a concern that would be exacerbated if conditions tightened further. >> it's thursday, september 19th, 2013, and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. and most on wall street had expected the fade to announce a taper paring back its bond buying program by $10 billion to $15 billion. but not yet said chairman ben bernanke. fomc policymakers tightening a decision specifically in mortgage rates. it blames washington, making note of another congressional showdown on the debt ceiling. >> a government shutdown and perhaps even more so a failure to raise the debt limit could have very serious consequences for the financial markets and

for the economy. and the federal reserve's policy is to do whatever we can to keep the economy on course. >> the fed also downgraded its outlook for the economy. it now expects gdp growth will be in the 2 to 2.3% range for this year. as for the market response to the fed's announcement, well, stocks soared to all-time highs. looks like game on as far as any of these short-term traders are concerned. you saw bond yields retreating. the dow jones industrial average closed at 15,676. the ten-year yield crept down to 2.7%. the dow and the s&p posting their best day since mid-june. all the sectors closed in positive territory. among the biggest winners, the home builders. we talked about how that was an interest rate sensitive group. 2.7% was where it closed yesterday. the futures this morning are sitting like they're going to be higher once again today. dow futures up by about 61 points. s&p up by 7.5.

in europe, the ftse 1 is 00 is up by 1.4%. gains of better than 1% for both the cac and the dax. in asia overnight, you saw major rallies with the nikkei up by 1.8%. the hang seng up by 1.6%. the dollar, after all of twhb obviously, you might expect the dollar to look weaker. if you take a look at where the dollar stands this morning, it's down against the euro at 1.355. he.up against the yen at 98.86. gold up by more than $30. this morning, up by $55. 1,362.90. i'll prices were up yesterday. as all the commodities ran on some of this news. oil up to $108.73. >> we're going to have much more on the fed in just a moment. but first, we have a quick short roundup of the corporate headlines this morning. the biggest one probably being the announcement that a jpmorgan

london whale settlement could come as soon as this morning. the settlement is expected to be for at least $700 million. some reporting that number could be -- >> 900 million? >> probably closer to $900 million. we should note that prosecutors still investigating jpmorgan for potential criminal wrongdoing over some of the supervisory issues. in other news, chrysler is late in the stages of preparing for its ipo documents. and some good news for jpmorgan, kate kelly reporting that they may be expected to underwrite that offering but will not likely be the only bank on the ipo. this one, mark herd is going to have a tur time. oracle gives a cautious outlook for its demand and software over the internet sales force and the like. it's the third consecutive time that oracle has missed its earnings estimates. and there's been a lot of

turmoil over in the sales forces at oracle and questions about some of the reorganizations that have taken place under mark hart. of course, mark coming from hp, you remember larry ellison brought him over and said despite all the problems over there, we want you to come here and -- >> we need some time here to talk about the fed. >> we can talk about it right now. i thought we were going to. >> i i had get to -- what was that first? i don't know. anyway, one thing i learned is that no one has ever gone broke overestimating the dovishness of ben bernanke. number two, has he got -- i think he has a straddle on or a spread where he's long s&ps now and he's short s&ps for 2014. >> no, i don't think so. i think they were -- i think they were spooked by congress. they didn't want to do it this -- >> i think they were spooked by this guy right here yesterday from wells fargo who said mortgage originations down 3%.

but i think that's short sided because we know why, because of the -- how quickly the move -- >> and they go out. >> housing will come back. >> as you wind down the strain, you're going to see rates climb. you can't control it and get out of trade at the same time. >> you know what else spooked them? unemployment. and the 63% participation rate. they know how crappy the job market is right now. >> but you know what? if that's the case, what i was stunned by, if sh this is truly a case of the economy doesn't look strong enough right now, it's not going to look strong next month and the month after that. >> this should be bad news and bad news should be bad news. >> ben bernanke got the test yesterday at the press conference when he was asked, you kind of telegraphed this to the market and now you're backing down. he said no, i never laid out a date for this. >> all the transparency. >> all the fed watchers, all the people we listen to, if the

market gets it wrong, the fed is supposed to quietly guide the watchers so we know we've misinterpreted. >> but you know how the companies do it. they lowered expectations and the stocks were up. that's why he's long s&ps right now. did you see their forecast? this was in the journal, how their forecasts for gdp have changed. and the journal points out, either your stupid policy is not working, so you try to do more of it within but that doesn't look -- that's where they were initially. in 2011, they were at 3.5% to 3 4% for gdp growth. now my biggest fear is here again. we have yellen coming on. and maybe they've passed the baton to yellen and she's more dovish. but we're in roach motel. >> that's what bothered me completely. if you can't make the case for it now, you're not going to be able to make the case for it. >> so lloyd blankfein said

yesterday, the most important thing any fed chairman can do is the forward guidance, right? >> right. >> this whole game, it's now communication. that's all it is. >> except the market doesn't trust because you've broken the trust. >> he had -- it had to be 95%. we were -- >> except steve liesman will probably tell you, if i remember, that the survey came out. 48% said nothing was going to happen. >> was it 48%? >> no, 48% said something was going to happen. so 52%, the majority of them got it right. and that's what i was pushing back at steve yesterday like, wait a second, if i'm listening to your survey -- >> i looked at that wrong. >> if i'm looking at your survey, i think they're not tapering. and he said, yeah, yeah, but the compilation -- >> it's unbelievable to us. >> the survey was right. the rest of us didn't look at it correctly. >> steve is a flip-flopper. he's worse that carrie. he said you shouldn't change. >> but that's what i mean. the fed wasn't offering enough

guidance to change the minds of the people who we generally listen to. and if you look at the communication, and that's been bernanke's strong suit at this point -- >> i think it's going to make it much harder for yellen. >> and the two things that el-erian has said, he said number one, so it's a sugar high. the stock market is on a sugar high. and the next one is, it's a wedge. >> can you do the whole show that way? >> i don't think i could. but there's a wedge between the economic and the reality. and the fed has inserted this wedge. now i see it. it's a big huge salt lick of sugar in between the markets and -- >> i think it's a bump. i think they're putting it back underneath it where you continue to jack up the expectations. does bernanke really think the wealth effect -- it just helps beam like you that have assets and that make 50 times the average employee. >> thank you. >> and it only helps rich people.

>> you know, we should do a disclosure chart before every commercial break about our pay versus -- >> your pay. i think it's stupid. i'm not for it. you're the one that's for it. we're doing yours. >> actually under our name. we should >> have that. it will say joe kernen and -- >> for someone who wants transparency, i said you make 50 times the average employee and you didn't dispute that. >> that's probably accurate, but then you probably make a hundred times the average employee, as well. >> i don't want to do it. you want to be transparent. i have a board, how shifting to television has more than tripled his disparity between the average new family. time for the global markets report. another one percenter and it's hardered to do that in europe. ross westgate. it's easier to be in the 1%, it's harder to get there with all the structural problems. ross westgate joins us now.

you're welcome for that green behind you. we all are beholden to helicopter ben. god, were they wrong about that thinking he was a helicopter man? >> well, clearly, they weren't wrong in thinking that he was. and one interesting comment already out there, therein been a huge emerging market reaction. we had the finance minister come out and said this decision by the fed not to taper means that they're going to put 50 basis points of growth back on the indian economy over the next six months. they've already worked it. fed not tapering, we've got stronger growth and we've seen the rupee rally stronger, as well. emerging markets have seen the biggest reaction. green on the board. we're not quite at the session high. we've come back. there was that initial bit of euphoria at the hope. 8-1, advancers outpacing decliners. it was 9-1 when we opened this

morning. moving higher. the xetra dax is up high this morning. about 1% or more on average across the board for european equities. the xetra dax up about 1% on this record high level, the cac 40 up 1% aas well as the ftse mib. only two sectors at the moment, telecom and media. there were none at the open this morning. stronger sectors, basic resources, 2.6% is where we stand. the dollar index has been down to seven-month lows this morning. that has boosted on plenty of commodities across the board today and the miners doing fairly well across the board that, as well. i'll shoal you where we stand in terms of bond yields, as well. treasury, 2.71%. spanish yields are low. we had a good auction today. auction yields coming down on a three year to 2.86%. yields in spain still coming

down. gilt yields are lower, as well. we did have the first bit of disappointing data out. the first time we've seen weaker data out of the uk. up to around eight-month highs. and it's been emerging markets, as well. i said earlier that some stellar gains have been so much selling into emerging markets. this decisions meant everybody instead of going selling was saying mine. .plenty of people saying, look, it's gone all the way to christmas. back to you. >> suave. liesman just walked in. and he went -- >> we were with you, steve. i changed my mind every time you did. i can't believe we -- >> steech, mr. oh, the fed is more open, more transparent. that's not good if you're lying, is it? we're transparent but we're not going to do anything we

telegraph? oh, look at you. you're going out in the studio audience? >> this is steve just walking into work. he's got his suitcase here or his -- >> welcome back. >> why don't you stick to that first call? >> this from the two guys who changed my mind. i talked to them in jackson hole and changed my mind originally. i talked to williams and lockhart. >> i said in the past if the public was getting it so wrong, the fed would get something like a liesman to change my mind again. >> i appreciate the trust you put in in me and i'm deeply sorry this turned out this way. i don't know what they gain, though. >> but they lost so much trust. >> and they lost the ground that they had built up where maybe they wanted the ten-year to drop back down. but they already laid the groundwork that -- what, does that mean never now? i like the hamster on the wheel. >> well, i told you, steve, that -- >> i just ate a doughnut.

>> like my grandmother. >> there it is. >> okay. it definitely is sugar. you know, i was thinking about something else, steve. but it's frustrating. oh, is that a good comment? no one ever went broke over overestimating the dovishness of ben bernanke. >> i love that comment. let's say he does fought do additional. what does he gain? he has the market primed to do it now. so he gets a month and two basis points. but maybe it's never now. maybe you're right. >> but maybe we get volatility back in because maybe we don't know what's happening. >> the only positive about it is maybe bernanke says -- >> we have to go? >> real quick. >> is that knot now bernanke has the market saying -- >> are your forecasts in there? >> i'll look at that in a second. but here is the thing. rates don't rise until i say so. maybe he stopped this preemption

a little bit. >> but isn't that kind of tempting? >> i'll go -- >> and i also wonder if it attempts to vigilante. >> who? >> vigilante. >> let's talk to richard steinberg. >> chief investment officer of steinberg global asset management and brian railing, chief of fixed income strategist at wells fargo advisers. you know, rich, or brian, i blame you. i blame wells fargo because we had your cfo on yesterday talking about mortgages. you guys know and you're good about it. >> but if we weren't right, why

didn't they tell us weeks ago? >> if you see the ten-year back up to 160 from 3%, you can't tell that you said something that made people think you were going to taper? you didn't know that people were expecting you to taper? >> of course he knew, which is a bit perplexing because he's definitely losing credibility in the market and that's going to make it harder the next time he wants to talk a position. >> rich manages money. and i -- for a brief moment yesterday being in a few mutual funds and stuff, i was thinking, i can live with this, i guess. so, rich, all your clients made money yesterday. but is it a sugar high? is it short lived? i felt dirty after i looked at how it happened. i felt like i needed to shower with the way i'm making money. >> yeah. i think to some extent, bernanke had to wrestle control back from bond investors who pushed rates up too high. but to your point, joe, investors have to think about where their comfort zone is now with equity portfolios.

as i was driving here today, valuition aes made me start to think we were getting into that pocket. >> it doesn't seem like the market should do great when you downgrade the market gdp forecast. a lot of people yesterday ascribed it to inflation. if you downgrade your inflation forecast, why not keep it on? what's the downside of not doing it rye now with inflation so tame and the economy questionable, what have you got to lose by keeping it going? and i can sort of see that. but it's sad that our economy seems to be running on 85 billion a month. it's like gasoline for the economy, run you know? >> i do think there's one good

part to this. because it's humbling the people that manage money in both fixed income and equities. and we've made a decision that, okay, at every meeting, there could be something that happens and i think bernanke on his way out is basically saying i'm the sheriff in town and you guys are going to have to wait to see when we make decisions. so i think we also have to take off the table that a fed decision between now and the end of the year could come between a meeting. >> then we have more volatility because we're waiting for a big surprise. >> didn't they say mid '14 we'll be out? we're not starting out, but we'll start soon and we'll be out by mid '14? then they can't do ten, they'll have to do 50 then. >> we're kicking the can down the road in syria, we're kicking the can down the road in washington and we're going to now kick the can down the road

with the fed. i think it's a matter of when, not if. >> that was a bigger question, do they effectively elongate or extend when they think they're out? is the next announcement not that we're going to start tapering, is it now forget about 2014, we're into 2015 now. >> we'll have a new sheriff in town that -- what do you think, ryan? >>. >> there's no way they're out by mid '14 if they're not starting until next year. that's what you see the market adjusting to. this is pushed out down the road and changes the calculus a little bit. >> and you didn't have to look further than gold. almost $90 in two days. richard and brian, thanks. we'll look -- i don't know. rates went down, that's good. the market went up, that's good. what are we complaining about?

>> it can't last forever. that's the problem. we're going to join john harwood in washington. we're talking about the sheriff in town. who is going to be the next sheriff? there's ann a lot of questions about president obama's attempts to name the new fed chairman. what's the latest? you guys are getting to a little washington level uncertainty, huh? >> we're getting used to punishable officials who lie straight in our face and we're surprised when -- >> or maybe you weren't listening to him right. >> well, then the gold market wasn't, the bond market wasn't, the stock market wasn't. they at the set us up for a taper yesterday, john. but maybe there's a method to their madness. they got 150 points from continuing a policy that they have in, they got new highs and interest rates coming in. it worked because so many people were set up on the wrong side. but you think we were all just hearing the wrong thing, john? >> oh, i don't know.

i was teasing. i'll leave it to liesman to -- >> you are teasing. >> in liesman i trust and i figure if he's hearing it, that's what they intended to communicate. but, look, from what i can understands, you know, bettrnan and some are saying you didn't listen tt nuance. >> we were still under the impression it was going pretty well. >> data driven. >> john, when i wonder what the administration thinks, i listen to you. you've been telling us that yellen is likely going to be the next fed chair chief. >> he was telling us that summers was going to be next. >> no, but if the fed looks at the markets and thinks we're somehow misinterrupting it, they would somehow back pedal to

liesman or some other trusted people. >> that's a great point, and on that, i think the administration is tired of the uncertainty around the fed nomination, which they've mishandled. therefore, they are trying to steer us now towards more definitively and steer the hill towards the idea that it will be yellen. a whoil white house official told me yesterday she's the leading candidate. there are inquiries being made on the hill about procedure and when this could get going. my understanding is that not this week, not next week, but could come very soon after that. i think the odds of a surprise, a bernanke level surprise with somebody coming out from left field i think are pretty low right now. i i saw you say that yesterday. even maureen dowl took my side yesterday on that speech. i almost tweeted yesterday, wow, stop the presses. the vice chairman of the fed is now a leading candidate and she's a woman and she should

have always been a -- >> shocker. >> yeah. i almost put that, stop the presses. and we didn't really introduce you properly today. you know what day it is, right? >> no. what day is it? >> well, we should have introduced you as john haarrr-wood. it's national talk like a parrot day. >> it's national talk bike a pirate day? >> yes. and we celebrate it every year. >> did the pirates win last night? >> i don't know about those pirates. we have to root against them. >> we helped out your reds last night by losing. >> did you? good. i think they got the wild card spot right now. i'm trying to think of a quick -- no, i can't think of any rs there. they've got music prepared. our producers, once a year, it's new to people that weren't watching last year. >> is becky showing off her peg

leg on set? >> people don't know that. >> that's a secret. >> that's a secret. some men -- some men are into that, apparently, i guess. >> captain hook. >> does anybody consider johnny depp to be a real pirate? >> captain hook. >> supposedly they're having trouble doing the next one because lone ranger was such a -- >> such a failure. >> but you know what it would be rated? arrr. >> very good. still to come, "squawk box" is powering gas to react to the fed and the markets. we have a couple pirates ourselves. among the newsmakers, jimmy dunn, stanley druggenmiller and merrill wittmer. now new york city mayor bob

steel all will be with us this morning.

welcome back, everybody. right now, it's time for the executive edge. this is our daily focus. facebook ceo mark zuckerberg says revelations about internet surveillance hurts users in internet companies. he argued knowing more about the programs would help relieve some of the pun's concerns. >> sometimes they ask for stuff that's overly broad.

we push back, we take this stuff really seriously. we view it as our job to protect all the team that use facebook and their information and it's the government's job to protect us all in terms of the broader sense in terms of safety and protect our rights. there's a natural kind of balance there. >> guys, i think one of the other things he said was, don't worry, we only spy on people who are not americans. zuckerberg said, yeah, thanks a lot. we're only trying to build up a platform around the globe. >> gee, sorry mark that we're hurting your efforts to expand. let's try and prevent a terrorist attack. far be it from us to -- >> the other flip side of this is he can only say so much. he's in a tough place because he wants to tell everybody that facebook is a good company and is obviously trying to protect your rights. at the same time -- >> i think he also wants to say -- >> i've gotten the sense from our silicone valley executives that, look, some of what was

happening is not as bad as the media has made it sound. i think they would like to see things disclosed because they feel the public would feel much more secure about it if they knew what was actually happening. >> it harkens back to marissa mayer and her comments that it would be treason. a lot of people took issue with that. it was subvert the actions of the united states to go to jail or be treason. they said that was overstating it. but these people are well aware of what cooperation means and they look like they're conflicted. >> but if you're a terrorist today, and we've talked to anyone in deposit, preem who used to go on facebook -- if you went on facebook before, if you were communicating by gmail before, you're not doing it any more. and that makes everybody's job that much harder to keep it safe. >> you mean you're not putting bomb making stuff on facebook any more. >> correct. >> like how-tos and a bunch of -- >> that's what we keep hearing over and over again. >> okay. i'm ready for this, i guess.

>> carl icahn. >> this is a great op-ed that carl icahn had today in the "wall street journal." the activist investor using his recent feud of what he calls a dysfunctional system of corporate governance. he writes in part what baffles me is that it it doesn't apply to shareholder cooperation. shareholders can vote, but boards can just ignore them under the business judgment rule backed by state lawes and courts. >> i am so baffled by what the right answer is here. there's part of me that believes the democracy even in the board room makes sense. and then there's part of me that looks at what he's done and i say to myself, this is not -- this can't be the right answer. because it's so -- sometimes can be so short-term. >> but that famous expression, where you sit depends on where you stand. and he's made a fortune because boards need -- you know, he's

sort of talking his book again. >> but did you see his returns? it's back in 2,000 up over a thousand percent -- >> i don't know if it's all because of entrenched boards. he is pretty savvy. and there's been times where people have said there's some luck involved. >> but he is now really flying the flag big time. >> a pirate flag. >> a pirate flag. but he is a pirate in his own way. but no, he's flying the flag that he is now, you know, the pure genuine trying to help the everyday man in a very different way. i read it with one eyebrow above my fair line, so that's -- >> that's gross. let's see you do that. >> i can -- no, i actually can't. can you lick your eyebrow? no one can do that. i can't even get -- some people can get their nose. >> can you curl your tongue? >> i can do that. but i can't tie a cherry.

>> can you move your ears? >> barely. >> when we come back, greg ip's take on the central bank's announcement. but first, let's take a look at yesterday's winners and losers. stay a look at the stock market. we went out and asked people a simple question:

how old is the oldest person you've known? we gave people a sticker and had them show us.

we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed much is the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ i don't recall stating that we would do anything in particular in this meeting. wa i said we would do is the

ride thing for the economy. >> joining us now is greg ip. greg, what happened? how did the market get this so wrong? >> you know, as i think about it, becky, it comes down to the vacuum of information over the last few months. the last time we heard anybody from the federal reserve board address the issue of the economy was two months ago when the chairman testified to congress. two months is a long time to go without any guidance from the top folks at the fed at a time of extraordinary flux in the economy and their policy. and i think, you know, a month ago, there was still a pretty big split on the street if you look at steve liesman's survey about going in september versus october versus december. everybody converged on the september number and it almost became this echo chamber where in the absence of information pushing out in the other direction, everybody agreed to agree on september. the truth is, better unanimousdy never did promise anything in september. so i don't think we were misled

in any way. >> but here is my question. if he says the economy is just not ready yet, what are the odds the economy is going to be different a month from now or two months from now? is this really about the economy and the unemployment rate or is this about what's happening in washington right now and the showdown over whether or not we're going to fund the government or deal with any of these battles that are on hand? >> well, it's about three things. i think number one, they would like to see more information that suggested the decline of the unemployment rate is backed up by other information that suggests the economy is nearing takeoff. number two, they would like clarity on the fiscal situation. they would like to get past the end of september. and most important, i think they were very worried about how much bond rates had shot up in the last few months. that was probably the do you know main reason they downgraded their forecast as much as they did. but all that said, it's a little bit confusing that although bernanke didn't exactly disavow the guidance he gave us in june, he certainly didn't reaffirm it.

so we don't know what their game plan is for beginning much ler less taperieneding tapering. >> we've heard from so many different, you know, fed players weighing in over the past two months, there's a reasonable bond yields went up because they were signaling this was going to happen. look where gold was. and it was breaking down yesterday, too. look what happened to the rupee. you think people in india are just -- there is, you know, as clueless as we are about what the actual intentions are? the whole world was prepared for this. that was appear accident? that was all an echo chamber? >> well, this is certainly not the first time in the years i've been covering this fed that the market has been wrong footed. they always tell us they're data dependent. and you know the famous line, when the facts change, i change my mind. something happened in the last few weeks to make them change their mind. >> i won't believe them next time. i don't think we can figure out anything now, greg. no signal will be clear enough from here on out.

if this is transparency, then i want to go back to greenspan. >> well, greenspan tried this stuff, as well, remember? the extraordinary period and so forth. >> when you tell me you're going to do it and then you don't -- go ahead. >> the only thing i was going to say about all this in terms of the communication policy, and we were talking yesterday about forward guidance. how was the market to even accept new forward guysance at all any more? >> well, because i think the bottom line -- and again, i've seen this time and again, is that the market needs information and they will always believe that whatever they get from the fed, tentative as it is, and subject to re vision as it is is better than having nothing. and honestly, there's nothing i heard from him yesterday that was out of bounds with the condition amount he had laid down. what i want to see, what i really want to see is the minutes in three weeks time to get a better feel for what were the factors driving this decision? >> one thing we know is their gdp forecasts were so wrong and that implies that they thought

qe2 and qe3 rm going to work. we've going to go though, greg. i'm sorry. still to come, we'll get -- we're going to talk to druckenmiller. and jimmy dunn, who must be -- have a new pr person. we saw the "new york times" piece over the weekend. >> i did, as well. >> now he's going to be here for two hours, which is anniversary. >> anniversary. >> and they're going to stay private forever because he loves it. >> also berkshire hathway board member merrill wittmer sits down for a rare interview. her best ideas at 8:00 eastern. (vo) you are a business pro.

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but a new disrupter has hit the streets and it's cutting out the middleman. christian shavo, ceo and co-founder of tabloo. wow, i have to get your name right and then your company right, christian. i have no idea how this works. pretend i'm -- pretend i'm a 12-year-old. how does it work? the company is tabloo software. and we make software products that people with any skill level can use to point to data of any size and make it useful. they can visualize it, map it, tell stories we tell. it's about making data useful for people. >> so who would be interested in this? i can't think of anything that wouldn't be that needs to use big data. >> yeah, really, in a sense that uses spreadsheets or a debate can use tableau's products. imagine you had a software product that you could double click and open, point it to a spreadsheet or a big data

repository of some kind and instantly answer questions you have. it's a visual drag and drol drop environment for asking and answering questions as fast as you can think about it. >> i think i could have figured out to do this a couple of years ago. how can you take business away from people that are already in this business? >> well, most companies, when they want to harness the power of their data, you know, companies and governments and universities, if they want to tap into all that data that people are talking about and make it useful, they have tended to rely on something called a traditional business intelligence platform. and these technologies are sold by the big goliaths of technology that you referred to. the problem is these technologies, almost without exception, are really complicated, development intensive, slow moving, expensive, and worse, they're really in the hands of a small priesthood of people who even understand them. so what tableau is bringing to the world is gnaw generation of

for everyone products that help them harness the power of data. >> maybe you could talk to the nsa, too. they're trying to figure out a lot of that stuff. have you spoken to them yet? they have a lot of money. >> we don't comment on the nsa. >> i was kidding. never mind. i want to take that as a yes. all right, christian, thank you very much. don't tell them anything about andrew and any of those -- i mean, the personal habits have to stay personal as far as i'm -- mark zuckerberg even thinks that, right? thanks, christian. see you later. the it's early out there. >> it is. still to come, we have two wall street legends. then tomorrow, a conversation you won't want to miss. warn buffette and bank of america ceo brian moynihan. we'll be talking to them about fed, investments and tomorrow starting at 6:00 eastern. ♪ [ male announcer ] 1.21 gigawatts. today, that's easy. ge is revolutionizing power.

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welcome back to "squawk box," from the minute apple unveiled the new iphones last week, dodo case has been busy shipping out the products. the all-american made company uses book binding techniques to outfit the hottest tech gadgets. and even president obama is said to be a big fan of the sophisticated accessory. i should say i am too. though, i should also say i literally may have left my ipad in a dodo case on the subway in new york city because i can't

find it anywhere. the co-founder and ceo of dodo case. >> in a subway? >> in the subway. >> you writing a story for the "new york times"? >> this is what a dodo case looks like. i use a gray one. >> like the underwear thing? >> these are great. they look like a journal. >> and you can show this one off too. what i want to talk about, though, go a little higher so people can see exactly what it is. it looks like a book. >> you see the -- >> it's like a book. what i want to understand, though, there's a whole world of people who make accessories for these devices. and you're a great window of to who is winning this game, whether it's apple, android or other devices. when do you find out what the next iphone or ipad is going to look like? >> we don't know anything more than you guys. >> does anybody know anything more? >> as far as i can tell, no. and that's one of the things, the beauty of being an american manufacturer, we've got

everything under one roof in san francisco. so when we hear the rumors, we start preparing all of our materials and we have our team ready to go from day one. >> and is that the case for everybody in this -- in your -- there's a huge market that's building all sorts of cases for these devices. >> yeah. i think there's a few exceptions. i think there's a few large players. >> and you think apple actually gives them a little bit of a nod. >> a little bit of the nod, yeah. >> this is a silly question, do you think they're ever going to make some devices that don't need cases? i know that's probably a bad thing for your business. i always want to own the thing and not feel like if i dropped it, it'll break. >> i think when you get into wearables and watches, you'll see a little bit different type of act sacessory market emerge. things like stands and bedside stands and desk stands emerge for those devices that are slightly different than what we see for phones and tablets. >> your business started with the iphone and the ipad, ipad in particular and you created something totally different than what most cases look like.

now you're doing stuff for android, kindle, others. how does the balance -- what's the shift here? what are you seeing in terms of how the market's changing. >> we're seeing a lot of uptick from the nexus 7. it's a great product, a lot of fun to work with. that's definitely the second best tablet in the market as far as our sales would suggest. >> and do you think that -- are you someone who says apple is here to stay and is doing better than ever? or do you really see a shift in terms of how the market's going to go when people say maybe apple's best days are behind it. >> well, i wouldn't go -- >> you don't want to go that far. >> yeah. i love apple, i think they've got a lot of great products in front of them. the tablet market and phone market is starting to mature. that said, guys like google are making great products now with the nexus 7. >> is there something different about the culture. an apple customer i could see really liking this because of what it looks like and the feel and all -- a google customer may

be different. >> i think historically speaking you're absolutely correct. but it's shifting. i don't think there's a stigma attached with using an android device anymore. they're really on par and it's just a personal choice. >> i bought a dodo charmed. did they try to sue you for taking that name? >> what's a dodo charm. >> dodo stores in every mall where you buy a little charm they make these charms. >> do you know about the charms? >> i don't. i heard of a bag manufacturer. >> do it, dodo comes up. dodo means if you look at it, it means it's big, unwieldy bird, large, heavy, lived in the past and was unable to fly or stupid or silly person. did you know all those things? >> we did. >> what are you a dodo? >> it's actually rather beautiful because when we started the company, we had this basic notion of protecting the art of book buying from extinction and protecting your

ipad from extinction. so the dodo bird is the most famously referenced extinct animal in the world. >> probably right. >> it was like a natural -- >> very quickly because we have to go, but you started with you and a partner. >> that's right. >> how many people now? >> yeah, 22 people. >> 22 people. how many do you sell a year? >> about 100,000. >> 100,000. >> yeah. >> two guys, great story. >> thanks, everyone. >> really appreciate it. if i find my ipad, i will buy a new case and put it in there. coming up, the day's top story, global stocks soared after the fed announces it's not ready. among our news makers, jimmy dunne and stan druckenmiller. i know what you're thinking...

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a shocker from the fed. >> evaluating whether a modest reduction in the pace of asset purchases would be appropriate at this meeting, however. the committee concluded that the economic data do not yet provide sufficient confirmation to warrant a reduction. jimmy dunne and one of the hedge fund industry's best, stan druckenmiller. and who will replace ben bernanke. >> you gelling? >> no telling how much i'm gelling. >> i'm gelling like a felon. >> quit yelling. >> yale economics professor robert shiller weighs in on why janet yellen is the right person for the job. and it's talk like a pirate day. >> the path -- >> we're going to celebrate with some special videos. >> it's a pirate's life.

>> and some basic lingo as the second hour of "squawk box" starts right now. ♪ good morning and welcome back to "squawk box" here on cnbc, i'm andrew ross sorkin along with joe kernan and becky quick. >> oh -- you didn't do that? >> i did not do that. >> you would like it. >> always. twice, three times, four times. see how the futures are setting up this morning. we can do the whole in a second. dow opens about 57 points higher after a big up day yesterday. the nasdaq looking like it would open up about 12 points higher right now. we're going to have a lot more on the fed decision, taper talk and market reaction in a minute. but first, let's get you through some of the morning headlines. the big one being that civil

settlement is expected to be announced today between jpmorgan chase and u.s. and uk regulators. the bank is expected to pay at least $700 million to settle the probes related to the london whale case. $6 billion or more. and some say, by the way, that $700 million figure could turn into $900 million. also oracle reported fiscal first quarter profit of 59 cent per share. revenue was shy of estimates, and weaker than expected guidance for the current quarter. also, sony has set a goal of selling 5 million of its play station 4 video game consoles in less than five months. play station 3 sold 5.5 million following its release. microsoft will be out with the new xbox 1. we'll see what that competition looks like. the fed settling markets by choosing not to taper the asset

buying program. and steve liesman is going to join us again. he was at the top when we came in. and he's sitting between stan and jimmy dunne. by sec rules we have to do a ratio of what these two guys make compared to yours, and it is not pretty. >> it's pretty for them. >> it is pretty for them. >> and i'm happy. i've got a good job, i make a decent salary. >> steve -- >> i get to fly -- cover the fed. i'm to the complaining. >> you have to do a scientific notation to get the ratio. >> you thought of that this morning. >> no, when i saw you sitting between these two guys -- >> scientific notation. >> i think it's cool that you get to talk before these two. >> i'm retired living on a pension. >> oh. >> and you're practicing your golf game trying to get down to, you know, to break 90. >> yeah, just trying to hang with the big fellas. >> steve -- >> yeah. >> have you thought about it

since? >> i have. >> even more? >> let me report what i know. >> transparency's no good if you're lying. >> what the "wall street journal" said here. you told me to read this story. >> taper trader. >> taper trader. >> tell us one thing and do the other. >> for him, i've got to put my glasses on. suggests a large failure of nerves that undermines the credibility of the fed -- >> i won't believe. >> here's why bernanke told us the fed decided not to reduce the purchase of assets to stimulate the economy. they all make sense, but what's left unclear if the conditions could be right for the fed to begin stepping out of the market here. so one would say lack of confidence of growth and jobs. the economic data just came off a little bit in the last couple of -- month or so. the rise in interest rates caused by his own guidance. the effects of budget cuts,

possible debt ceiling that and/or a government shutdown. but he's not contradicting himself in saying he's told us all these conditions were of concern to the fed. although, he has said he was somewhat pleased. remember this? at the rise in rates for bringing some of the excess out of the economy. now the rate is too high. the question is, what has the fed gained and lost from not tapering? here's what bernanke said about what comes next. >> if the data confirm our basic outlook, if we gain more confidence in that outlook and we believe that the three-part test i mentioned is, indeed, coming to pass, then we could move later this year. we could begin later this year. even if we do that, subsequent steps will be dependent on continued progress in the economy. so we are tied to the data. we don't have a fixed calendar. >> all right. here's what he gets. a near term relief in rates. does that guarantee a selloff? we go through that big up and down we had in may. and is the fed targeting some

unknown rate out there? what rate on the ten-year is good enough for the fed to taper? it does buy time for the fed for the debt ceiling debate to play out. and finally, there's one more thing. he gains control of the rate market a bit, but does he do that at the expense of trust? and the market might be unwilling as it has been in the past to do the fed's bidding. one other thing, guys. what did our fed survey say? so here is the results. september, 48% said it happened. and what you have in the right column is a running total, okay. so october is where you get 3/4 of the market, that's 76% in there. november, another 4%. so 90% of the market thought something would happen by the end of this year. there was a huge plurality in that september there. but maybe a lesson here for us reading the surveys to pay a little bit more attention to where you get over -- >> is it 100 minus 48? was that the people who didn't think it was going to happen? >> yeah. >> 82% -- >> really? >> yeah. >> you don't need scientific -- >> yeah, but i thought maybe

there was a don't know. 20% of the country knows what qe is. >> we got one blank out of 47 responses, we had 46 responses to the question. >> they were right. >> the question is how you read this survey. we were talking about this yesterday, you were making fun of the media -- >> not making fun of it. i just didn't listen in school when they -- >> how did you get it right then? >> come on, you were a microbiologist. >> molecular. >> steve, how did they get so right if everybody here has been so wrong? they haven't been watching us? what happened? >> i mean, look, it was on the fence. my take was twofold. one was that lockhart and williams steered me to thinking they were not going to taper. then i talked to them in jackson hole and sounded to me like they were ready to go. i think these guys are centrists who are a little bit dovish. if they're ready to go, i'm going to follow them down that path. >> i'm trying to figure out -- >> september 6th, the jobs report came out, less than

expected. i don't see tee the market up for this what you get. what do you get? we're going to have two months now of ten bipartiss. >> fed president he was pretty sure about it. he said at this point, it was almost -- >> and i asked him, why do it now? >> should we still listen to other guys? >> don't -- >> other than bernanke. >> on the fed. maybe that's where you went wrong. >> i thought, well, i think it's -- what in the middle of october some time we'll get the minutes. we'll listen to what people say. i've got a couple big interviews coming up next week. >> bernanke? >> no. and i guess we'll talk at 8:30 about his future and how we responded to that question. >> but if you were going, if you know knowing for the past five years, if you'd always gone with he's more dovish than anyone thinks. >> i like. >> you cannot overestimate. no one ever went broke overestimating -- >> if it's right, he didn't talk, we didn't get anything

from dudley. >> yellen was pissed off because of summers, i think. she's not going to say anything. she's sulking. >> that's true. politically she couldn't say anything. >> she's not sulking now. no, i'm kidding. >> i think what we see here, the market was more on the fence. and then because the call is binary, you've got to make a call yes or no. you're on the -- well, yes. >> i can understand the reasons for doing it. it was just odd it was so mistelegraphed, misunderstood. >> well, we'll go back and do it again and we'll try to get it better next time. >> all right, steve. thank you. >> my pleasure. as we mentioned, two special guests this morning to talk about the fed stimulus, the market's next move and much more. jimmy dunne joins us on a very special day for the firm. the firm is celebrating its 25th anniversary. and jimmy, congratulations. >> thank you. delighted to be with you all. >> also joining us is stanley druckenmiller. and you've heard what we think

about this whole thing. what can you tell us about what the fed did yesterday and what you think. >> well, i'll be brief and we'll let stan handle it. i think it says that the bernanke feels the economy is worse than we imagined. i'm shocked that 52% of the people said -- that surprised me. i don't believe that number. but we need an independent, strong, courageous person to come in there. and i don't think we're going to get it in janet yellen. i think we're going to get more of the same. i think they view the economy's much worse, they must know more than we do. i don't understand it. >> did you think larry summers was that person who was going to be different? >> you know, i think summers -- i think he would have been better. i don't think there's a guy with a disposition or a personality that's less suited for the college life or political life. so he should run a private equity firm. but i mean, i think that was more -- it was more his disposition. i think he would have been

better. but he knows more about this than i do. >> i was surprised to hear steve not mention the term financial conditions. bernanke didn't open with interest rates, opened with financial conditions. and it's my understanding last time i checked the stock markets at an all-time high. and it's up 200%, whatever the amount, it's up over a number of years. and the way the fed calculate financial conditions, i read a piece this morning, it's probably accurate, fits my intuition that financial conditions are higher than they were in june. i don't know whether that's true or not. someone else wrote it. but certainly a stock market at an all-time high would suggest that we don't have a problem with financial conditions. i -- i was surprised -- look, i don't really care about surveys, those people aren't betting with their real money. the big money was betting that they were going to taper. otherwise gold doesn't go up

$50. a dollar doesn't get killed, stocks don't go crazy. i agree with the article this morning. i think they lost their nerve. and i think it's the tragedy here is i think they had a freebie. they had telegraph tapering. it was in the market, they could have started the process, get us off the dope. it wouldn't have cost them anything because it was in the market. and to me, they blew it. and the problem here is when you look at what happened in june, okay, to the financial markets, the first response to this, this is going to make it so much harder for the next chairman to start the process than have we not been through this fiasco the last three or four months. >> to the extent that we -- to the extent that one of the tools in the tool box is communication and this whole transparency argument, do you think it's been a mistake? >> well, i don't believe in transparency. jimmy and i were talking earlier, i was at pittsburgh national bank in 1979 precell

phones, pre-cnbc, all this stuff. i wake up and i'm managing money. i wake up one sunday morning and fed has raised rates 200 basis points on a saturday night. paul volcker, to me the greatest fed chairman in history broke the back of inflation, set up a period of long-term growth, ran the operations the same way. transparency has led to more volatility and more confusion. look at what just happened with this forward guidance stuff. they were trapped by their own dots that you guys have outlined the last few days. they wanted to be transparent on forward guidance, but then, oh, many i god, if you take what their own funds spit out, now what do we do? i'm with volcker, what you do is just stop all the talking and do your job like he used to. >> i know you watch once in a while, but i've been saying over and over. this -- this narrative that we've heard from the fed. well, we're going to slowly start to taper and then

unemployment will be at this point down to seven and then it'll be heading to 6.5. gdp by then will be 3, to 3.5. but we've had a five-year recovery already. there's no way they know the future about whether it's going to go as planned which is going to allow them to exit. and my biggest fear that the economy doesn't cooperate because it hasn't. they're nowhere near where gdp is supposed to be. how do they ever get out? what if it doesn't -- what if we get an uptick in unemployment? what if -- what if they can never justify getting out. do we need $85 billion a month forever? >> look, my concerns with qe are probably more well documented in the press than i would like. i had a little press tour four months ago for other reasons and made some comments about the fed. let me crystallize what my concerns with qe are. first of all, i'd like to say that qe-1 when we had

dysfunctional markets and were facing a meltdown, i thought chairman bernanke, what he did was creative, what he did was courageous. one of the boldest, more effective moves in the history of the fed. and i can't think given the intellectual capacity where he came from, a better man, a better american to do a better job he did with qe-1. let me first of all say i think chairman bernanke has been a great public servant and what he did with qe-1 was phenomenal. having said that, i believe qe is extraordinary measure. and i didn't even agree with qe-2, but as you pointed out, joe, we are five years into a recovery. the stock market has gone up and up and up. we're talking about $85 billion a month. and i don't think the academics that the fed understand the

unintended consequences of the potential exit. yesterday the chairman was asked about whether this would complicate the exit. and incredibly to me, he suggested it wouldn't. can you possibly say what went on in june? where they hinted that maybe if the economy's strong for three months, maybe we might do a little taper. you saw what created, can they possibly think by adding $85 billion a month to their balance sheet and frankly to investors' balance sheet. and i want to make this point, the exit is not going to be harder. and on the two balance sheets, everyone focuses on the fed's balance sheet, $3 trillion and the problems that creates. don't forget, there's another balance sheet. and that's the balance sheet of us in the market that sold them the bonds and were forced into the risk assets they're so desperate to have us in. we have been forced into prices of securities at subsidized

prices. and when those subsidies are removed. whenever that is going to be sometime in the futures, those prices will adjust as shown in june and they will adjust immediately and they will do it on no volume. i had an old boss in pittsburgh, we'd talk stock manipulation. takes hundreds of millions of dollars to prop the stock up. the minute the earnings report comes out, all that money is wasted because it reprices. this wealth effect they've been using to prop this stuff up, once that's removed, you go down on no volume, you reprice and i will bet from beginning to the exit that the wealth effect of qe will have been negative not positive. >> explain this to me then. yesterday, and looks like today, the market will be up. i don't know if it'll end up, but clearly up. should bad news be bad news? and if you think that the fed, this is really bad news and is this just a short-term pop in the next week or two investors -- >> no, it's not a short-term pop. first of all, as a practitioner in markets, i love this stuff.

this is fantastic for every rich person. this is the biggest redistribution of wealth from the middle class to the poor to the rich ever. who owns assets? rich. the billionaires. you think warren buffett hates this stuff? you think i hate this stuff? i had a very good day yesterday. so anybody who thinks that friday we get summers is out. a white house official leaks it's going to be yellen and then we learn 20 minutes later it's going to be yellen without tapering. anybody who thinks financial markets could possibly have adjusted to that equation in 72 hours is crazy. this is very bullish for markets. but is bullish for markets intermediate term. all this stuff i'm talking about is long-term. i think when i was on your show in march, i said we were on the seventh inning in a full-year

bull market. i thought we'd be about done right now, we're going into extra innings, the punch bowl was running out, just about dry and two waiters came in and they're carrying this new punch in. we're going to really party now. >> no, the reality of it, it's very good for guys like stan and to a much lesser degree, someone like me. it's bad for my children, his children, and the guys that caddy for stan and me. that's what it's really bad for. no, the economy is not where they would hoped it would be. and obviously bernanke, i think it's the worst thing long-term for the economy because he's saying this is much worse than we would've thought. because he did have a free pass to do it. he's supposed to be tone deaf to all of this. and that would be good. but, i just can't imagine why they wouldn't do it. just started. their hangover's going to be worse from this. but it's good for us. >> jimmy and stan are going to be with us for -- well, stan's

with us for the rest of the hour, jimmy for the rest of the program. we're going to talk fixed income with jeff rosenberg. bond yields in a tail spin after yesterday's fed move. jim cramer tweeting this morning that the ten-year was a mean mamajamma. was anyone not short when bernanke lowered the boom? wow. here's the ten year right now. it's yielding about -- oh, slipped below 2.7% at 2.699%. tomorrow, another conversation you won't want to miss, warren buffett and brian moynihan. the financial markets, tomorrow starting at 6:00 eastern. we'll be right back.

treasury yields dropping to the lowest level in over a month after the federal reserve said it would maintain the bond purchases at $85 billion a month. jeff rosenberg is blackrock's fixed income chief investment strategist. and when i saw it, i guess it made sense, jeff, but my big fear was that, you know, if it eventually becomes clear that they don't know what they're doing in terms of an exit strategy, some day the vigilantes will be back and they're not back. it all worked like clockwork yesterday. is there anything to be worried about if they actually do lose control? >> well, of course, and it came up in the earlier segment that this is good news in the short

run. but the problem is, what happens the next time that the fed thinks it's about time to exit. the key to yesterday was the conversation around financial market conditions. and the tightening that they're worried about. but a lot of the tightening that was created in may and june was because of their own actions. and so the next time we get to this, the risk is, well, will you have a similar result in financial markets? this was really a missed opportunity by the fed. short-term it's good news, markets love easy money policy. but the next time we get to the economic conditions or the fed viewing that it's time to begin tapering, it's going to be a very difficult time for financial markets. >> was the move in the bonds yesterday, the positive move, was that because the fed really can put rates where they want? or was it because now we know the economy that maybe that's where rates should be based on how crappy the economy is? >> well, the market was expecting something that the fed didn't deliver.

it was a surprise as was just mentioned. you had the janet yellen news come out before that. so there was a lot of surprises pricing into the market. and that's why you had such a big move yesterday. >> if there's no negative consequences and i'm talking about let's say everybody who has bet on inflation has been wrong. it's been the same as anyone who bet on bernanke ever tightening has been wrong. but if inflation really is dead in the water for the next five years even, say that, why not prime the pump? i mean, let the good times roll. what's the downside? >> well, there's no downside from the real economy inflation. you know, 1.2%, that's why they can continue easy money policies. the problem is financial market inflation. we're forgetting what led to the global financial crisis was a prolonged period of excessive monetary policy accommodation. that creates asset inflation but the line between asset inflation

and asset price bubbles is very hard for anyone to discern. and the consequences, of course, of asset price bubbles bursting, well, we know what happens when that happens. those are the longer run consequences. >> jeff, i don't know if you saw earlier, he made the argument that, actually, we had -- that the fed did not telegraph this. and that there really is. the credibility issue is not on the line. do you buy that at all? is anyone in the market going to buy that? >> well, you know, bernanke took the question yesterday and he definitively answered. you know, monetary policy is not run for the benefit of meeting market expectations. and that's a very important point. that being said -- >> market expectations matter because it ultimately -- go ahead. sorry. >> no, you were about to say -- what you were about to say is exactly right. market expectations matter because you want to telegraph what you're going to do so you don't create financial market condition tightening. i.e., you don't create a market selloff when you begin to move. it does matter. >> jeff, thank you very much.

>> thanks, everybody. when we come back, mark zuckerberg hits capitol hill. the co-founder of the case shiller home price index robert shiller will join us. we'll be right back. i love having a free checked bag

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well, welcome back to "squawk box," everyone. in our headlines this morning, obviously it's a busy morning for economic numbers. at 8:30 eastern time, the labor department is out with the weekly look at initial jobless claims. this is an especially interesting one because last week's number was that artificially low 292,000, it was the lowest in years. but that's because two states failed to report all of their numbers because of some computer situations where they were upgrading things. investors will be looking for a revision from last week and we'll see what that number looks like over a four-week trend. also at 10:00 eastern time, we'll be getting existing august home sales. that's expected to retreat slightly from july levels. also at 10:00, the fed index and the index of economic

indicators. and walt disney has pushed the release of the pixar movie "the good dinosaur" into 2015. that means no pixar movies will be released in 2014. the film had been originally planned for next may. and facebook ceo mark zuckerberg visiting capitol hill to lobby members of congress in support of comprehensive overhaul legislation. with leadership on both sides of the aisle and the house and the senate. the issue stalled in the gop led house months after the democratic controlled senate passed a sweeping bill that included more border security and eventual citizenship for millions here illegally. zuckerberg has already helped launch an advocacy organization, fwd.us. one of the most active groups on the issue. we have two special guests with us this morning. we've been talking all kinds of things from what happens with the fed yesterday, how the markets are reacting. jimmy dunne joins us on a very

special day for the firm. sandler o'neil is celebrating the 25th anniversary. also joining is stan druckenmiller. and you're here because jimmy's celebrating the firm's 25th anniversary. describe the relationship between you two and tell us how you know each other. >> first of all, that's absolutely the reason i'm here. and i want to congratulate one of my very best friends in the world on 25 years in business. as you know, i think only 1 out of 10 people that starts a business makes it five years and he's in one of the more volatile businesses out there. and tragically, we all know he had a challenge almost exactly in the middle of that 25 years. and he not only overcame it, the firm has thrived and has gone to the absolute top of a full service financial services investment banking firm. >> we should describe for people who aren't familiar with the background. was at the top of the world trade center. and that's the tragedy that you're talking about.

>> yes, 9/11. jimmy lost his two partners and his mentor and over a third of your employees, jimmy? >> yeah. >> and i was talking to jimmy every day. and i saw the man go through hell. i think you gave 200 eulogies personally and not only did he survive, he brought the firm back to a higher level than it'd ever been. and great with the families. anyway, we met on the golf course and it was one of my more embarrassing moments because jimmy had heard about some of my accomplishments and my courage in the money markets and he was greeted on the first green with a guy going down into the side winder, almost a fetal position on a 3-foot putt because my ego is a little too big from my fear of failure was just dramatic. and i've heard him tell the story in great humor about 12 times. but we met on the golf course and we've been close friends

ever since. >> stan's been a great, great friend and obviously was, you know, he shows up when things are bad. and he shows up every day. but particularly when things are rough. and we've talked every day and he was a tremendous help. a lot of days when i didn't get home. during the crisis, he'd come over to the office and walk me home. he's a special guy, he really is. when i first met him, i had this image. and i'm like, pretty nice guy. get on the first green, a 6-inch putt, he's begging this thing to go in. and i said, golf's a humbling game, isn't it? but he's -- but what's really great. he's going around to colleges to talk about what's really happening with entitlements. what they're being faced with. the issue that they should be thinking about. he was at nyu last night and talking about our issue, his issue is more vietnam. and, you know, here's this problem. today, it's this transfer of

wealth he's talking about. all this stuff is happening, it's so incredible. to listen to obama, to know how much he hates it. he is a part of something that is effectively promoting exactly what supposedly he's against. and stan is out talking to colleges, going to come to notre dame on october 9th, my birthday, and going to talk about what questions they should be asking. where the economy's going, what are the results today for our kids? >> you know, this showdown we're about to have over the budget and the government spending and the possible government shutdown, i can tell you the one thing that won't happen is they won't cut entitlements, they won't touch them. we're going to continue to cut food stamps. we're going to cut head start, we're going to cut nih grants. and it's -- it's pretty amazing what's going on here. >> you had a really incredible statistic that i was reading through early this morning about

what we're paying seniors right now versus what we're expecting the kids who are about to be born to pay. >> well, this is a number i've been looking for for about a year and a half in this organization that i've helped out a little. the can kicks back commission. i think i mentioned on your show and -- >> yeah. >> back in march. he's the number one generational in the country. basically, the numbers as follows. if you are an average 65-year-old, you will be -- have benefitted by receiving $327,000 more in benefits than you paid in. and whereas -- >> $300,000? >> $327,000. >> more in? >> maybe it's $300,000 maybe it's $350,000. but this is a guy taking his best shot at it. but if you are an unborn, you're going to pay based on current benefits on tax schedules, you're going to pay $425,000

more than you get out. so current seniors are going to get $700,000 more than future seniors. and some how, people don't have a problem with that. i mean, we're -- look at the stuff we're cutting. and these people are untouchable. and, you know, well, the seniors wouldn't give that up. i think if the seniors knew this number, i think they would give it up. i don't think they want to do that to their grandchildren and great grandchildren. i really don't. >> and we're worried about -- >> i agree with you, but i think it's so hard. >> why is it hard? >> well, look, i agree with you 100% if you look at the numbers rationally, it'd make every single thing make sense but everybody ultimately is so selfish and so short-term, it's very hard -- >> but -- >> this is the same guy that came up with the actual unfunded number that we don't use. some people said $70 trillion, $80 trillion. >> no, but if you take -- joe, everybody here pays a payroll tax, right?

>> yep. >> if you think about it, what that really is is the government is borrowing the money from you and promising to pay it back later. so it's an offset balance sheet debt of the government. if you brought that on to the balance sheet, so if you took the future revenue stream according to scheduled taxes and scheduled benefits and you netted out the present value, the current debt of the country is not $16 trillion as advertised, it's $200 trillion. >> 200? >> again, there's assumptions in there, maybe it's 180, maybe it's 220. it's a heck of a lot more -- >> but you look at the way the shutdown is being portrayed by mainstream media is if it's so unheard of to even talk about these things. no one wants to hear it at this point. and the people that want to deal with entitlements are losing the pr war with the president. >> part of the reason they're losing it is they're focusing on the debt. i think we've got to focus on

the unfairness of this. >> right. >> a statistic, becky, that you may have seen that i sent you earlier. >> yeah. >> if you go back 30 or 40 years ago, the percent of federal outlays spent on children and on the elderly was the same. it was about 20%. that number over the last 30, 40 years has gone to 50% for the elderly and 15% for children. i mean, think about that. and that's where we are now. and if you look forward, the next ten years under the federal budget according to cpo, we're going to grow $1 trillion, $875 billion goes to medicare, medicaid and social security, six goes to children. six. >> we're going to slip in a quick break. rising on news that agilent is separating into two companies. "squawk box" with a lot more coming up.

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when bernanke speaks, markets listen.

yale professor of economics and co-founder of the case shiller index, robert shiller joins us after the break. "squawk box" on cnbc. profit from it. (vo) you are a business pro.

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box," the federal reserve keeping its foot on the easy money gas pedal and the taper off the table for the moment. the search for bernanke's successor goes on. and here to talk about it is robert shiller at yale university and co-founder of the case shiller home price index. i take it you are a yellen man. why? >> i first should disclose that i've written a book with her husband. i called george and end up talking to yellen, happens all the tile. so i feel close to her. but beyond that, i admire her. i think that she has just the right constellation of skills that would make her terrific in that role. >> i'm sorry, i've got two questions. skills and then policy issues. we've been talking about around the table how there's a feeling, at least, this table at the moment that things are too dovish and she may be the ultimate dove in all this. >> i don't think that she is a dove. i think that she may differ one way one time another way

another. what strikes me about her is she's a people oriented person. she cares. she's not doing this job for the glory. i really don't think so. and i think that she has a sense of patriotic mission here. so, you know, both unemployment and inflation hurt people, okay. and i think she cares about both of them. >> let me ask you a question, larry summers got killed for the idea he was somehow responsible for deregulation or the removal, she was, as well. and i wonder if you think that's going to make her confirmation challenged at all. >> well, not many people figured this out. and there's another side. you know, i am a big admirer of larry summers also. i've known him for years. he and i are in some ways kindred spirits because his very support of financial innovation

is exactly what i have been -- i believe in financial innovation. it's not about making people rich. it's about protecting society and making our economy work better. for example, larry summers was the one who brought in the -- i think was the power in the white house that brought in the inflation index bonds in 1997. that was a huge innovation. and i admire him for the courage and the intelligence to perceive the importance of something like that. >> okay. robert shiller making the case for janet yellen this morning. we appreciate your perspective and it looks like you may be the winner in all of this because she looks like she may get the job, but we'll see. thank you. >> great. >> and we are back with our guest hosts and we're also marking the 25th anniversary of sandler o'neil. jimmy dunne and stan druckenmiller sticking with us. fred still there? >> sure is.

>> fred's still there. were you there 12 years ago on that -- or joined subsequent? >> no, i've been with the firm 23 years. i was not there. i was up in boston. i got called away that friday afternoon. >> another thing you guys had to deal with. i remember fred, i think, was golfing in seattle or something as i recall. and the guilt -- you happened to be out that day. >> no. >> and you've got to deal with that and give the 200 eulogies. now it's been 12 years and 25, i guess it lessons the sting a little bit. but, you know, it all turned out amazingly -- >> well, first of all, the thing you do recognize with 9/11 is that it may not be people dealing with planes flying into buildings, but there is not a family -- there is not anyone that escapes without something really tragic happening. i mean, if you care about people, if you love people, something awful is going to happen. that's one thing we talk about. stan talks about the deficit, i

talk about college kids prepare yourself, start being selective with who you deal with. be careful who you associate with. think about something undeniably bad is going to happen, be ready for it. the reality -- it was historic, it was international, it was terrible. but you deal with it. and, you know, by the grace of god, john wasn't there that day, he was in boston. i remember exactly where i was sitting when i heard he was alive and what an uplift that was because i couldn't have done it without john period. >> it's more than flourishing. >> i think john -- or you, you were hoping with all that stock you were going to go public some day. i guess you read that piece. i don't know if you spent any of that money. >> that's not a new thought process. >> have you talked to him at all? >> we talked every day. >> is it -- that's a right move to make it. >> the right move for us is to stay right where we are and do what we do and do it better and do it with more people that we

can do business with. we've got a great formula, we've got very, very good people, we were an incredibly challenging markets and we're going to stay that course. it's worked for us and it's a great and incredibly thankfully simple formula. >> what would -- if -- knowing what they're going to do with the banking sector, andrew, how should these guys approach it? deal with the medium and small-sized banks? >> these guys are the last real investment bankers around. >> absolutely. >> they don't exist anymore. >> yeah. >> if you look at the banks, there's these guys, allen and company does what they do. the big banks aren't in the same business anymore. a different game. >> and thanks for -- i'm going to talk to him. let me just see. there's some things -- you can raise more money. >> i think he'd be a great public ceo. >> that's what i'm thinking. that's what i'm saying. >> and he can do that.

let's get some final thoughts from stan druckenmiller. jimmy's going to be with us for the next hour too. but stan, you've had very outspoken thoughts about the fed and about the market. you touched very briefly on the market. you said the last time you were here, you were saying that we were in the seventh inning of a bull market. what do you think now? you said extra innings? >> yeah, i think, again, what happened in the last four days is extraordinary. i think it's going to extend things. you got to love gold here.

when you look at a yellen, potential yellen fed and what just happened with the inability in my opinion to ever instigate any serious tapering unless there's something really extraordinary going on. i mean, maybe this trickle down monetary policy that gives money to billionaires and hopefully we go spend it is going to work but it hadn't worked for five years. so i'm afraid of, you know, joe's implicit question earlier is how do we get off the dope. we just had the greatest opportunity you can imagine to get off it and we didn't pull the trigger. >> if it had been summers and if they had done 20 on the taper would've deposited for gold? >> yeah, gold would've gone down. >> down to 1,200. >> facts change, you change your mind, joe. >> yesterday morning, i've got people saying, hey, nice call on gold. it wasn't my call it was that you would think -- >> it was goldman's call, but all bets are off. >> well, no, everything i have said about my concerns about qe,

that's as a citizen, and that's a long-term thought. as a money manager and as a wealthy person deals in markets, this is great for me. i don't think it's great for america, but i'll tell you what it is great for, it's great for gold and on an interimmediameed basis, it's great for risk assets. i think the risk/reward is good for risk assets. >> for how long, though? that's the game, right? figuring out when. >> i don't know. luckily i'm not managing a huge hedge fund anymore. i'll be able to change my mind. >> the bubble can't be as big as we had, though, right? >> i don't know how far they're willing to go. >> we could reflate to the same size. >> the monetary policy was too loose, but we weren't doing this stuff. where's the crisis? why are we spending $85 billion a month adding to the eventual exit problem? again of two balance sheets.

and all the stuff the public got sucked into. >> stan, thank you for being here. >> thank you. >> and do come back and call us when you do change your mind. coming up, meryl witmer and bob steel is going to join us when we return. i love having a free checked bag

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are the markets drunk on the fed's easy money policy? >> one, it is a vile drink that turns the most respectable men into complete scoundrels. >> why is the rum gone? >> we'll ask meryl witmer. plus the future of finance, we'll talk to bob steel who is a deputy mayor of new york city. he'll join us onset. >> and breaking economic data. >> charge! >> weekly jobless claims hit the tape at 8:30 a.m. eastern. and arrgh it's international talk like a pirate day. >> on deck.

>> as the third hour of "squawk box" begins right now. ♪ come sail away ♪ come sail away come sail away with me ♪ ♪ sail away with me >> welcome back to "squawk box" here on cnbc. our guest host this morning, jimmy dunne at sandler o'ne o'n. the street was expecting the central bank to cut back its $85 billion monthly bond buying program by $10 billion to $15 billion. fomc policy makers cited tightening financial conditions, specifically mortgage rates. it also blamed washington making note of another congressional showdown that is coming up on the debt ceiling. >> the government shutdown and perhaps even more so a failure

to raise the debt limit could have very serious consequences for the financial markets and for the econy. and the federal reserve'li do wp the economy on course. >> the fed also downgraded the outlook for the economy. it is now expecting the gdp growth. we'll be in the 2% to 2.3% rate this year. as for the market's response to the announcement, stocks soared to all-time highs, bond yields came back quickly too. if you're looking at what happened with the ten-year, you'll see it's below 2.7%. at one point 2.699%. sticking around 2.7%. and all the main s&p sectors closed in positive territory. as we mentioned the ten-year as you can see it there was trading right around 2.7%, and the u.s. equity futures after all of these strong moves are looking at another gain today. dow futures up by about 34

points above fair value. s&p futures up by about five points. "squawk box" has received an exclusive statement from david tepper. he writes that the fed's nontaper and forward guidance should give a clear message of what the fed wants. they are not worried about inflation in the next few years and want growth first, growth second and growth third. with the stabilization of europe, the apparent pick-up in china note higher dry bulk index and a u.s. economy still on reasonable footing despite a slight slowdown in housing. the fed's leaning to growth policy should lean to a favorable environment for the markets. this is the same story we heard from stan druckenmiller who says while he's concerned as a citizen, as a money manager he says, look, this is adding more fuel to the fire and that gold and equities are the place to be right now. >> goldie locks market, maybe not economy, bad news is good news. more on the fed and markets in a

minute. an announcement on jpmorgan's london whale settlement could come as soon as this morning. that settlement expected for at least $700 million. it could get as high as $900 million. the agreement would resolve several civil probes into the bank's multibillion dollar trading losses. but we should say that u.s. prosecutors are still investigating jpmorgan for potential criminal wrong doing, as well. in other news, chrysler is late in the stages of preparing for its ipo documents. and this part, some good news for jpmorgan. they may be expected to underwrite that offering and likely not going to be the only bank on the ipo. oracle giving cautious outlook for the second quarter. the company battling soft i.t. demand and smaller rivals now focused providing software over the internet like salesforce and others eating into their business. falling in afterhours trading. we are continuing our discussion with one of the most important voices on wall street. in her cnbc interview is meryl

witmer, recently added to the board of directors at berkshire hat hathaway. thank you for being here today. >> my pleasure. great to be here. >> you've been someone we've been trying to get on the program for a long time. you're here today because of jimmy dunne. >> absolutely. >> tell us about your relationship and how you met. >> we met socially a long time ago, in 1991. and jimmy and my husband -- jimmy's wife susan and i, we're all very good friends. and we also have a business relationship. i mean, we do and have done trading through sandler o'neill, it's a terrific firm. i think i really know a lot about jimmy, how he built sandler o'neill back up. and so, you know, when he asked me to be on, he's one of the few people i would not say no to. >> so i look back and just taking a look at some of the

people, some of the legends on wall street, you know, it's jimmy dunne. you know warren buffett on the board with him and you started out you investment career with michael price. >> yeah. and another person very helpful to me over the years was mario gabelli who is on here a lot. >> is there something you've learned from all of these legends? >> well, i think there's a similar -- i learned a lot from everyone. but i think there's a -- they all definitely have some similarities. and i think they're all confident but they're humble. i think they're humble because they're very logical. so, you know, they -- they're confident, they look at the facts, have opinions, but when they're presented with new information, they're willing to change their minds, which, another way you could put that is they're willing to say they're wrong. and that's a pretty rare trade amongst people. a lot of people they stake out a claim, they'll defend it until they fail. and i think every one of these people we mentioned is very happy to get new information

even if it contradicts what they're thinking and they'll change their mind. i also think they're all optimists. and it's funny because they take advantage of adversity to a certain extent. michael buys stocks when they're down, warren too. jimmy hires people, whether they're fired or part of the business has gotten slow in m&a. he'll look for people to bring over. in that, you have to be an optimist and say, hey, this is going to come back. people like them. i think it's because they treat people fairly so they build up that good will. a lot of similar veins. but really one of the key, key things is the ability to change your mind when new information comes. >> we've got some very different information yesterday than we were expecting from the fed. >> right. >> tell us a little bit about what you think in the post no-taper fed world. what does this mean for the markets? >> well, you know, our style

really is bottoms up. we're looking at individual companies and trying to find a cheap one. find something that's misperceived. i don't spend a ton of time. and we use a 10% when we discount the after tax free cash flow. i will say i was a little disappointed because a few stocks hovering around where i want to buy them and i was hoping negative news would come out and i would add a position or two. the way i see the market, it doesn't look cheap to me. people put money into stocks because they want the yield or they're gambling or getting nothing on their cash. i think that really adds to just a speculative environment, a bit of a bubble, and at some point you have to pay the piper. that's the thing. and, you know, when that's going to be, i don't know. >> that's the issue. we could be paying -- we may --

we will have to pay the piper, but it could two years from now, four months from now, it would be years from now. if you think yellen is as dovish as steve and others are suggesting. >> yep. yeah, so -- i don't know when it'll be. >> what do you therefore do? as a value investor, how do you live in the speculative bubble? >> well, we have some cash and then we -- when we look for stocks, we want something that's really cheap. so we want something where we can see ourselves making 50% over a couple of years. so i can -- so maybe we'll make zero or maybe we'll make 30 or be lucky and double our money, hopefully not lose any money rule number one. but we're really looking for the misperceived situation at eagle. >> what is a stock that fits into that? >> there aren't so many now. i think one area is refining. and i in particular phillips 66 which is a position of ours. and there you have a refining

business but you have two other businesses that are really great businesses. there's a cp chemical business, great niche, high return on capital employed. and then they have a midstream business that moves oil and gas around. when we look at that, you know, we really love those two businesses. it was spun out of conocophillips and we bought it when it was spun out and we bought some since even around the current prices. so we have two great businesses in there that i think are high multiple businesses. 15, 16, 17 type multiple, i think is what they deserve with their growth characteristics and return on capital characteristics. and then you have refining and refining in the u.s. has advantages. so one of them is natural gas prices are really cheap. that's a big input into cracking crude oil. >> sure. >> and so that -- you know, all things being equal, they should make $1 a barrel more in the

u.s. than in the rest of the world. that advantage if not more. and then you also have, you know, we have some advantage crudes here. and the good companies, and in particular psx, really getting good at sourcing these advantage crudes which are from the shale fields and then the canadian heavy crudes. so, you know, they should all things being equal over time make money. plus they've put all this capital into their refining business. and then the other thing and it's really interesting, these older businesses. they have a lot of value under rocks is kind of how i think about it. and phillips 66 when we were meeting with management a couple of months ago, they talked about an export terminal they want to have for their refined products. and, you know, they're going to build one. where did you get the land? and they said, oh, it's land we've had. and i said when did you buy it? and they said 1940. what is that on the balance sheet for?

$2,000? >> right. >> so they have a lot of advantages like that. they also -- just -- they've created a new division where all the pipelines they have that move the oil around to the refineries. they have many they're not using and they're finding some that have real commercial use to others. and they're monetizing that. and moving oil around for others or finished products. so there's a lot there. and the ceo's very good, really understands allocating capital. and if there's something to do there, he'll do it. and i think over time, you know, if you sort of normalize earnings, 650 is a number, they're buying back a lot of shares. the stock's 57. the earnings could go into the sevens on a normalized basis because the refining earnings are volatile. and we see a stock like that that should trade at least in the 70s if not higher. so -- >> what's it like being on the berkshire board? >> well, for me, it's fantastic. you know, i love learning.

so seeing warren, you know, occasionally so to speak is really great. he's so bright. and the other members of the board are bright. but the thing i really love also is, you know, meeting the different company managements and learning about those businesses. you know, recently lucky enough to see the geico management. and that's a terrific company. warren was so smart to buy that entire company. i mean, they're really a great company, low cost, something to the consumer, everyone should really see if they can save 15%. >> the camel. >> hump day. >> the iconic, the advertising for i don't know how many iconic commercials are good for. there's like five different themes i can remember and they're all pretty good. >> yeah, they have the gekko the pig the camel. >> the two guys. >> camel on hump day.

>> yeah. >> some other good ones. >> cave men. >> oh, you remember? the cave men. there was a sitcom came about from -- >> right. >> they didn't cast the right guys because the geico guys were so much better. >> right. >> talks about how much advertising helped. it's like -- what? did they go up ten times their advertising budget and came back in spades. >> it's a great business model and they keep their costs low and pass that on to the consumer and the consumer can save money. what a great thing, right? to save money on your insurance, you have more money to do something fun. >> biggest surprise being on the board snr either about the meetings, i don't know. is there a debate that go during these meetings? i've always thought that warren was so agreeable that it's hard to actually have a debate about anything. >> well, we have probably the best ceo in the country, right? from that point of view, it's great. there are probably some debates here and there, business issues that come up. but it's a well-run company, a

lot of great subsidiaries and it's not so contentious. but it's a big company. >> it's a big, big company. >> really, industrials are, i think, if i have a strength, that's a strength of mine. but, you know, really learning even more about, say, geico, the insurance businesses, really learning about marketing. strong in finance, strong in industrial, but geico's marketing to a large extent. so that is very, very interesting to see how that's done. it's fantastic. >> we want to thank you very much for joining us today. >> thank you. >> we hope you come back. and coming up, the fed's tapered delay taking a toll on some emerging markets and helping others. michelle caruso-cabrera joins us next. coming up, bob steel will join us on the set. he's the current deputy mayor of new york city. we're going to talk banking, the economy and i wish he'd run. and a lot more. aw this is tragic man, investors just like you

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the fed's decision to delay the taper giving it kind of -- actually, it was good. a boost to the emerging markets, our chief international correspondent michelle

caruso-cabrera joins us with more. i'll show you on the chart here. you had it backwards a little bit. >> oh, one month high. the emerging markets sold off the most when we started hearing about the fed taper. so not surprisingly, they rock 'n' rolled the second. so i'm going to show you the prior day of the -- take a look at mexico, as well, the prior day chart, intraday move higher. and i would not be shocked if that doesn't continue today. let's show you what happened in southeast asia overnight. wow, i mean, really big moves there, indonesia higher by 4%. we're talking the stock markets here, gains of more than 3%. currencies, remember, the brazilian real, the indian rupe. gotten hammered. so this is a chart of the dollar versus the real. that means the real recovered and, boy, they need the help down there because they've been

suffering as a result of it and having to raise interest rates at a time when they wouldn't want to. and there's the rupe. we showed you a two-day chart so you can see how dramatic the move is there. and that's a one-month high. they got a new central banker on friday is going to outline hopefully a coherent plan about what they're going to do in india. this certainly gives him a lot more breathing room with the fed. >> bernanke's like -- i think about it now, it's almost like santa claus. think if you're needy, if you want people to love you. look at what you did. look what he did to you. if i could say do something in every stock market in the world would go up 3%, i mean, that's -- not only is it power but it's like you're -- >> what must make you mad is at the same time where all the markets rallied, all these investors are complaining. on and on and on. it's a hate thing. >> what? this is what i get for increasing everyone's wealth by -- >> right. >> kind of ungrateful, jimmy.

>> well, i mean, the reality of it is, i think a little bit of what andrew is talking about it. it really tells you what he thinks about the economy. and that is the scary thing. >> is he a good forecaster or is he not? some people would suggest his forecasts have been wrong. >> well, it's hopeful. >> even the guys we had on yesterday, the wells fargo guy that said they are down 30%. they understood it for what it was. initially you go up a lot. it's going to be -- there'll be a slight slowdown. but on an absolute level, rates are still so low it'll be a great time to get a mortgage right now. does bernanke not have that confidence? >> you can see sort of general corporate debt at 4.25%. >> right. >> it's crazy. i mean, 650 is a number that everybody ought to be able to work with. if you -- if you're not going to do it because, you know, you're going to raise it at that level, you probably shouldn't be doing it in the first place. >> for example, wells fargo suggested they were going to be laying off a lot of people

because they said originations were going to be down. do they now say to themselves, oops, we're not going to lay off those people. because we have people who have real jobs and can -- a layer of unpredictability. >> no matter what you do, someone will benefit. that's not the issue. >> and the fed also, they've been making gains in the employment sector. we've seen it come down from above -- almost nine to a much lower level. i think they know about the participation rate. they know about how many part-time employees are. they know a lot of these jobs aren't great. so they're telling us, you know, we've taken credit for the jobs market, but it's still terrible. >> lousy. >> the reality of it is, the economy is not doing what we'd hope to five years in. >> with all the qe. >> why did you stop if it's not working? >> counterfactual. >> right. with the federal government doing what it's been doing. >> look at gold. it was up 35 yesterday, 63 --

>> gold scmold. >> he would have been short the day before, he was long the next time. >> i'm still in the warren camp. gold is a psychological something. >> elizabeth warren. you are in her camp everywhere else. but you're talking about warren buffett. you meant warren buffett. >> warren buffett. >> there is a symmetry there isn't there? >> yeah. you're in the warren camp. >> i feel like a pirate today. coming up, weekly jobless claims hitting the tape at 8:30 eastern time. forecasters expect the number to climb after a glitch reported to a seven-year low last week. "squawk box" returns with that and a lot more. there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge.

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we've been talking all morning long about the fed deciding to delay the taper. "squawk box" has received an exclusive statement from david tepper. he writes the fed's nontaper and forward guidance should give a clear message of what the fed wants. they are not worried about inflation in the next few years, they want growth first, growth second and growth third. with the stabilization of europe, the apparent pick-up in china, note higher dry bulk index and u.s. economy's still unreasonable footing despite a slowdown in housing. the heavy leaning to a growth policy should lead to a favorable environment for the markets. that's certainly what we've seen and how the markets across the board have been responding.

when we come back, we've got breaking economic news. we're just a few minutes away from the closely watched weekly jobless claims. as we head to a break, though, again, take a look at the u.s. equity futures. right now, looking at the dow futures up by about 25 points. "squawk box" will be right back. we went out and asked people a simple question:

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welcome back to "squawk box." just seconds away from weekly jobless claims. rick santelli, standing by at the cme in chicago. steve liesman in the studio. rick, the numbers, please. >> and the survey says a jump, a jump to 309,000 from an awkwardly revised 294,000. i'm not sure how many states are reporting. but maybe it's close to 50 today. 309,000's the number. draw your own conclusions. if we look at always a week in a rear as the continuing claims, 2.78 million, it's dipping below 2.8. i'm not sure how to interpret these numbers. that's up to you. if we look at another number,

second quarter, showing an account balance. this is basically the cousin to the trade balance. arguably a bit worse. inching closer to $100 billion. this is minus 98.9, little worse than we were looking for. and our last look, which was over 100 billion, minus 106 originally reported was carved out to about 105 billion. 270 is what i see on the yield from a technical point of view. tomorrow being a friday, if we close under 274 in yields, i would think there's going to be continued pressure, a lot of yield curve wiggles. the five-year, you know, mr. gross was on yesterday and he was actually a bit giddy about the five-year position responding the way it had been. that was the focal point of the yield curve. and i think some of the big boys have been long that maturity since a couple of fed meetings ago. one difference between the big boys and all these guys is they

could withstand the heat in the kitchen for a long time. back to you. >> rick, everybody remembers where they were with president kennedy when they got shot. i was in the gym yesterday and i went over and the market was up 160 points and i was watching cnbc and the sound was off and they kept putting other stuff, the asset purchases and then i finally saw the one that said current conditions don't dict e dictate -- and i was flabbergasted. i really, really was flabbergasted. what was your reaction on the floor? we haven't talked to you yet today. >> i think there was a lot of surprise. i think the one guy that mostly had it right was my guest yesterday on the santelli exchange. jim bianco. he pointed out just the facts that if you looked at data over the last year, it hadn't improved. steve liesman's survey said there would be no taper. >> there is something in it for you, rick. and that is what you've been saying that after all of this,

things still aren't good. and that is your point about the jobs picture and, you know -- >> listen, i'll be more blunt than that. i'm not bashful, joe. i think the "wall street journal" op-ed had it right. >> right. >> this strategy five years in, it doesn't look like any progress is being made. they're defending a strategy. >> got to do the counterfactual. >> yeah, they always say they have new tools, more complicated tools, better tools, i say i don't buy it. i don't buy any of it. their tool is printing and, i think, this time around, the only difference is that the dimensions of their printing are only defined by the size of the forest of the trees that they're going to convert. i don't know how it's going to turn out, but i know he's an expert in the depression so he's going to make sure it lasts the same amount of time. >> liesman? >> it looks like the data is still a little messed up by the backlog in two states, california and nevada. >> not for the current week, last week. >> no, even for the current

week. >> nevada. >> nevada? >> no. >> tomato. >> represents a full week of data. however, claims for the prior week may still be low. >> are you reading the dow jones story or reiters story? >> dow jones. >> i read the dow jones story, and it says here the sharp decline that the two states appear to be working through the backlog. so that's what -- anyway -- >> so we don't know -- >> we don't know if there's still some left. >> dow jones not. >> i want to go back to the fed here. we did a little count this morning. trying to see, is the fed saying more but explaining less? so we looked at the number of words in the statement. and there you can see greenspan elegantly at 167 words, bernanke comes in, there's 2011, 2012, ramps it up to 420 words and then the average for this year 606.

720 words in the last -- >> this goes back to exactly what stan, though, was saying. >> exactly. >> that when paul volcker -- you would do it in the dead of night, wake up in the morning and you find out, you know, that interest rates were going. that was the deal. >> right. and the question is, is there more volatility because they're saying, well, here's what i know. what i know is that when i read this statement, there's policy and then there's caveats to policy. and there's more caveats to policy. >> the problem is that policy's always going to change. so the -- and the second you pretend it's going in one direction and the facts change, you change your mind. but the problem is, the rest of the market didn't see that. actually, your survey people did but i -- >> that was old. wasn't that a month old. >> thursday and friday. >> we did it thursday and friday. >> real quick, take a look at what bernanke told us in june. >> thank you. >> and let's see if what happened yesterday, is it odds with that or along with it? you make up your mind at home. if the incoming data are broadly consistent with this forecast, which was not a terribly robust

but better forecast, the committee currently anticipates it would be appropriate to moderate the purchase later this year. that's part one. then part two, if the subsequent data remain broadly aligned with our current expectations for the economy, we continue to reduce the pace of purchases through the first half of the year ending purchase around mid year. so he does tie it all to date. and the data didn't come in especially strong. it didn't come in too badly. and that's what he did. he did put a big caveat on it. bottom line, the market was off size. central banks policy or theory says the markets shouldn't be off side. you should have this reaction function. >> steve, that's the difference between us, you're looking at -- >> just that one thing? >> i'm telling you what. you're interpreting his words better than anybody i've ever seen. you're interpreting the defense of a failed strategy. >> i'm not defending it, rick. i'm just pointing out what was said here. >> that's okay. you're interpreting boundaries on the pasture with no grass. i got ya. >> i agree with you, i don't

think it's working very well. i applaud transparency as a journalist. >> welcome to the club, you're only 3 1/2 years late, paul. >> i think the idea makes sense and i think the question is whether or not it's led to better policy. and i don't -- i don't know it has in part because the fed has had this need to expand the statement to keep everybody on board in the consensus. i can point to new lines in the statement and say, well, that one was added for bullard, this one for lockhart. i'm not sure it's the best way to make policy. >> i'm sure there's a lot of people that have manifestos who you'd question their rationality. >> i'm a little lost on that one but maybe we don't have time to explain it? >> i don't need to explain it. >> did you get it? >> the fact is the explainers you're talking about, we spend all of our time interpreting a statement about a strategy that's off the charts, i think, untethered to reality. >> okay. i just don't know what happens

next. how we figure out what they're going to be doing in the next go round. >> on the same page with a lot of us today. >> okay. thank you for that. coming up, he was the ceo of wachovia. now bob steel is deputy mayor of new york city. he's making his way to the "squawk" set. i think i want him as our next mayor. right now as we head to a break, what stanley druckenmiller told us in the last hour about the fed. >> we're going in extra innings, baby. the punch bowl is running out. it's just about dry and two waders came in and they're carrying this new punch in. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today.

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welcome back to "squawk box." between 9/11, the financial crisis and hurricane sandy, new york city is no stranger to hardship. our next guest left wall street and is playing a key role in rebuilding the city. bob steel, deputy mayor in new york city and former ceo of wachovia. and we were saying we were all just saying during the commercial break, we would hope you could run for the mayor of new york city. can we do anything? >> no thanks. i've got a great job working for mayor bloomberg. >> how many more days? >> 103. >> 103. >> not that we're counting, but -- >> do you guys have a calendar where you do count it? >> sure and the motto is make every day count. the mayor continues to push us, we've got a lot of great projects. and our job is to finish strong and organize a great transition. >> what is left to do? what can be done in the next 103

days for the city? >> what we've seen, andrew, is lots of projects that people want to get done or far along in the process. especially in the land use area where you just see we're finishing up the applied science initiative, cornell will take the keys to roosevelt island on january 1st. we'll need to organize that. and lots of other activities like that trying to build and reshape the economy and really taking the mayor's efforts to diversify the economy. >> when you see what bernanke said yesterday about the economy across the country and frankly what i would have thought would be bad news, do you think that's the same case for new york city? >> i think that we have a lot of strengths and we have challenges. most of the strengths of new york, i think, are specific to new york. and the challenges are more of a national challenge. so let me try to flush that out for you. i think the strengths are we have a growing population. we have more jobs than the city's ever had and there are a lot of good things going on to diversify the economy.

people saying i want to be in new york, facebook, google, business expanding, that's the good part. the bad part and the challenging part is we have economy -- an economy that's changing the nature of how it works. and if you think about it -- step way back. 3,000 years, we had an industrial economy, we're three decades on a knowledge and information economy. how do we reorient the economy to have the right jobs and the right industries here to be successful? >> new york city has one of the highest tax -- you were being taxed through the nose if you live in new york city or frankly if you work in new york city. do you think that is going to change? is it going to get worse? do you think, by the way, the blazio's going to win. >> are you worried about this? >> well, the bellagio will win. it's awful. and tax rates will go up. he ran on it basically. everything's going to be fine, we're going to raise taxes on the rich and go away. >> and all those projects, we're

going to divvy up the land. your whole department of economic development is going to be unnecessary at this point because there'll be none. >> we're driving hard on our projects, you know, our effort has been to try from the mayor's perspective has really had pillars to our economic growth. the idea of quality of life in the city, having regulation that's balanced. trying to make the investments you need and thinking longer term. >> when you say disappointing, is it because after all of this, no one in new york city or at least a majority of new yorkers don't understand the actions that were taken to get the city to where it is now and they'll basically go back on all that progress by electing this guy? >> i think it's too early to tell. i think you have to separate the political rhetoric from how people actually rule. >> maybe he -- >> someone's going to wake up on january 1st and be the mayor of new york city.

responsible for more than 8 million people. and they'll do their best. >> you think he had to move left to get the nomination? >> i'm not a political strategist. i'm observing it's one thing to be a candidate, another thing to be the mayor. >> if you look at new york city, under yours and the mayor's leadership, it's done a phenomenal job. after the great recession, new york actually rebuilt its private sector jobs far more quickly than the rest of the nation. i think almost three times as quickly. to the most private sector jobs that new york city has ever had. what's new york city doing differently than all of the other cities around the country? >> so your data are correct that since the recession on average in the economy, we've regained 65% of the lost jobs, 65%. in new york, we've regained 200%. and i think really mayor bloomberg's push really two things, diversifying the economy with a real five borough economic plan across all of the boroughs. it's interesting that the outer boroughs have gained more jobs than manhattan since the recession. this has really been a

successful effort that the mayor's led. and then, i think, thinking about looking forward with the idea of applied sciences, how we build skills, pushing applied science, learning into high schools. that idea, as i said, the big secular issue or the longer term issue, the structural issue for the economy is how do we get the skills needed to be successful in the future? i think that's a big, hard issue that people will have to work on. and it's not just in new york city. this is a national issue. and how do we think that way and change the mindset? >> do you think it matters that the diversity element in manhattan has gotten worse not better? when people talk about diversity in new york city and think of manhattan, it is much harder, obviously to live in manhattan than ever before. does that matter to the economy? does it matter to the city? to the cultural fabric of the place? >> sure. i think that one of new york's greatest strengths is the fact that 40% of the people that live in new york are first generation americans. it's a positive.

and a challenge that jimmy alluded to is that the costs of living in new york are high. i think what you've seen with people don't make this connection, i believe very clearly, but the success of public safety in new york has made new york city bigger. there are more places to live. and there are places that you or i wouldn't have lived a decade ago that now because of the success of the police commissioner are now new york's a bigger place. it i it has allowed for more places. >> is that manhattan you're talking about? >> yeah. >> manhattan, yes. >> okay. i thought that -- >> "d" or "t." >> manhattan. >> you guys are friends how, by the way? >> well, we've known each other for a long, long time. when jimmy's firm really was one of the key firms that focused on financial services. >> right.

>> i care about that industry and i knew him. and then after 9/11, he's one of my personal heroes is that basically what he and his colleagues did to rebuild a firm set an example and when you get punched in the stomach to come back stronger, you know, he's in my hall of fame for doing great things with his firm. and then any time i can be with or say i know jimmy dunne, i run to the occasion. >> i was very happy to throw you that ball. thank you. appreciate that very much, bob. >> all right, mr. mayor. it's not going to help. >> i know we don't have time. why don't business executives want to get the job? you've talked to these guys. >> i found it -- i can only speak for myself. i think it's a real privilege to work in these kinds of jobs. it's been great. >> thinking about -- >> the mayor would agree with that too. >> i'm hoping that next time around you can convince some others to run. >> you could run. you don't want it. >> it's great to be here. when we come back, stocks

getting a boost from the fed's taper delay. we're going to talk it over with jim cramer right after this. [scream] ♪ don't tell mom. don't tell mom. don't tell mom! don't tell mom. okay. don't tell mom. don't tell mom. don't tell mom? yeah. the best stories you'll ever tell start with, don't tell."

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jim cramer joins us right now. jim, what do you do with this? i saw your tweets from earlier but what do you do with the new fed no-taper policy? people were really wrong in the bond market. i think it's okay to celebrate that. i like the fed's for growth, growth, growth. i don't like the fact that they did this because they think the fed's going to have a shutdown. be careful. you've been given a gift ahead of what's going to be a definitive slowdown, which the feds saw coming, which is the fight between the republicans and the president. >> we stoke with stan druck

druckenmiller and they say it's still on for anything with risk. gold is still strong. do you agree with that? >> gold is strong. i can't emphasize enough is talk about what's really hurt, what are the nonessential services that will be cut out by the government? is it going to be medicare checks? is this going to be the end of travel for the government? are there going to be furloughs? and it won't be a great discussion about the fed tape are and no taper. >> if we get through that in two weeks, do you think they can come back at the next meeting and go ahead with the taper? >> yeah, i think that's what they were looking for. say we were analyzing bernanke as a retailer. we have to go back to the november/december period of '95. i'm sure that bernanke looked at that period. >> i'm with you on, this jim, except what bernanke kept saying in the press conference

yesterday, which is this is all about the economy, the economy right now doesn't justify it. that to me made it seem like it would be a little difficult to come back a month from now and say the economy justifies everything, it wasn't just about washington. >> mortgages rates, we know we heard from macy's, walmart, target business was bad. most of the home builders are reluctant to admit just how bad things are. the economy in the last let's say three, foreweeks is quite terrible. and i know that the shotdoutdow going to be very bad for business psyche. >> i'd like to believe it's just about what's happening in washington, if they can get their act together and the children there start getting along, they can get back to tapering at the next meeting. it worried me about what they said about the economy. if they do it a month from now, they can turn around and everything we just saw about the massive moves in the market,

that was a head fake. >> if i were a home builder, the last thing i'd ever say is housing is bad right now. then i wouldn't want to buy a house. so that business is bad. i think the back to school season was the worst since 2009. >> we had the toll brothers guy on and he said the numbers weren't bad. >> i talked to macy's, walmart, target. i don't know who they talked to. i'm having to talk to the people who are in charge of back to school. sorry. >> we'll see you in a few minutes. >> our guest has been jimmy dunn. we'll give him the last word when "squawk box" returns. >> ready or not, the stock of the day is coming up. you're watching "squawk box" on cnbc. first in business worldwide.

street by reporting a profit for its latest quarter. analysts were looking for a loss. it's a $4 stock. drugstore chain raised its yearly earning on the basis of continued sales, growth and expanding margins.

let's get back to jimmy dunn for the last word. you didn't sugar coat anything. you think the fed needs to get out eventually, we need the training wheels off. >> i do believe that. i think what we need is somebody that is sort of courageous and really independent. i think we're going the wrong way with yellen but that's going to happen. i guess the economy is worse than anybody really understands. i'll take bernanke at his word. i don't understand it but be that as it may, you know, we got a great country and these things are not working and we have to have more growth. this is about the fact we've been doing this for years now, it's not working. >> the fed and maybe some of the policies of government in general. >> absolutely. absolutely. but, you know, our business is pretty good. >> not for savers. you got nothing to sell people. >> there's going to be a lot of m&a activity. we've been involved in quite a few deal. we had a couple billion dollar

deal, a $2 billion deal. one thing that is different, every investor that you talk to, five, ten years ago, it's all about who are the targets. not anymore. now it's about who are the right acquirers and you see it in their stocks. >> thanks for doing this for two hours. >> my pleasure. >> congratulations again. >> we appreciate all your support. >> be sure to join us tomorrow. "squawk on the street" begins now. >> good morning. i'm carl quintanilla with david faber and jim cramer at the new york stock exchange. kayla? >> carl, we're just getting word that cross border regulators are levying $920 million in fines for jpmorgan for faulty oversight on the london whale oversight case. the federal reserve will get a $200 million fine, the office of th