point steve, he didn't want to make it about him, he wanted to make it about the stux. one thing we have observed is there are more voice coming from the fed than we are seeing before. that creates uncertainty, right

now, one has to question or at least i question whether or not they need to reign in the number of voices. i wouldn't call it a caukaphony. you hear different things. >> i don't know they need to speak with a different voice. i think it's a strength. i think they need to agree on policy rules and have a better discussion about why they would move, go up or down with qe. remember, substantial improvement is a very nebulous term. >> i remember the markets took off when he came out with a metric you could understand. so that's what they need to do as opposed to the answer, we're going to physical it out. >> rick, if are you right about bernanke, what's the timing? meaning some people think he might announce the summer, some people think he might announce, i'm not talking about tapering. i'm talking about his own role. >> i understand. you do announce beforehand, typically because you actually

have to stop going to meetings so you don't have "inside information." so typically, people do about several months beforehand. would be my expectation in this case as well. i think that what i would emphasize here is that the fed has, there's, that it is true, first of all that, there are many voices. notice the reason for the press conference was to give more co heerns the key voice you want to listen to is ben bernanke or the next chairman. i think this tells you, given the skittishness of the market, obama has to take into account. there are a lot of people capable of being in the chairman or chair woman, going outside the box would not be the right thing to do. yell isn't somebody people have confidence in. she's a part of the team. cease extremely well yaufl. so, clearly, continuity is

something for the federal reserve at this time. >> we appreciate it. thank you. thank you for putting that cnbc sign up in your yard for us. >> listen, anyway i can help you guys. i know you guys need the money. >> branding. thank you. coming up, we will talk deals, robert kindler is head of m&a. we will continue our disruptor series. hoteltonight, we will talk about that when we return. ♪ norfolk southern what's your function? ♪ hooking up the country helping business run ♪ .

arriving for the fomc meetings minutes ago. >> who we thought could never leave. >> the briefcase indicator. >> right. >> even in years. >> why not blackberrys? >> they had been black before. >> still more powerful. you think the silver mean itself -- intlak more powerful. >> maybe you are riding the white horse vs. the black horse. >> you guys are like what in the heck is going on here? our next guest says they are the real thing. despite the announcement to sell the large deals the mna mark has

been weaker. here with us is robert kindler vice chairman, a knob of those at morgan stanley and global head of mergers and 66s at morgan stanley, i think there is one of those. >> that is true. >> a global head, that is you. i will go street i straight to the news, actually. are you involved in this smithfields deal. >> right. >> yesterday we at 8:35 had a gentleman jeff smith call in from starboard as an activist saying that the deal is the dole that they struck with the chinese, joe here hates on -- >> that's my stick. i like bacon. if there is a shortage, it's all in poo poo park or whatever it is if we get no bacon, i will be mad we stole it. >> all the best bacon will go over there. >> they will send the picks in the river. here, eat there. on this specific issue, is he right? does he make any sense?

>> well, look, he takes positions that are somewhat hard to understand in lots of circumstances. >> explain who you work with. >> we were advicing -- >> look what's happened with office depot. they signed a great deal with officemax. they sold their mexican operations, which was in the works for a long time and basically he shows up, he continues making noise, just, in fact, he started the consensus solicitation with the board and did nothing with it. i think he does a lot of things for pr effect. here in this situation, hard to figure out what he is talking about. if he can cobble up a hire merger. that's what the market supplies. >> do you think he's a greenmailer, that what you are suggesting? >> i don't think it's greenmail. he's looking at a way to shake things loose at a higher price.

activists sometimes have succeeded in that. if you look at the t-mobile deal or metro pcs, a lot of activist itself got in the stock including joe paulson. they had the recut the dole. here what he is proposing doesn't make sense. >> it's a two-bit pirate. >> you are seeing a lot of that, carl icon jumping into the dell deechl you looked recently another blackstone, does that make sense what is happening? >> sure, it does. >> is it a good thing for the system? >> i actually think it's a good thing. the problem with some of the activists is they are short-term trader. that's not an issue. they may own the stock. they trade all kind of different stocks and positions having nothing to do with the merits of the deal t. theory, the fact that his institution look at deals and decide whether or not they want to vote them up or down and force people to recut them. i think that's fine. >> did the companies come to you with an interest in smithfield, that how it started?

>> well, they've had a relationship for a long time. >> did you say morgan stanley advised them, maybe you should boy the company? >> it was really their motivation to do it. it's interesting. >> they didn't even smile within i said that about the banking going on. i didn't know at the time you were representing the chinese. he mouthed it. he looked at me. >> when all of this stuff started, it was really to talk about national security secrets. >> this is more important than -- all right. this is more important. do you know for sure this isn't a trojan pig they're going to start to try to sell chicken here? >> i think all the businesses are going to stay here. >> do you ka irthat we can't buy a chinese company outright? that's not your -- you can turn their euan into dollarssh that's ul you care about at this time? >> you actually can boy chinese companies, sure you can. more on a joint venture bachls it's opening up more. >> you think it's a fair playing

field? >> it's not as fair as it should be. >> it's not morgan stanley's place to decide whether how to fix the world. >> can i throw in another inactivist, dan lobe, do you differentiate him and you guys are working with sony? >> no one has, none of these advisers have been mentioned for sony. >> you reported it. look. what dan loeb, he used to have a reputation as being an activist who takes very aggressive moves. he hasn't done that in lat four or fivers. i think when he's played a bet on japan, we will see if he is all right on that. i think he's pointed out something with sony. he has basic annally shown the light on how great the franchise is. what he has proposed is you should ipo the subsidiary the intertaint subsidiary to raise capital so that people understand the underlying value, sony said they're going to take

a look at that. >> do you think the japanese companies. >> he takes about the third leg in all of his letters, he says you are the great representation of the third leg in terms of structural reform. do you think japanese companies will be receptive to american overtures? >> well, historically, there has been no activism in japan, a couple small deals. i think he bigally made a bet on an undervalued company. it's a terrific company. i don't think it's the beginning of a wave in japan. >> and deal making broadly, kind of lousy? >> it's lousy. >> it's too expensive already? >> it's too expensive. >> well, this is the first time i have been doing this 230r 4ers. i have been doing this for a long time. >> it's the first guy. >> it's the first time that we've had and up market mnas have been down t.mna market has tracked the equity market forever. it's always 4 to 6% of the

overall market cap. this is the first time i can't account for it. the market loves deals. look at gannett, they announced a deal last week, stock went up. i would say there is a lot of deals in the billion to $3 billion range. a lot of sales going on now t. private equity guys get it. this is a great time to sell companies, so they're selling everything they can sell. >> rob kindler, thank you for coming in. we have data we will get you. you have to come in longer. >> love to. thanks. when we come back, we have bri breaking economic numbers. we will be back right after this. we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform.

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♪ welcome back to "squawk box," everyone. we are less than a minute away from cpi and the housing start numbers for may. ahead of those number, the u.s. equity features have been up, rebounding from i guess up 30 earlier for the dow the dow futures are indicated by almost 50 points above fair value. this comes after gains yesterday, yesterday the market at the end of the day was up 109 even though it had been up higher earlier in the session.

rick santelli is standing by at the cme in chicago. also we have xhis stu hoffman who is joining us from pittsburgh this morning. the housing starts numbers, we are locking for a big gain, rick, go ahead, take it away for us. >> all right. cpi for the month up .1, energy up .2, close expectations no revisions last month. housing starts, up, 14,000. a bit disappointing. when it's benchmarked against the 856 slightly revised last month, it is a positive number up what close to 7%. permits 974,000. of course, that's seasonally adjusted and annualize. is as close to expectations as you get with these numbers. last month it was also a very subtle revision, but remained above 1 million.

so, really, there is very few surprises on the day. it's not about surprises. it's not really about expectations. that's for all the short-term guys. for many viewers, the notion that housing continues to be a positive versus a negative at the least is a good thing and there's probably actually more positives, the closer you look. the real issue is, historic standards still dictate there is a long way. i'm sure it will kick in the gdp. interest rates, we're back up towards the 220 area t. current high yield closes 223. to put nit perspective, pretty much every technician on this floor thinks should we have a significant close above that level? 240 is the next level. back to you. >> steve, you got a cannes to look deeper at any of these numbers. anything jmp out at you? >> you know, inflation is not a

problem t. housing number starts number has lagged a little bit. i think it's the second month in a row. you had this relatively ro bust. >> a lot of rain. >> i guess it could be weather-related. i think worry at an interesting point right now, dpimp what's happened to mortgage rates about the effect on housing. i know the federallily wants housing to be good. >> because of the jobs impact. >> because of jobs. it's one of the few places in the economy the fed can have a directesque. it's a sensitive sector, autos and housing being the loaders. they see it responding to interest rates. they feel liker that monetary policy. >> if they don't see it to work, do they wonder infity doesn't have the same punch that it used to have in. >> i think their concern has to be, what is the right mortgage rate that keeps the housing market robust. i don't think they know. >> i think one of the thing we have to do is bring this about.

how does it affect main street? how does it affect individuals? i think all of what we are looking at is a relatively tepid recovery. we talk about 200,000 jobs created as if they were out of control, moving towards inflationary. in fact, we ought to be in the 3 to 400,000 job creation mode. this is an economy because of all the work that companies have done in order to drive profitability has enormous excess capacity in it that isn't being utilized. i think we have more to go in terms of what the fed can do to stimulate or offset the fiscal drags on the economy. >> you think they should be doing more or qe enfinty is working? >> i think qe enfity, it's not what i would come up with. it's important in maintaining the psychology of the markets. goes and affects the average person. housing is important because that's the biggest asset most people have. what we need is for individuals to go out and buy things. within they boy things,

companies will then make things. >> make things. >> hire people and make things. >> if they make a lot of things, we should hire more people to make more things. so that's the real key here. >> feelings, snoets it's all about feelings ♪ >> stu, your thoughts on what we were just talking about. >> yeah, i agree, housing is, you know, where the consumer lives, figuretively, literally. there was a little disappointment on the starts number. remember just yesterday, we learned the june home builder survey jumped to a record high. so these builders are not seeing such good numbers saying such food things if the numbers aren't going to be good this summer. the cpi is a picture perfect number. .1 on the total t. core 1.7 from a year ago. this just reenforces the fed's view that there is inflation on the horizon and a very good number. indown, you will actually get a

big jump if gas prices because they didn't fall after memorial day. this all speaks as to what you were saying and listening bernanke, i do agree will probably want to start tapering in the fourth quarter. if by then it's clear he won't be reappointed, but it will be a slow dole back. we think maybe a third is cut back in october. by this time next year, qe will probably be over. i agree with what was just said the economy is still healing. it's still a $200,000 jobs a month or a little over, a little under. we probably won't even get that in june. >> stu. >> still healing. >> stu, can you talk about inplation a little bit. the fed survey, thinking it's not at a point where the fed will act based on what's happening to inflation. is inflation low because of economic weak inside or is it just sort of a sick lick am decline in commodities? what's going on right here? >> yeah, i was a part of that

survey. >> i thanks for participating. >> always do. i think it's a fundamental problem. it's not due to commodity prices. if anything, oil has risen over the last several months. maybe the change in regime in iran could change and productive telecom back him productivity, companies are still scaling back. worker protectivity, capacity is still at excess. this is a fundamental, i wouldn't call it weakness in inflation, but it's below the fed's target, it's not due to commodity provisions. >> do they do something, is it something that fluns policy right here? >> oh, absolutely. i think it's why they will decide, it's meaning to keep qe3 or infity whatever you want to calm it at 85 billion billion a month. i actually think we will see higher inflation over the summer months. one more quarter of better job growth is when they start to dial back.

whether it's 85 billion or 60 billion, it's the feds spoerth the economy and that positive markets psychology. i think that's necessary and appropriate. >> we have to go. we have known a long time, the liquidity track of japan is his biggest fear. >> japan's following bernanke, not the other way around. >> stu, rick, thank you very much, scott sperling is with us, he's our guest host the rest of the hour. >> do you have a picture of this guy, smith? >> i seen a pick. >> why didn't they include one? i want to see whether he looks like. >> i was wondering, too. >> a longer story. >> inquiring miensd want -- minds want to know. i want to sue you, people don't know know what we're talking about. >> you have a column. i'm selling ill, promoting it.

i'm not going to try any more if you will cut me off. >> we will continue our disruptor series, an app that helps fill unoccupied rooms by offering last minute booking discounts. there is some music. you will quite at some point. [ music playing ] 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.

welcome back to "squawk box," everyone. listen up, fewer person adults are smoking according to a new government report. only about 18 participants in a 2012 national health survey said they were heavy smokers. it had steadied around 20 to 21% for seven years before dif dipping to 19%. this last statistic is 18%. is good news. the cdc is still analyzing the findings and say they haven't yet concluded why the rate has dropped. joe. >> well the stigma is not exactly very positive. when i see someone smoking, i think what are you thinking? and you smell. >> and you smell, you tell them that. >> i do tell them. even a half hour, can i still tell. >> i am with you. i am sensitive to it ever sense they banned it in restaurants and places, i never realized how

you can smell it from way across the room. the other thing is employers are now making people may more for their health care if they smoke. i wopd fer they're telling the truth. >> they still smoke in france. >> and china. >> coming up, our disruptor series continues with a last minute app for travelers or pro cast nators or -- owe pro craft nators or anyone kicked out of the house by their wife. i don't know if you can book by the hour. we'll ask the ceo when he jones us next. .

>> we're continuing our cnbc disruptor series. hoteltonight the company works with hotels to fill unoccupied rooms with impulse travelers. and procrastinators joining us from san francisco is hotel tonight ceo sam shampgs shanks. in the past, i know you can, there is a way the excess inventory found its way online five years ago and you could find things like that. how is your company different? what is different than the companies that already established that do this? >> well the main difference of hoteltonight is we were built from the grounds up for mobile. that's the genesis of the company as i said.

what if you built a company from mobile working on demand hotels? what would it look like? it would be different than the at opens were and website itself done particularly do last minute nearly as well as we do. >> there is a lot of reasons. your flight gets canceled or something? i need a hotel? whether are the reasons most people use? >> those are some of the reasons where you might need a hotel tonight. but what we really focus on is inspiring people to be more spontaneous and create a primary demand for the industry and hotels. these are people that would have stayed home or returned home. they have a tool to get a great hotel at a great phenomenal last minute rate. three taps and a swipe. we are creating demand for hotels getting people into hotels that would have otherwise stayed home. >> sam, if i was going to san francisco, for example, tomorrow, would i be better off

not booking inle the last minute, would i get a better rate? could i get a decent hotel? >> we have great hotels every day at noon local time is when the inventory released. the hotel itself release their inventoryment we choose the best deals from the hotels competing. i am sure you can't always get a deal. in terms of should you do that, it's about your own travel needs and if you want to get a last minute deal, do you want the convenience of last-minute booking? do you not want to pay cancellation fees? >> i'm asking. as joe knows, i'm cheap. if i was going on a trip to san francisco in two weeks from now, i knew i was going, i had the plane tickets, would i be better off literally taking the rick of not getting a hotel room at all. are there days, for example, there are no hotel itself available or hotels with different star rankings or what not are not available. >> we have hotels every day at

noon. at that time superbowl in new orleans, we had the only hotel rooms in town. they were expensive. they sold in 20 minutes. we have rooms across a lot of different price points. we categorize them based on moodsment we have bake hotels, solid hotels, lux and hip hotels. so you will find something for everybody. yeah, we have rooms every day. >> do i know the hotel before i agree to sign up at it? >> like hot wire or priceline, they say it will be a plank hotel? >> absolutely. you know name, where it's located. you know the amenities. you can see the bar. you don't want to book an omake hotel on a service like priceline or hot wire and find out it's much further than expected. right there. >> good for one night. >> it starts for one night. can you book forfive nights in total. >> if it's available. >> at that price. >> if you were coming to new york, you knew you were coming, what would you be doing? >> i'd be using hoteltonight, of

course. >> it's supposed to be on the day of. you are planning a trip in a month from now, when would you book the hotel? >> for me, a lot of my travel varies, it's last minute. a lot of times i have cancellations, i may not even go to new york even though i have plans to be there in a month. so for me, it works well for the type of travel i do. we're not trying to go after the entire market. we're going after that last minute same day booking which is about 15% of the market. we see that growing over time because of services like ours and the convenience of mobile booking, but we're not trying to go after the entire market of travel, just be the best of this specific part of it. >> what percent of your user base is under 30? >> our core market is 25 to 40. so under 30, i'd estimate it's around 25%. >> i can't help but think, i can't help but take it here. bapg you later, right? is that, bank you?

remember that? >> bank with friends. >> bank with friends. so someone says, you know, it's afternoon, they say, hey. >> your merging app? >> synergy, is this used for a for anyone who says, whoa, someone said yes and i need a place s. that the spontaneous people that you are looking for? >> why are you laughing? i knew that you guys would go here. >> come on. you will take money from anyone, and the credit cards are good, aren't they? >> we don't qualify any users, but the hotels are happy with the type of guests that we are sending them. >> and instead of some dive with an hourly rate, go over to, hey, baby, let's go to the ritz-carlton. just thinking. i think. sorry. things happen. things pop into my mind. anyway, now, did not answer that question that well, but it sounds interesting.

you tease it, but if you are thrown out of the house by your wife then you need a -- so we already went there. >> you know, there is a lot of d different use cases. we look at ourselves as the on demand push a button and get shelter. so that is how the world is moving. with hoover, you push a button and get a car, and another one, you will get food, and a lot of apps, but as humans we need food, clothing and shelter, and so we are providing the shelter. >> check out the disruptor 50.cnbc.com. >> he is trying so hard to keep it clean. >> he was. >> and come on, we have an idea. >> they are disrupting more than one business. >> and i didn't know the name of it. it rolled right off of your tongue so to speak, that banging thing? >> banging with friends.

>> it is not real. >> the deal was not real. >> and banging with friends is real, but it has merged with facebook or whatever it was, and april fool's joke. >> we have stocks on the move. >> nobody uses it. [ female announcer ] what if the next big thing, isn't a thing at all? it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here. to accept less and less in the name of style and sophistication. but to us, less isn't more.

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welcome back, everybody. let's get down to the new york stock exchange. jim cramer is joining us, and we have been talking fed-speak all morning long trying to figure out what the market is anticipating and expecting, and here is a question for you, is tapering tightening from the market's perspective? >> absolutely. i think that we had a dry run which shows you that no matter what you might think and the guests have been fabulous on this morning, i have to tell you. no matter, it is going to impact the stocks and the real world earnings are not going to be impacted but the phony world that we deal with, stocks, gets inpacted and we saw the investment trusts and the utilities giving you a clear canary in the coal mine that it is tightening. >> and what are investors supposed to do.

i know that telecom was the worst performing sector yesterday, and do you look at the utilities and the bond-like stocks and steer clear or wait to see what happens? >> no -- no, becky, you have to use strength to peel them off. we saw it, and ole fashioned tech was not hurt that badly and banks did not get hurt that badly, but clear if you are in real estate investment that has bounced, it is not going to work, because the stocks in the equivalents are in the wrong hands, and we have to recognize that the run we saw was a fire drill. this would be the real deal, and those don't work. >> all right. jim, sounds like people need to tune in to hear more advice to figure out how to play this, because the clock is tick. we will see you in a little bit. >> sure. >> all right. thank you, jim. and coming up we will have the ceo of sterling partners and give him the last word when we return. 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.

we replaced people with a machine.r, what?

customers didn't like it. so why do banks do it? hello? hello?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello? ally bank. your money needs an ally. guest host scott sterling of limited partners, and let's -- >> here are the keys to focus on. our economy is the best of the world, and no matter what we are

talking about today, we have better position industry, and low-cost base created because of the energy revolution in the energy, and we have the best legal system going in terms of protecting investors and companies doing business here and around the world. >> great. >> and if we can be freed from some of the regulatory burdens, this economy could take off, and so will the stock market. >> thank you, sir. join us tomorrow. "squawk on the street" begins right now. good morning and welcome the "squawk on the street." i'm david faber with jim cramer and scott right here. carl quintanilla is off this morning, and afterf a 100-point rally, the fed is under the microscope as it begins, you know it, a two-day meeting. the futures are holding onto the gains and consumer prices up one point in may, and housing