good morning, everyone. i'm becky quick along with joe kernen and andrew ross sorkin. we start this morning with the markets. the dow and the s&p 500 snapping a four-day rally yesterday as some of the fed euphoria fades. we've been asking our guests to make what they make of the markets. yesterday, i sat down with arguably the world's best known investor, warren buffett. he says over the last five years, stocks have gone from ridiculously cheap to more or less fairly priced now. >> the lower interest rates are, the more assets are worth, basically. and to the extent that qe3 is keeping interest rates lower than they would otherwise, it probably keeps asset prices somewhat higher than they might be otherwise. but there's other variables. if that doesn't exist, it's maybe because business is a lot better. there's more than one variable. but interest rates are a terribly important variable in the evaluation of assets. >> when you look around, are there still deals that you can see, like the deal you did with

brian with bank of america? do you still see good positions or have stocks just moved too far sfp. >> they've moved a long way. they were very cheap five years ago. and redeck yulsly cheap. that's been corrected. they're probably more or less fairly priced now. i mean, we don't find bargains around, but we don't think things are way overvalued, either. we're having a hard time finding things to buy. we'll have more of ourcation with buffett and bank of america's ceo brian moynihan in just a few minutes. meantime, carl icahn singing a similar tune. he argued that the market is fairly valued, but still sees apple as a buying opportunity. >> i think that right mow the market is giving you a full picture. the market tells you you're doing well, but i don't think a lot of companies are doing that well. they are taking advantage of very low interest rates. so, obviously, you don't have to

be a financial genius to understand if i can borrow at 3% or 4% and buy assets, maybe my own stock, that's yielding 9% or 10% or 11%, i'm going to make a lot of money. >> as for the markets this morning, take a look at the u.s. equity futures. s&p futures up by about 2.5. >> great interview with warren, becky. the nud head of india's central bank shocking the markets by hiking the benchmark lending rate at his first policy meeting. analysts say the move signals that his goal to fight inflation in asia's third largest economy. the newest iphone going on sale today at 8:00 local time. lines could be long because the 5s divide is launching with no preorders. eunice yoon is joining us in

beijing where customers have the newest phone. the kick is on today to fund president obama's health care law. house speaker john boehner. >> when it comes to the health care law, the debate in the house has been settled. i think our position is very clear. the law is a train wreck. it's going to raise costs, it's destroying american jobs and it must go. we will deliver a big victory in the house tomorrow and the fight will move over to the senate where it belongs. >> it's highly unlikely that the democratic controlled senate would pass the bill. joe, over to you. >> thanks, andrew. we're going to talk global markets. and i think it's cool that we do talk global markets. did you ever think in your life that you would know what the central bank of india -- >> was doing? no. i think it makes us -- we have a very smart audience. did you see how many people -- you gave them five answers for

what qe was, americans. >> no. what was this? >> if they could pick was quantitative easing was. how many got it right? >> i want to know what the possibilities were. in i don't know the actual -- i can get it for you. 27 the%. 12% thought qe was a computer assisted program that the fed uses to manipulate the dollar. 11% thought it was -- >> that might be it. >> that was your answer. >> yeah. >> 11% thought waits dodd frank and wall street reformed part of dodd frank. two of the more popular incorrect answers, a way the fed makes it easier for commercial banks to monitor banks or in the right ballpark, but only 27%. it's hard to know what it is, to even have heard of it. but i just think that it's cool that one of our headlines is what the indian central bank is doing. >> because it matters.

>> it matters to our viewers who are the finest, smartest viewers in the universe. >> with buffett and moynahan, i was trying to look across the screen to where the markets were closing, here is what oil is doing and they were kind of laughing. they said it always changes. i was talking to them about greenspan saying the ten year. and buffett said i remember when m1 and m2 were important. >> i thought he almost didn't care. his comment about what the fed -- what the fed is doing was almost like, look, this is what happens, right? >> but it's true. it's similar to what meryl witmer said yesterday where they are bottoms up and you're always going to have winds whipping around and you're looking for good company in spite of all that. >> but even top down, if we're 3.5 million as far as a balance sheet, that may be the fed's new permanent balance sheet. so he didn't seem to have the worries about the exit.

>> and druckenmiller said the same thing. >> if the economy doesn't prove, tax revenues go up, we'll be able to handle that -- well, that's assuming a lot. but i just think it's neat that we have viewers going, hey, honey pb how about it, you know? but india has gotten more and more important. we talk about important things. not chicken kiev and how to make sure you turn it on some of these other morning shows. >> although we did spend a lot of time yesterday on "back to the future." >> that was two days ago. >> is that two days ago? >> come on up with -- >> michael j. fox coming back on nbc. >> premiering soon. could be a great comedy, you know, that we have high hopes for. so it's a method to my mad ps. becky mentioned the futures. let's check on the broader markets this morning.

people were talking about oil is going to be one of the things that could be problematic. we get a lot of good things from more pumping, more qe, but oil could make that a little bit problematic. the ten-year, this is the best thing. and warren pointed out eloquently yesterday, there's nothing -- not just mortgages, not just housing, it's just the way you value financial assets. they're much more attractive if interest rates are low. it's that simple, that assets are worth more. it's a little scary that he says that they're fairly valued with 2.75% long ten-year bonds. so you wonder whether they would be fairly valued at 5%. i don't think they would. anyway, we'll look at the dollar. we're going to add the rupee here at some point. but at this point, we're still just looking at the yen, euro and pound. that's my idea. to add the rupee just to say rupee once in a while. i like it. >> just to act like you know what it is. >> right? >> and maybe some day we're

going to add the renminbi. >> i think i was rupees in my wallet right now. from your old trip? >> no, i think i do from the last time i was in india. >> really? >> yeah. hold on. >> you've got a rupee in your wallet? >> i think i do. >> you've got to be kidding. >> there's the rupee chart. the dollar had been soaring. look what happened when we said we're going to keep pumping. >> i do. >> becky has a rupee in her wallet. >> here is a 350 a50 and a 10. >> how much are those worth, do you know? >> i don't remember. >> gandhi is on the rupee. i'm impressed. i can't make any jokes about that. i can't do it. i was going to say something. >> please don't. that's cool. >> i really can't? >> no, you can't. >> are they good at 7-eleven? >> oh, stop. >> all right. i won't. people may say that all the time, right? >> they do. they say it all the time. i've heard that before.

>> i'm sorry. i take it back. i apologize before i have to. anyway, let's look at the -- yeah, that's right. because of miss america. got all kinds of flack from the tweets. yeah, exactly. >> she is a beautiful american woman. >> but in the posts, they were making the same thing. anyway, gold has been a big winner, recently down about $12 today. it's time for the global mcreports. ross westgate is standing by in london. for a long time, you guys basically -- your imperialistic tendencies were most clear with india, weren't they, ross? that's not a real proud chapter. >> the jewel in the crown. >> yeah. there's still some animosity about that, isn't it? sort of just -- maybe not. they like being associated? >> i think we're over it. >> not you. >> what's gotten over it? >> not you.

yeah, them, i don't know if they're over it yet. >> are you over it? is america over, you know, the first civil war? you know, with us? >> the civil war was gut wrenching. and they're -- it's something that oolt of countries have gone through. it makes a country stronger. i think it made us stronger when it was all said and done. >> he's talking about the civil war with britain, the first civil war, meaning the revolutionary war. >> oh, the revolutionary war. you were taxing us without representation. you should have thought about that. >> new york city should think about that, too. >> yeah. new york city should think about that, too. anyway, what's going on, ross? >> we're let flat, joe, in europe. advancers are pretty evenly matched to decliners. the ftse yesterday was up 1% in the sort of the post federally we had around the globe day. u.s. stocks finished down as we know during the session. right now, it doesn't get much flatter. it's just down a few poemts points for european indices.

at the moment, we wait for the u.s. to see where we go. suitly flat for the ftse. the xetra dax is up 0.08%. the ftse mi is down 0.2%, as well. take a look at some of the sectors here. even ily placed with sectors. utilities, basically sources down, they rallied the most yesterday. health care, chemicals, oil and gas a little bit firm. so no real direction, either, in terms of sector breakdowns. and we had some better news ow of the uk today. public borrowing for august, a little lower than we might have thought on the year in august. gilt yields, though, still fairly elevated, 2.9%. treasury yields here, you can see the difference in spreads. treasury yields 2.73, as well. now, you also were mentioning india today. the rupee actually weaken today, as you can see. dollar up to 62 after being down at 61 yesterday. we were at 70 a couple of weeks ago. we had a surprise from the fed yesterday, surprise from the inn central bank today. they actually increased the rate

by 25 basis points, sort of hiked rates and cut them, as well, because they rolled back from the liquidity tightening. they have a new government there who has just taken over, mr. rajan. no one expected the rate hike to try and curb inflation. so the sensex was down 1.85%. but maybe he felt comfortable in doing that because the fete were continuing the tapering. we heard from the finance minister yesterday, that said, tapering decision or the nontapering decision meant that the indian economy would grow by another 0.5% as a result over the next six months or so. so there we go. we got india in at the end, as well. back to you. >> thank you, ross. we're just counting our rupees at the table, becky putting them back. >> she has a lot. >> i was 60 rupees. >> how much is 60 worth, do we know? >> not much. >> we saw the chart. we can do the math. we'll do that after we get this next story. >> you could maybe get a cup of coffee for that, maybe not. honestly. in the meantime, we're going to go over to beijing.

apple's newest phone goes on sale in the united states today, but in beijing, they've already been on sale. eunice yoon joins us for the latest. good morning or good afternoon. >> good evening, actually. hey, guys. basically, i'm outside of apple's biggest store in asia. right here in beijing. people have been coming in and out of this store getting the latest iphones, the 5s and the 5c. this is the first time where chinese people can buy the iphone on the same day as americans. and a lot of people have been telling us that they feel proud about that and that it means that the countries are on equal footing. originally, there was a lot of discussion about the 5c. people were talking about how the 5c was going to help people expand its market share in china and fend off competition from its rivals that are making and selling cheaper smartphones. but today, all the talk has been about the 5s. people here love the technology and they especially love the gold model. because chinese people love

gold. and the combination of gold plus apple is making this particular iphone the ultimate status symbol. guys. >> eunice, thank you very much. we're going to try and get our hands on one of those later this morning. were appreciate it and we'll talk to you again soon. as we've been talking about, we sat down yesterday with warren buffett and brian moynihan in washington. this was ahead of a conversation they were having yesterday in front of georgetown students. while in d.c., i asked them about the biggest issues facing our economy including the debt ceiling, obama care and when the pace of hiring will pick up. >> one of the difficult situations going on in america is the producers of products are so efficient that they're not hiring a lot more people to continue to generate revenue growth. that is one of the dirveth issues of getting us out of the unemployment numbers. the underlying fact, the competition for market loans is as severe as i've seen it. so it's really -- it's pretty strong.

>> so what's holding hiring back at this point? >> you know, i think final demand is still uncertain for a lot of companies. they'll sit there and say i'll squeeze every ounce out of production. all this is good and it will break through where they'll have to do things. and have to says they're -- they're pro growth, just it's a grind. now, 2% versus 1% is better. in the second rt yeaher, there's a lot of fundamental aspects that we see across businesses that you just are relentlessly moving forward. as long as we don't do something to knock them off kilter. >> like not agreeing to lift the debt ceiling? >> well, that would be pretty

dumb. >> if they do have some sort of government shutdown over this, what happens? what's the fallout? >> it would get resolved in a reasonable -- the market is not going to fall apart. they expect washington will only act irrationally for a certain length of time. it would have to get solved. so i don't -- it's so dumb, you know, that it's disturbing, but it isn't disturbing in terms of investing or in yao business plans. >> there were comments in the last week, warren, that you said obama care was wrong. >> that was wrong. that was just wrong. some firm pulled that out and suggested they had an interview with me. i never heard of the place before. it just isn't true. >> what do you think about the health care initiatives that are being put in place because we are getting closer? >> what i have said consistently is health care costs in this

country are a tape worm of american business. and then when overall the economy what the has 17% of gdp going to health care. that lovts leaves 90 cents or thereabouts. it is a huge problem for the country and one we haven't fully addressed at all. but that is not the fault of obama care. those trends were in place ever since 1970 when we were spending 5%, a little over 5%. >> brian, have you seen any changes in your businesses or the businesses that you give loans to? any impact from obama care? >> well, i think just that the need to figure something out. when you're a company like ours that has 250,000 plus employees and has an hr team that's wonderful and has several thout thousand people, they can figure out how all these rules work. but if i'm running a 25-person

manufacturing firm or a 50-person manufacturing firm, to figure out how it works, all this has an impact. so he think it's more that element than anything else. we're self-insured. so if we can save money and provide our employees better health care for less dollars, that's great. i think the affordable care act, the debate around it has focused business on how much this is really costing them. and we're all working. at the end of the day, that's why we exist. so we were trying to -- it's in my best interest and my team's best interest to have the healthiest, most robust workforce in the world. >> so they looked through obama care. guys, they seem to think we'll be able to handle it, although they do both admit that health care prices and corporate leaders are looking at. joe, you mentioned it yesterday, too. businesses are trying to figure

out how they can get their hands around these costs that have been growing at rappit growth for decades. >> we're hurdling towards that date, too. >> yeah, october 1st is when the exchanges are -- >> in the journal, they'll fix this. there's a glitch in trying to figure out how much people should have to pay. but they point out that, you know, in the 36 states where the federal government has to run the exchanges because the states aren't cooperating, that at this point, they don't -- there's 32 million uninsured people and they only expect a small percentage to sign up initially. but they need people to sign up. and if there's a glitch, they can't do it. some of the states that are doing it themselves have said we're not going to be ready. the remaining 14 states that are running separate marketplaces, oregon has announced it's going to delay some features because it has software bugs. >> this is a pretty massive program to get things up and running. >> we're hurdling towards it.

we've delayed the corporate mandate. a lot of people -- >> whether you'll delay the individual mandate, as well. >> that might keep the government open. that might be the thing that they can back off and say, fine, we won't shut the government down to defund it. >> do you think they'll really shut it down? >> i don't think so. even grover norquist said they wouldn't. >> '95 and '96 is when they did it. the republicans in congress got blamed for it. you start thinking about who is going to get the blame, how this comes back around, it's tough when you're hold ago loaded gun like that. >> i don't know what's going to happen with -- you heard boehner said earlier, in case you haven't noticed, the house does not want obama care at least as it's currently constructed does not want obama care to -- >> they also said he's not going to make any suppositions on what the senate will or won't do, but he's sure that they will have something they get closer agreement next weekend. so he's planning on this going

all the way in the next half hour. we will tell you what buffett had to say about the economy and the consumer. they've got a really good idea about what is happening. bank of america has one out of every two households they're doing business with. buffett has a wide variety of businesses. come up, why microsoft's ceo steve boalmer says it's difficut to go to work. firsts, ever wonder how the behind the scenes dirt happens? you'll not believe what goes on back here. if you do, take a look at talking squawk. it's or blog and it has all that info and more. go to squawk@cnbc.com. this week's edition wraps up an amazing week. moynahan, druckenmiller, dodd, frank and captain underpants. to go squawk@cnbc.com.

time now for the executive edge. microsoft's ballmer says it's a little weird to come to work. the board asked him to get to know all of the top people at the company's competitors to scout out people who might succeed him.

he says he did and he liked the folks at his own office better. that is leading some to speculate that the next ceo will come from inside the ranks at microsoft. >> that's what i thought. i thought it was revealing and i thought it was nice that he said that. maybe there's great talent inside microsoft and yet we just don't now it because it never bubbles up. >> it could be. although he said he was asked to get to know the top leadership at all his competitors. allen mulally is not something you would think of because he's outside that circle. >> they happen windows. i don't think you could expect them to be google. i don't think you could have expected google to be facebook. the way he that it works -- >> you think you only get really

one, don't you? >> apple has more than one. >> jobs had more than one. >> google has sort of had -- android and apps and all these other things that they've developed, but maybe they're not -- >> but they didn't have the social -- you know, they're trying for that stuff. what i'm most excited about was google, and you've seen that they've picked up on my singulairty thing. but google is trying to solve death. >> that would be nice. >> we're talking about downloading your brain on to a computer, so that you are still you but it's on hardware and giving yourself a body of stuff that will last forever. >> larry elison spends a lot of money. >> yes, he does. all of it has to do with when computers have a billion times as much computing knowledge as all of humanity, you don't know -- you don't know what is

potentially possible. and we could hit that as early as 2040, according to optimistic people. you think it's crap. >> i don't know -- i just don't think we'll get there by 2040. i think it will happen. >> you're sure that there would be tidal waves and the arctic circle. you're sure a -- >> he's sure it's going to happen, just not before we die. >> yeah, right. by the way, on google, totally separate to move the conversation, they changed their logo today. did you see that? >> what? >> just slightly. they just started to change the letterings. >> forever? >> they've made it flat. it used to be sort of 3dish. >> yeah. >> there has been some pressure to not talk about the 15-year pause, which your newspaper even talked about in global temps, remember, back to 1998, there's been no increase.

germany is saying emphasize. but can you believe -- your movie. where 2005, wasn't it? so seven years. so there's been no -- even seven years before the movie came out, it had stopped. >> let me just say, i'm not edjumacated enough to -- >> it was ten, wasn't it? >> to refudiate what i'm saying. >> andrew's move was 2008 to 2011. >> whene come back -- we're wrapping up, can we go? >> i guess, yeah. ing. i'm hoping for the sing ewe layerty. i'm not as worried about the carbon dioxide. >> when we come back, a snapshot of the american consumer. first, though, as we head to a break, take a look at yesterday's winners and losers. [ male announcer ] these days, a small business can save by sharing.

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brian moynihan and warren buffett both spr some insight into the consumer. sheshg shire keeps the poll for the conzoomer through many of

its stores. >> our furniture stores were up 8% or 9% in august against the best figures they had had a year ago. carpet is strong. most of the businesses are strong. railroad, we had 207,000 cars last week. that's the highest of the year. the peak was 216. the low was 152. but we think this fall, if the harvest is normal, we'll just be at the peak that we had before everything hit the fan. but that -- i mean, you're back at the peak. that's -- >> yeah. >> better than people might think. >> and housing. but we have a real estate brokerage operation and i look at the median prices and all these different markets each month is -- what's taking place. and that's coming back. things are coming back. but the slope doesn't go like this and it doesn't flatten out. it just kind of keeps going. at a rather can't rate.

although you see pockets of strength in one area or another a little bit as you go along. but business is overall it's getting better. and i would say that -- well, look at our businesses. three quarters of them, at least, would be doing better. >> brian, you've got, i think, one out of every two american households does business with bank of america. what are you seeing in terms of the economy? >> we still see consumer spending. in the data that we see, the spending for the month of september so far is about 5% to 6% over last year's september. the internet spending grows at twice that rate. you might hear different retailers have different outcomes depending on whether they're at the internet or not, but overall spending levels are up about 5%, 6% for the year. we can see it continue to move forward. and when you talk about corporate side, they're very constructive. access, the market is there. so it's okay. and the questions, it just takes time and i think people wish we were going faster, but it's a little on the work to take a huge economy likes ours to get

it back to what people want. >> in the next half hour, we'll hear what people have to say about buffett's investment in bank of america. in the mean time, there are two funds that called the housing bubble ahead of the financial crisis, but the ones that did made it big. joining us now is paul mitchell. whitefox ramped up its housing short in 2006. that was the trait trade that was featured in michael loose lewis's the big short. paul, thank you for being here this morning. >> you're welcome. >> so you saw the housing bubble coming. and i just wonder if there's anything that you see happening today with the fed, with zero interest rates, with everything they've been doing with qe. do you ever any other big bubbles building up? >> potentially. i think that whenever you have a situation where there isn't free market price discovery of assets, that the potential for those assets to be mispriced on a risk reward basis is significant. to the greater degree that

repression exists, the likelihood that is significant. that's the way we feel today about sovereign interest rates and what people consider to be risk free interest rates. that at some point, the wheel of the market will be greater than the wills of any central banks and that you will have price discovery. and that price discovery could be disruptive to markets. >> are there any areas in particular that worry you or is this more of a broad call? >> it's more of a broad call. and what worries us and where we have to hedge our risks is that when these price discoveries happen, that they do not happen in an orderly fashion, but there will be a lot of dislocations. it will be very damaging to investment portfolios. so it's really our job as, you know, fiduciary toes try and hedge out those risks. >> so what did you think of the fed's decision not to tape they are week? >> i think they they -- i don't like to evaluate it from a -- i'm not an economist. we don't try and evaluate these from the merits. i think it demonstrates that the fed doesn't believe that they

can maybe -- once you engage in quantitative easing, it might be the case that you can never disengage and they're not going to allow efficient market price discovery, but the market will at some point impose that on them. >> warren buffett made the point yesterday that interest rates have a fuji impact. the interest rate will have an impact on just about every asset class that's out there. when you look around, did you find certain areas that you think are better positioned? do you find deals out there? >> we find deals, but the deals end up being very much one off type things, where you are under the radar type securities that are mispriced. we have finding a lot of interesting securities at rnbs. and it's not the general type of mortgage structures that people have been trading the last couple of years and have done very well on. these are much more nuances and are much more -- the price is representative of what's going to happen in interest rates

rather than what's happening in the housing markets. >> but you do like puerto rican bonds? >> we did. >> you did? >> they moved and rallied quickly in the last few weeks. so we put on a significant trade. we still like them, but it's not nearly as interesting a trade as it was. and you have to be careful there because there are many parts of the puerto rican bond market we do not like at all. so it's very specific to individual issues within the puerto rico y'allan market, not the market specifically. >> okay. paul, i want to thank you very much for joining us today. >> thank you. >> thanks for coming.in. coming up, a key issue for the pharmaceutical industry. first, a reminder to check out the "squawk box" blog, the story behind all the stories that you hear on air every morning. go to squawk@cnbc.com. ♪

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attention all you road warriors, are you getting ready for a dreaded business conference? next time around, try to get the boss to spring for this. the home of the old dominion bank offers office space in its original two-story vault. if it's not exotic enough for you, check out the camp in the emirates. at this camp, you're going to see that these are some pretty incredible things. it's operated by a dubai based company. it offers experience with arabian cushions and even camel tracks. for more on business travel, go to road warriors.cnbc.com. in the meantime, let's talk about drugs.

narcotic pain kill ergs are causing an epidemic of abuse and the next guess say they're often ineffective. a reporter who covers business and medicine, the author of pain killer, how are you? >> i'm good, thank you. >> help us with this. we think of oxycontin, a lot of these opiods, and i didn't realize until reading your book how ineffective they are and how much money not only consumer res spending, but the government is spending on behalf of taxpayers. >> the costs are gigantic. you not only have the cost of drugs, you have the cost of urine screening, addiction treatment, all kinds of things. we've been using these drugs with the idea that they're effective. they do work for some people. but it's actually a relatively small amount. there's no good, long-term data. but estimates are maybe 15%, 20%, 5% of these -- of the people who take these drugs

actually benefit from them. >> so how much extra money are we overspending, if you will, on all of this? >> there's no exact number, but there are billions of dollars being spent, not just on these drugs, but on ancillary services to these drugs. for example, urine screening, it's now typical for people to come in, leave the urine sample to make sure they're not abusing these drugs. so billions of dollars are spent on testing urine that could be used on other health care services, i.e. physical therapy, rehabilitation. >> so when we say it's being overprescribed, and there's a lot of drugs that are obviously overprescribed, and you think about all the incentives in the system that create -- that go on to create that, why do you think doctors prescribing this medicine, if it really is as ineffective as some of the articles you've written and the book that you've written suggests? >> because the health care system is not set up for effectiveness. it's set up for reimbursement.

doctors are set up on procedures, prescribing a drug, giving a cortisone shot. there's no incentives for outcome. until we reconfigure the system to pay for good outcomes, we're going to have these bad outcome peps. >> we've been debating obama care. boehner is going to have a vote on the floor. does obama care change this equation at all? >> there's some incentive to have so-called accountable care organizations where hospitals and other providers are paid for good outcomes. and that really should be the basis of our system, regardless of how it's reimbursed. are these treatments effective? are people benefiting from them? and when you look at this particular treatment, as i tried to sketch out in the book, there's not much evidence that many people are benefiting from it. >> the big manufacturers of these drugs are whom? >> johnson & johnson, a company called purdue pharma, indoe pharmaceutical. across the board, everyone has their own version of an opioid.

there's been a tremendous push to kred increase their use, spreads out their use. they were originally intended for cancer patients and people with very, very severe pain. >> you mentioned the really serious side effects. i think after an appendix, i think i took them for like three or four days and what happened after that was probably worse than -- and i'm talking about constipation. and it was probably worse than the -- any of the effects of the operation itself. it was beyond belief. >> yes. >> my life passed before my eyes. >> there are consequences to taking these drugs, but these drugs are necessary for, you know, after surgeries -- >> you have to stop after three or four days. you just have to stop after three or four days. >> you know, doctors need to prescribe these drugs to the people who need them. and when they prescribe them, they need to do them in very limited, controlled ways. i had a friend, his kid got this

drug for 90 days. it's a very powerful pain killer. he was addicted. and that's the tragedy of what's going on here. >> barry, thank you. thank you for the interview this morning. the latest book, a world of hurt. painkillers is the other one. thank you. >> it was. i described that to you at the time. do you remember that? >> yes. >> the world of hurt. >> that you were living in? >> incredible. it was like cement. i'm not kidding. and i thought, never again will anything happen. you can get seriously injured like that. you can. i mean, you can imagine. but if you never go again, it's a problem. i just wonder if 80% of the people shouldn't be taking these drugs, and all the money that's -- and then all of the things he's talking about. >> you've never had that. >> luckily, thus far, i have not had the experience. >> you're young. you haven't had any -- >> give me time. i had my appendix out. >> oh, you did?

>> appendix out, add nationwides out, tonsils out. >> la boughtmy, clearly, there's a lot of things going on here. >> try having a baby. >> yeah, right. are you a soccer fan? if not, a new ad campaign wants to make you one. a big bet on english premier league football, next. thank you orville and wilbur... ...amelia... neil and buzz: for teaching us that you can't create the future... by clinging to the past. and with that: you're history. instead of looking behind... delta is looking beyond. 80 thousand of us investing billions... in everything from the best experiences below... to the finest comforts above. we're not simply saluting history... we're making it. transit fares! as in the 37 billion transit fares

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we're going to win a lot of goals, going to get in the playoffs. >> no playoffs. >> there's no playoffs? again, my job just got a lot easier. ties and no playoffs. why do i even do this? >> one of the issues i had was what tackling was. >> that's not a tackle, just sliding around. >> soccer tackle, sir. >> all right there, gary. that's how you tackle. >> that ad garnered more than 3 million views in the first week online. now soaring well past 5 million. it's football just not as we know it. nbc sports launched the ad last month aimed at selling u.s. audiences on english premier league football. guy barnette is creative director and co-founder of the brooklyn brothers. . and the visionary behind the ad. we've got to -- this is good. we need this. because there are times when i understand the fanatic soccer

fan and then there's time when i give it a shot and i'm still -- i'm still not there. i need to be -- i feel like i'm missing something. it's great because the whole world loves it and yet there's something that americans miss still with soccer. >> maybe we need to find you a team, joe. >> to root for. >> to root for. >> and follow. that would help, right? instead of watching every once in a while watching some game. and if you have to wait every four years for the olympics, it makes it tough too. i think this is a great idea. >> yeah. >> and nbc commissioned you because you're a soccer fanatic, right? >> yeah, i've been supporting one team for about 45 years through various pain and disillusionment. >> which team? >> the team where we filmed the sudekis piece. >> and have they ever won? >> we've won some things, we

haven't won the premier league. we're hoping within the next couple of years we'll get to those heights. >> so what will we be able to see now on nbc? >> you can see, actually, every live -- every game. throughout the season. i think when i was -- when i first came to new york which was about 18 years ago, i had to scour the "new york times" for the lead table which they published every couple of weeks to find a result. then with the internet, obviously, it became easier to follow the games, follow the teams. and now it's incredible what nbc are doing by showing every single game live. >> i'm going to -- i think maybe this is the team i'm going to follow. >> you should. >> do you recommend? >> i can't say i'd recommend. i think you grew up in cincinnati -- >> i did. >> so you support those teams. >> i do. and that hasn't been easy. >> right.

you should be used to disillusionment. >> thank you for saying that. do they play manchester united? >> we do. >> you ever beat them? >> notice how we say we. >> it's always we. yes, i've been on the team for about 45 years. >> got it. >> they do, they have won, they have beaten manchester united. >> and nbc, probably was able to get jason to. that's a great ad. >> it was a lot of fun to do. he's an amazing talent. amazing performer. >> he's funny all the time. i guess when the camera wasn't rolling he was pretty funny too. >> i think he's incredible talent. he's probably got a career in being funny i would think at some point. maybe he wants to give up the movies and just stay in the ad business. but i think -- i think one of his greatest achievements was we flew in from l.a. on the wednesday and shooting for two solid days thursday and friday. i can't imagine how funny he would have been hadn't had the

jet lag. >> i'm going to do it. i thought that was something that made it hard for me to sit. >> it's the name of harry hotspur who founded the club in 1880 or something. >> there were times, we like football because there's a lot -- seems to be a lot more going on in our football. and i was thinking -- >> because there's more scoring. >> right. and i was think you like this football because you didn't know enough about our football. but now i'm thinking we don't know enough about -- >> we're trying to change that. >> that's what i see. and that's what i'm going to do. give it a shot. what do you think, andrew? >> i think you should start playing. >> i do like to do that. >> i played soccer. >> did you ever take your shirt off at the end? >> no. >> would you do that now? >> no. >> that was a good idea, wasn't it? it was worth a shot. >> absolutely. >> good to see you. >> thanks for coming by. when we come back, we'll have more of the top stories including consumers lining up at

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can the u.s. avoid a government shutdown. guest host larry lindsey sounds off on what needs to be done. plus, thoughts on who should lead the fed. more of our special interview with warren buffett and brian moynihan. >> playing out the last half of this game is very different than the first half. >> what they think of the move not to taper. and why buffett says bernanke should remain as fed chief. former new york city schools chancellors and knenewscor memb

as the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernan and andrew ross sorkin. we've been watching the futures this morn. and after a slight pullback yesterday, you'll see the futures are indicated higher this morning. right now, those futures for the dow are indicated up about 26 points. s&p futures are about 2 1/2 points above fair value. in our headlines this morning, apple's newest iphones go on sale in stores today. the 5c was available for preorder online. this will be the first chance for the consumers to buy the 5s. we have the 5s right here, just got delivered to us. it's the gold one, little shiny on the back. here's the front. andrew, you're better at this stuff than i am, so i'm going to

turn it over to you to make the judgments. >> can i do the fingerprint thing? >> i don't know. >> they told us not -- >> oh, there's a pass code on it. well, that mean -- anyway. >> your fingerprint wouldn't work anyway. >> oh, the pass code is one, two, three, four. whoever thought of that was clever. >> you'll forget that. >> here we go. >> i will forget that. but can i open an app or no? >> no, don't open the apps. >> here it is, it's a beautiful phone and that's about all it can do at the moment. >> it's got that gold color which is not as gold as i thought it would be. >> and this is where i would do the fingerprint, right? >> we're going to play more with this. >> oh, wait, now it's going to be completely synced only to you. >> maybe, i don't know. we'll see. >> no one else can open this iphone ever again. also, part-time workers at home depot will no longer be getting medical coverage from the company. shifting coverage to the new marketplace exchanges being created as part of the health care reform law.

the move affects about 20,000 part-time workers. they had been covered by a type of limited coverage plan that will no longer be allowed under the new law. and goldman sachs has reportedly suffered an unspecified financial loss because of a clerical error at the fed. goldman got none of the three-month treasury bills it had ordered at a debt auction and got more of the six months than it wanted. that apparently stemmed from a manual recording of the bill orders because of a computer problem. joe? from the fed to the budget battle, there's no shortage of market-moving events happening in washington. joining us for the next two hours, larry lindsey, former director of the national economic council. president and former federal reserve governor, currently ceo of the lindsey group. is that -- it's named after you, right? not after -- >> i don't know, s-a-y is john lindsay. so probably after me. >> he has a new book, as well,

"the growth experiment revisited: why lower, simpler taxes are america's best hope for recovery." that's one of the things that occurred to me, larry, was that there's a debate about whether qe-3 is actually -- whether it's effective or not. that, you know, when bernanke said we can't end it now because we still haven't reached our goals, it's like -- that's saying something, isn't it? after five years, after qe-1, 2, 3. you still haven't reached your goals? are you still you're on the right track? but i would argue maybe the counterfactual to some extent that the fed has helped because of all of the structural problems we're up against with taxes and regulation. >> well, the best that monetary policy can do is move demand around. can't create new growth, but it can take tomorrow's spending and move it forward. >> by lowering interest rates. >> moved it into risk assets, didn't it. >> but basically lowering rates

below what it would have been. the stuff that we would've bought in 2011 and 2012. they tried to get us buy in 2009 and 2010. and the stuff that we would've bought in 2013 and 2014 got moved to 2011. >> you mean the consumer or t the -- >> it's consumption. when you think about what a lower interest rate means, it means it makes sense to buy something sooner than you would have. replace your car, get a new house, buy a new machine for the factory. any of those things. that's what lower interest rates do. that's what monetary policy stimulus does. >> especially if they're not real lower rates. then it's almost like cash for clunkers. you use some of the future demand to make ends meet currently. corporations do that too when they try and, you know, they try to bring some stuff into the current quarter and may have a problem two quarters down the road. >> right, as time goes on, you do that more and more and you're constantly sucking tomorrow's demand into today and then today becomes yesterday.

when are you ever going to get off the cycle? it's very, very hard. and i think the fed is in that conundrum. doesn't mean they did the wrong thing. it means it's going to take a long, long time for them to hit their goals. and i think we're probably going to be in a qe type of situation for quite a while. >> so you don't think they're going to start tapering any time soon? >> i don't think they'll taper this year, no. >> wow. >> so if you go back and just look at their own numbers, right? they were projecting 3.2% for the second half of this year, we'll be darn lucky to get to 2.2. so if 3.2 is the condition, it's pretty hard to see how you're going to be tapering. >> so we're not talking about the middle of next year. does that push back when they actually start to raise interest rates too? >> they're going to have to figure that one out. my suspicion is when these sort of things happen, the central bank never quite raises rates when it wants to. it raises them because the market forces them to do. one of your earlier guests was

basically saying it's going to happen in a disorderly way. i think that's probably right. but by definition, you can't predict it. if something is going to happen, some glitch, some time the market's going to get tired and they're going to say, oh, guys, you've got to raise rates and the fed will have to accommodate. >> the big piece in the journal today. whose fault was all that? bernanke, he has cover because he says i don't remember seeing anything. and he gets to go back to his actual comments for the record. some of his foot soldiers and minions were definitely -- the market is either stupid or misguided or the market was responding to cues it got from the fed. >> well, i'm a member of the international brotherhood of central bankers and my union card says central bankers do not err. >> so you need -- that's your story and you're sticking with it. >> that's my story and i'm sticking with it. >> but the -- i think what happened here was the fed had

the best of intentions. it said if we get this goal, if we get to this employment, if we get to this growth rate, we'll do it, they didn't, they missed, they didn't do it. >> they were also forecasting growth rates based on thinking that this was working and they've been ratcheted down ten times in a row. they have missed their targets every single time. >> yes, they've been consistently overestimating growth as have our budget estimators. and i think that's an important thing to keep in mind going forward that we actually are digging a hole deeper and deeper. and, you know, if you want to think about head winds going forward. so we've got, say, $4 trillion of monetary unwinding to do. plus a few hundred basis points on the short end. plus we have a fiscal deficit that has to come down probably $800 billion a year at some point. you add all that up and you've got probably nine points of gdp growth as a head wind that you at some point have to unwind.

why people think with all that coming at us we're ever going to grow faster than we are now, it's kind of wishful thinking. >> is there credibility now damaged in terms of how they -- will we believe anything they say again? >> well, i think they said -- >> what's the thrust of this piece today? market misreads signals, they're quoting people saying, look, if you say something, then you've got -- scott minor was quoted. >> bernanke's right, he never said this was going to be when they would do it. they didn't put out a date, they said it's according to situations but they also knew that the market was expecting this. >> you have the market rely upon what you're telling them, what the fed did was decreases their credibility. >> i think the real lesson here -- >> you're not mad at them at all. and therefore you would have less? >> i would have less transparency. i would have a different kind of

transparency. i think the fed and every governmental body should be transparent about what its intentions are and explain carefully why it's doing what it's doing. i don't think that laying out every detail of every squiggle and tieing yourself to particular numbers is a good strategy and i would go back. i'm a volcker-ite in that manner. >> that's what stan druckenmiller said yesterday. >> is that the right word? i want to see. i like opaqueness -- >> it's opacity. >> is opaqueness okay? >> it is opacity. >> there's some words that should be words. >> opaqueness sounds good. >> it flies. but the word is opacity. >> it has or. >> oh, wow. >> so i'm legit. >> does it say repudiate. when you refudiate --

>> i have never used it in my life. >> you should. >> i'll have to get modern. we're also having becky's interview with warren buffett and bank of america's brian moynihan, their thoughts on qe-3. and the fed's decision to not start tapering. take a look at the futures and see how things are setting themselves up. "squawk" coming right back. ever wonder how the real magic is made? craving the behind the scenes dirt? do you wonder what we talk about in the commercial breaks? then the talking squawk blog is for you. go to squawk@cnbc.com. this weeks edition wraps up an amazing week of guests. buffett, moynihan, druckenmiller, dodd/frank and captain underpants.

welcome back, everybody. fed chairman ben bernanke not cutting back on stimulus measures just yet. and we've heard from a number of folks of what that move means for the market including stan druckenmiller. >> the punch bowl is running out, just about dry and two waiters came in and they're carrying the new punch in. we're going to really party now. >> we sat down with warren buffett and brian moynihan yesterday and asked them if the fed's decision not to taper came

as a surprise to them. >> i didn't have any great expectations one way or the other and it doesn't make a difference to me in terms of our business or our investments whether it's zero or ten billion or 20 billion. some day it'll stop and maybe it'll go the other direction. >> although you had been telling us for a while that you didn't think qe-3 was as effective as the earlier programs. >> well, i think that's right which is probably why it's being continued. it hasn't done the job yet that they -- presumably they hoped it would. but it -- i don't think it's been harmful. and what you see in the economy is just this gradual increase which has been going on ever since the fall of 2009. and now and then people think it's accelerating, sometimes they think it's decelerating, kind of creeps along. >> you made an announcement recently you'd be laying off about 2,000 people because of the huge decline in demand for mortgages.

i guess you're seeing some of what the fed has seen in terms of mortgage business. do you think this move to continue with $85 billion a month will make a difference in terms of what you're seeing in demand for mortgages? >> well, you saw it yesterday. so, you know, i think -- i think you had an economy which we see very constructive growing at 1.5%, 2%, we don't see a lot of downside risk, absent the usual things. i think the fed just thinks -- and i think the chairman's clear about it yesterday until unemployment's down, he's got to keep this economy going in right directions for fear it might go in the wrong direction and mortgages -- low mortgage rates help housing, housing starts helps warren's carpet factories, all that go on. >> if qe-3 hasn't been working until this point and the fed is saying we have to wait until we see the unemployment level come down, you need to see a pick-up in the economy. that's not necessarily something that will happen next month. >> no, who knows when it's going to happen.

no, you could be looking at this rate for quite a while. but i'm no good on that sort of thing. i really don't try and predict it. >> brian, i know the next fed chairman is going to be your next regulator. do you know janet yellen well? >> i can -- we know all the candidates. that's a question that anybody will answer. i think it's up to other people to make that decision. and, you know, we'll work constructively with all the candidates i've heard mentioned. i'm sure there are some i haven't thought of. but we always will. >> warren, how about you, who do you think the next fed chairman should be? >> well, i think bernanke. i think if you've got a .400 hitter in the lineup, don't take him out. he may want to leave but i think -- i think he's done since the panic five years ago, i think he's done a terrific job. and i think he ought to get a chance to play out a little more of a hand. >> meaning you think the president should ask him to stay

for another term. >> i don't think that's necessarily going to happen. but that's what i would do. >> if bernanke doesn't want to do that, who do you think should step in and who would be your second choice? >> yeah, well, i don't have a second choice. i don't know janet yellen at all. and i just don't know enough about the various candidates to come up with a second choice. i know bernanke in my view is very, very good. so i would not trade him away. i would trade some of our -- >> what do you worry about in terms of what the fed is facing and how difficult the exit strategy might be? >> well, whoever has that job at some point will have to do something unprecedented starting with a $3.5 trillion balance sheet still growing. and it's easier to buy than to sell. now they have don't have to sell. playing out the last -- the last half of this game is very different than the first half.

he would know more about that than i would. but i think bernanke ought to be given a chance to play the whole game rather than just the buying end of it. >> what do you think about the exit strategy? >> they've studied it, they've thought about it. they're playing out the exit strategy as we speak, right? in other words the dialogue and transparency and clarity. if you ask the people who work on the trading desks around wall street yesterday, a lot of them set up the wrong way. that'll happen, it'll go through the system, ten-year bonds restabilized. the first 100 basis points was a 60% move as opposed to 10% move. it has to be carefully crafted. not only in the united states but around the world. i think people getting the science of this and i think the clarity that has been through all the central banks will get out as the economy improves. they think they're getting out without the economy improving to the rate they want. given the strong economy growing at whatever rate they need, this will be, i think, less of a

pressing question given the first thing. and they're not going to give out until there's a strong economy. >> i don't think it's possible five years from now you have $3.5 trillion fed balance sheet. they may take it back to where they're not going one direction or another. they'll just decide the $3.5 trillion instead of $1.5 trillion. >> big thoughts there. >> and one thing we always see, you ask anyone else, and oh, yeah, i think any of the current candidates would be spectacular. everyone has that -- so to have him by omission say i don't have a second choice and then there's silence and you go, well, what about the people -- and he finally goes, oh, well, i don't really know janet yellen and -- he gave -- >> that's his point. >> but he really wants bernanke. >> well, he thinks bernanke was unbelievable in 2008. >> called him a .400 hitter. >> steered through everything

that happened since then. >> so who wants -- does bernanke not want to serve? would he serve if the president asked him? >> i think anyone -- if the president of the united states asked you to do something, you should do it. and i think, yes, i think ben bernanke would say yes. >> do you think the president wants him? >> no, i don't think the president does. in the first press conference where the subject came up, the president said i want the next fed chairman to be someone who will pay more than just lip service to increasing employment. >> i don't know how i missed that. i did not see that. >> you don't think bernanke thinks he's trying to deal with -- >> well, anyone who has read any fed statement, minutes, any fed anything, knows -- look, this is the kind of stuff -- >> how does the president not realize he's doing everything? you're saying he doesn't understand obama? >> look, i'm going to talk process not this president. each president takes home a briefing book. that briefing book goes through

staff clearance. the staff is not going to clear something that tells the president that something other than his actions had a positive effect, particularly now. what the president does get is question, why isn't equality up in spite of everything i've tried to do? the answer is qe. so i think the president has a very skewed view of -- >> incorrect view. misguided view. >> it's not one that i share. i'm not going to use those words. >> if that's the case, why would he like yellen? >> well, he didn't. the west wing wanted larry. there's no question about it. >> and why? >> every other fed candidate is a creature of the fed. we're going to have our 100th birthday party next month. it's a very close institution. and if you've been through the process, a new fed chairman with fed experience. there are some things he or she

is not going to do, like take sides in fiscal matters. larry, on the other hand, has no institutional loyalty to the fed, plenty to the treasury and white house. spent his career trying to pressure the fed to do other things. i think that larry was someone they knew they could work with if they had worked with and did not have institutional loyalty to the fed. i think he was in that sense the obvious choice to an administration that really is focused on regulatory ways of implementing its agenda because it can't do it any other way. coming up, andy reid's return to philly was a good one. highlights next. and then tech in the classroom, the ceo of amplify, that is you know who that is. education visionary joe klein will join us. "squawk" is coming right back.

chiefs coach andy reid making his return to the city of

brotherly love trying to guide his team to the first 3-0 start since 2010. and that he did beating his former team, the eagles, 26-16, my apologies to jim cramer. the chiefs took advantage of five turnovers and linebacker justin houston had 4 1/2 sacks tieing a team record for sacks in a game. the chiefs became the sixth team in history to start a season 3-0 after having two or fewer wins the prior season. but none of those teams should've made the playoffs. and be sure to catch this week's big match-up on sunday night on nbc. chicago bears taking on the pittsburgh steelers. up next, news corp. executive joe klein is looking to bring tablets to every classroom across the country. we'll talk the technology and media landscape in a couple of minutes. "squawk box" will be right back. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly

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welcome back to "squawk box," everyone. in our headlines this morning,

the house is set to vote on a bill today that will keep the government running but also de-fund president obama's health care reform law. house speaker john boehner called the law a train wreck that has to go. democratic senators have labeled this bill dead on arrival in that chamber. and the rebound in the u.s. housing market is prompting more consumers to pay their mortgages on time. that's according to credit reporting agency transunion. it says as prices have increased, the late payment rate has shrunk to a similar rate to that of credit cards. that kind of payment behavior was more typical before the housing bust and the financial crisis. and when we spoke to bank of america ceo, he told us the bank has benefitted from the housing rebound. >> the purchase businesses stayed pretty strong. so it's been relatively consistent. you're seeing that in the new home numbers. it's a consistent market. the re-fi market came down quite a bit. and so, you know, dramatic, we'll be down, second quarter, third quarter, in terms of

origination volumes. the purchase piece has been important. that's really a lot of the broader economy. people buying homes, new homes, getting built to do it. people who buy a home, typically a home someone else lived in, they improve it, which is good for the economy. re-fis are terrific for the cash flow of the individual that re-fis, but terms in job activity, we're down and we'll see on the quarter first two months weren't so bad because we were carrying over a big pipeline. >> much more of our interview throughout the show. okay. our next guest oversaw the largest public school system in the nation for nine years now bringing new technology into the classroom. with us now on the set, joe klein, the former chancellor of the new york city department of education. currently ceo of amplify, which is a subsidiary of news corp. where he's also on the board. could also talk about anti-trust, i guess. there's a lot of things we could talk about. but let's talk about amplify and education. you guys -- just explain what

amplify is doing and what the new tablet is all about. >> what we're trying to do is take teachers and give them the support, the tools, the content they need to excel. this is what it's all about. america's been falling behind in education. we want to accelerate the pace. technology's changed virtually every other field. what does the tablet do? the tablet is a digital assistant to the teacher. helps her get her work done more effectively. helps her ask kids, those kids who need acceleration. she can move them forward. those kids who need remediation, she can address those needs. something no teacher in the classroom has been effectively able to do. for the kid, it's a way to engage him or her in a very, very different, much much more active way. >> and so you're rolling these out in march? >> the tablet has now been rolled out. we've got some 14,000 kids in greensboro, north carolina, right now using it. teachers excited, kids excited. what's coming out in march is the digital curriculum, andrew,

like nobody's seen. this is going to be so interactive, so engaging. and behind it are some 30 or 40 games that are aligned with the curriculum to get kids involved. it's a new way to think about -- >> what's the cost of these tablets. >> $199 a year three-year tablets. >> and in terms of schools taking this program on, are you finding support from public schools, private schools, charter schools? >> all of the above. the big implementation we have going on is every middle school kid in gilford county in north carolina. we've had private schools that want to try the tablet. we've had charter schools we're working with. one here in new york. so it's across the board. it's the beginning of something that i think people ought to get prepared for. you've probably talked and seen a lot about these massive open online courses at the university. ours is to try to do something very different but along the same line which is use technology, mix it with human capital and try to drive a new

learning experience. >> in terms of accessibility, when you think of the new york city schools, do you see them using this in the next year or two? >> absolutely. when you see it in a place like gilford county, it's the great equalizer. for the first time, you can customize to the kid. kid takes his tablet home, you can extend the day or the year. it's really a different way to do business in the classroom. >> what happens, i just think about myself not being able to always figure out the technology i bring home. i have an i.t. department to ask for help. are there places the teachers can go that the kids can go to either get help along the way? or what happens if they drop their tablet and break it? >> well, absolutely. and it's an important question. everything we do comes with a team of people that literally are on the ground working with the teachers, working with the i.t. team. all of the kinds of things you're talking about are real world challenges. but we've got people in the

classroom working with kids. if the kid drops a tablet, replace it. these tablets are reasonably sturdy tablets. we build in some replacement in order to make sure, which will happen. everything we're about is to support the teachers, support the i.t. teams and make sure it works well. that's what's happening. >> my daughter -- it's fully the curriculum at her school and we have mixed feelings about it to some extent that when she's writing a paper now she's lounging back in her chair with her feet up. sometimes if i walk over really quick she's got horses moving around on her ipad. i think she's doing her homework and she's putting a different bridle on a horse for a horse game. but you can't stop the technology, it's going to happen. and you need the personal responsibility of parents to see their kids are doing their homework. but does give you a lot of opportunities to play angry birds or something. >> you know, joe, it's funny and that's why i think ipads are not

designed for the classroom. what we did was design something for the classroom. teacher can control all the apps in the classroom. >> i saw that video. lock them out of everything. >> lock them out of everything. teacher has tools in there in the middle of the classroom can say to kids, are you getting this lesson or not getting the lesson? something that makes it helpful. very different. >> andrew here with his -- i see him sometimes with his phone with the iphone. it can be distracting with kids with minds going elsewhere. >> well, he's a young digital native. a guy like me -- >> oh, i know. >> got to stop horsing around. >> actually, grekko told me that in my ear. >> the revolution we've seen in medical technology and how it's transformed the way people practice, the revolution we've seen in media and think about it, i mean, you're right, you're tweeting and you're trying to change the way you do business. that's going to happen in k-12. and it holds out some hope for something we haven't seen which

is to really raise the bar across the entire nation. and the excitement you see with kids and teachers. and i'm really keen on this. teachers have got to make this work. this is not to replace the teacher, this is to empower, strengthen and make her feel that she can get her work done more effectively. >> we always know what homework is assigned. we can find -- there are certain advantages. >> the parent can check on the homework, check what happened in the classroom. but for the first time, you can actually see how much time a kid is spending reading, which is really -- our whole theory is, if we can get kids to read twice as much, write three times as much and get five times as much feedback from teachers, we'll change the game. this enables us to do it. >> i want to switch topics and talk about a couple of things if i could. one, media landscape, but -- not more broadly, but more narrowly news corporation. you're on the board of news corp. you oversaw this investigation, if you will that took place in the company. what happens to news corp. in your mind after rupert murdoch?

i know rupert doesn't think there will ever be one. >> the board thinks a lot of talented people in the company. there are people that will step up. if anything ever happened to him that chase kerry was right there. enormous talent, obviously, rupert's children are people deeply involved in the company and i -- i think there's a lot of opportunity. the important thing about news corp., though, it's constantly taking on new challenges. here's rupert at age 80 getting into education and trying to do something big and exciting. we're looking now with our whole set of newspaper assets. looking at ways to think about new delivery systems, new content management, new ways to approach the market. >> do you think the newspaper business, which is now been separated into a different company is going to excel under

this new structure more than it did before? or do you think ultimately newspapers will be tough business and that's why they've been separated? >> no, i think they're going to excel for the following reason. i think they basically stood in the shade of the other companies and now they're out there in the sunshine. we've got to focus on them, we've got to think about new models. my own view is the newspaper industry's going to go through a transformation. but that content will remain important. and that's what we've got to focus on. and how we mix and match the assets and learn from all the various papers. from the "wall street journal" to the times of london to the australian, there's enormous reach there. and we've got to be smart about it. >> another guy you're friends with, mayor bloomberg. what do you think he does after his mayorship? >> this is the big question. how he does it, i'm not sure, but what i'm sure mike will do is become a continued powerful voice both domestically and globally for the things he cares about. enormously involved in the issues involving gun control.

very, very important issues involving health. he'll continue to be a big spokesperson on education. he's got the platform and the means. the specifics, i think he's still working out in his head. >> think he starts another company? what do you think it is? >> no, i don't -- i'd be surprised if he starts another company. but i do think he'll do a lot of philanthropic stuff. whether he'll buy additional assets to give himself increased voice and so forth we'll have to stay tuned. >> we started thinking about bernanke staying. i wasn't crazy about the third term. i think a fourth term is fine. >> i'll take him for a fourth term. >> what's the alternative? we might write in you. >> i know we have to go, but i am sure that -- >> why do we have to go? i'm having a good time. >> i'm sure you must have talked to other business leaders in new york who thought about or you may have encouraged to try to run for mayor. why did nobody else step up to the plate? >> that's a good question and there were a lot of good people. and i think the perception was this was going to be a tough

year for anybody who wasn't a conventional democrat. the city is running so well that people take it for granted. and that's a real problem. and at that point, i think people felt this was not the right season. but it's too bad i think good competition would help us. >> boy were you wrong we didn't get a great bunch of candidates. how many people? 9 million people? that's the top nine? i'm glad i'm a jerseyite. what's going to happen to the education system in the city? >> well, i worry about that because it's working. i'll give you one statistic to think about. this year for 20,000 charter school seats, 70,000 families, almost all poor families, children of color in the city applied for 20,000 seats. and here you have a candidate now running for mayor who says he doesn't want to expand the charter schools. in other words, he doesn't want to give the people exactly what they need in nashville. i'm concerned about that. i'm also concerned about any

notion we divide the city. leadership unites. when you start playing people off against each other and saying this versus that. that's the way you hurt a city. we're all in this together. city's got challenges going forward. great leadership brings us together and says let's work together to solve problems. increasing pre-k, creating good charter schools, holding people accountable. >> i hope the white house might be listening too. >> right. >> i don't feel that together as a country right now either. >> well -- >> okay, joel klein, thank you. thank you. >> appreciate it. coming up, big weekend in europe, always is. german chancellor angela merkel awaits the outcome of the election. favored to win a third term there. what are the headaches that will come with it? we'll take a closer look. european markets at this hour are just as boring as -- it's like watching grass -- painting grass. anyway, "squawk box" will be right back.

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well below estimates of 70 cents. revenue also below consensus. darden says it's been reviewing the spending practices and has identified areas where it can make, quote, thoughtful but significant cuts. it also announced its chief operating officer. drew madsen will retire. in global market news, the new head of india's central bank shocked the markets today by hiking the benchmark lending rate at the first policy meeting. in the meantime, germans go to the polls on sunday. it's the most important event of the year determining the fate of the euro. michelle caruso-cabrera is here with more on that. there is a new sheriff in town in india. this guy came in, another m.i.t. ph.d. his first policy meeting and hiked rates. up until now i heard people describe the indian central bank policy as incoherent. this guy started at m.i.t. if you weren't paying attention, india's been on the verge of a balance of payments crisis.

>> that happened on our show. >> yeah. >> what? i don't think so. has he? >> yeah. >> from the university of chicago. >> yes? why do you not think so. yeah, how many times he been on? two or three times at least. he's been on two or three times, one of our "squawk" -- >> i'm shocked i've missed it because i watch your show from 6:00 to 9:00 a.m. every single day. >> apparently not. he's brilliant. >> yeah, very smart. >> went to 7 1/2. that will help strengthen. >> well, first of all, it's a symbol, a signal, right? because up until now they've been floundering around. he made very clear, he did it in the face of the fact that the indian stock market fell roughly 2% because this is now threatening to grow, right. but he's concerned about inflation and the fact that capital was leaving the country in dramatic fashion. something needed to be done. you pay a higher price for it. started raising interest rates.

we'll see if this puts a decline to the rupe which has started to decline because the announcement. here's the one year of the rupee, 70 rupees to the dollar. this has helped it overnight. take a look at two-day chart and one-day chart. bam, there's the move as a result of the announcement and take a look at what the indian stock market did. it's going to see it declined sharply intraday when the news came out. are we done with this? can we move on to germany? >> let's talk germany. there's an election this weekend. angela merkel is extremely likely to win, at least the way it kind of works in parliamentary elections. she'll get the largest percentage of votes. here's what you need to know. if on monday we arrive and she did not win, there will be market turmoil because that is the expected outcome. we will not know, though, the final coalition. she's going to have to make these deals, we don't know how

the rest of the parties are going to do. it could be eight weeks before we know the final look of the german parliament after this. reason we care is because now that she has been reelected, we think we will finally know what germany's ultimate plan is for dealing with the euro zone crisis. greece needs more money or more debt forgiveness. they need something and how is that going to look when it all happens? that's going to be up to her. >> has it been -- has she been talking a tough line to get reelected and if she wins reelection, the guess is she'll pivot and be more accommodating. >> there's been almost no talk of greece or the euro zone crisis. it's all been local domestic issues. exactly, she did not want that on. she's purposely, when issues come up with greece, they've been padded over until we get to this point. they need something. you either have to forgive the debt and extend and pretend. okay, greece, you can have 100 years to pay us back at 0% interest rates and then it won't

look -- >> but they're really not paying them back. >> few pennies on the dollar. >> exactly, exactly. that's why we care so much about the german elections because it will decide ultimately what's going to happen with the problem countries. >> a "squawk" market master -- >> i'm sorry, joe. >> we don't take it lightly when we give that title out here. and they've gone on to great -- >> where is he on there? >> yeah. >> he's gone on to great things. yeah. yeah. >> is that him? >> yeah, that's him. >> yeah, i'll be darned, thanks for watching. >> he's an m.i.t. ph.d. >> yeah, i know. >> you know what they said on the beverly hill billies, you don't need to spell those dirty words around here, son, we're all adults. >> yeah. >> well, we should get him on again. >> i mean -- >> he might be a little more reluctant now. >> he's a market master. he almost went on -- >> they both have accents. is that why -- >> no, he's going to run egypt. >> going to run egypt, remember.

>> larry's working his butt off today to try to become a market master. he's done everything. >> i think the market's a little ahead of things of what's going to happen in germany, but we'll see. >> okay. >> she's not going to deliver all that much. >> she still has to form a coalition. >> that's weeks away. >> i think the rupee, they said we need to get our destiny in our own control. based on taper talk, we need to raise rates, right? >> nobody expected him to raise rates. i think -- >> we did because he was a "squawk" market master. >> market master. >> it was not news to us. coming up, more stocks to watch. "squawk" will be right back. ever wonder how the real magic is made? craving the behind the scenes dirt? do you wonder what we talk about in the commercial breaks? then the talking squawk blog is for you. go to squawk.cnbc.com. this week's edition wraps up an

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let's look at some stocks to watch. this is jason aldean, i think so. good year tire announcing $100 million stock buyback program reinstating a dividend of 5 cents a share. darden, earned 53 cents in the first quarter. it was supposed to earn 70 cents and we watched that closely based on how the consumer's feeling. we haven't checked in recently. but the restaurant operator -- it's identified areas where it can make thoughtful but significant spending cuts. and i wonder what they do with their health care right now and whether they're staying -- right, whether they're staying part-time. >> they sure are. >> they are, right. i bet they are. facebook upgraded. we've asked them about that. anyway, facebook upgraded, outperform from neutral. citing higher mobile revenues

and strong and sustainable return on investment. i wonder how long they've been neutral. and "new york times" declared a quarterly dividend of 4 cents a share. andrew's buying today. that's the first time in -- it's paid a dividend in a while. how long? >> a while. >> four years. coming up, jane wells has an exclusive interview with the infamous john mcafee. venture capital and why anyone would want to work with him again. you can't afford to miss it. with the spark miles card from capital one, bjorn earns unlimited rewards for his small business. take these bags to room 12 please. [ garth ] bjorn's small business earns double miles on every purchase every day. produce delivery. [ bjorn ] just put it on my spark card. [ garth ] why settle for less? ahh, oh! [ garth ] great businesses deserve unlimited rewards. here's your wake up call. [ male announcer ] get the spark business card from capital one and earn unlimited rewards. choose double miles or 2% cash back on every purchase every day. what's in your wallet? [ crows ] now where's the snooze button?

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warren buffett's $5 billion stake in bank of america is more than two years old. >> well, i got a chance to buy, you know, when the crop was half way out of the ground but not all the way up to harvest. >> we have more of our interview with the oracle of omaha and bryan moynihan. pimco's corporate bond guru says the central bank's outlook is still too optimistic. >> and to describe internet security as eccentric would be an understatement. mcafee is back with an exclusive interview with jane wells as a

third hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with becky quick and andrew ross sorkin. and with us today is larry lindsey. more still ahead. first, though, andrew has your morning headlines. and including this iphone -- >> iphone. apple's latest iphone models are officially on sale. you're looking right now at a live shot of the fifth avenue store in new york city. courtney reagan will join us with more in about 15 minutes. it's unbelievable. >> there were questions about whether they'd have lines this time around. >> unclear how much stock they have. there's some talk there's not a lot of stock out there. not a lot of stock, though.

we do have a new gold iphone onset with us courtesy of a lovely lady from at&t who came over from at&t wireless. and it's a pretty cool phone. i'm on verizon, but i should say that the one thing you can do on this phone you can't do on verizon is you can talk and surf the web at the same time. and they now claim their network is faster than verizon. i don't know if i have to reconsider things. you're on at&t? >> yeah. >> how about you guys? >> i just have the company issue. >> you're on att. >> i'm on the company issue. >> how could you not know? >> says it right on your phone. anyway, we tried to do the fingerprint thing but we were told -- >> does verizon have an incredible tournament in pebble beach? >> no. >> i'm at&t. >> at&t. stay on at&t. >> happily. >> verizon's named after a

bridge. you guys both go to that tournament. and -- i'm on verizon and now i understand why i haven't gotten an invitation yet. >> you want to go to out there and play golf in front of people? >> no, i don't. >> i don't either. >> also in our headlines, the new head of india's central bank has shocked the markets today by hiking the benchmark lending rate at the first policy meeting. analysts say the move sends a signal of his goal to fight inflation in the third largest economy. take a look at the indian rupee, 67.23. >> a 50 and a ten. >> that's not -- >> that's a picture of ghandi. >> it's been a while since i've been there. maybe a couple -- >> and by the way, if the new central bank governor looks familiar to "squawk box" viewers it's because we told you about him two years ago when we made

him a "squawk box" master of the market. i don't know if we can get him back now that he's running the place. but we can try. and then also in corporate news, part-time workers at home depot are no longer going to be getting medical coverage for the company. shifting coverage to the new workplace exchange. we've been talking a lot about this being created as part of the health care reform law. the move affects about 20,000 part-time workers. they'd be covered by a type of limited coverage plan that would be no longer allowed under the new law. >> radio viewer. >> we have radio viewers. >> you skipped his name. >> i say rajan. i said it. and we do have radio viewers. i hear from radio viewers, i think almost as much as -- >> i know. >> as tv viewers. >> that's why i say the boards, read the boards. >> look at that chart. we go, whoa, look at that. >> and they go, what are you talking about? >> let's take a look at the markets and i will tell you what the u.s. equity futures are doing right now. they've been higher this morning after giving background last

night. off the highs of the session, but the dow futures still indicated up by about 7 1/2 points. overseas in asia, you can see that the nikkei ended down just slightly. the hang seng up. at least at this hour, you'll see modest declines. these are declines of just points, ftse down by ten points. it was just over two years ago that buffett's berkshire hathaway took a $5 billion stake in bank of america and received warrants to buy $700 million worth of shares, the stock closed yesterday at more than double that. berkshire also collects around $300 million a year in dividends from the yield. >> important thing is he was doing the right things two years ago. and he laid it out and said, well, he's going to do it. it would take time. it's just the nature of things. he's cleared away the debris of

the past. not entirely, but -- he already made significant progress. you knew he was going to make more progress. he went back to the persuasionipersuasion basics of a positive. and he got rid of this stuff that was -- had been sort of accumulated as they tried to play various trends of the period from 2004 to 2007 or '08. and it was all in place, but it did take time. and so i got a chance to buy. you know, when the crop was halfway out of the ground but not all the way up to harvest. >> so it's been two years since that deal. you are in a position, brian, where you can call the preferred at any point. what does it cost you? $300 million a year? it's got to be good to have warren as an investor. >> why are you bringing this up? >> warren's capital, he has 700 million shares in our company

and i think of him as a common shareholder, gets a preferred yield. there's no plans to do anything. we've got other instruments that are much more expensive to our company that we're calling and his capital helped us do that, frankly and a lot of preferreds, we did $5 billion this year so far. last year we did some, so we were trying to get 8%, 9% instruments out. and there'll be some day when we'll talk about this. but that's far out there. >> but i'll be in the witness protection program. he won't be able to find me. >> he likes cash yield. the one thing about warren, he likes the cash yields. >> just in terms of the warrants that you have, are you going to exercise those at any point? >> well, eventually, but we'll wait until -- it's 90% probability at least that we will exercise them probably the last month, which will be eight years or so from now. there's no reason to exercise them sooner. there would be if there were a high dividend on the common or something like that. it's conceivable. but basically, we love the position being an owner and

we'll love it when we exercise close to eight years. >> where do you think he is in terms of rebuilding the bank and repositioning it. >> well, he probably can't say precisely where he is in relationship to some of the legal stuff. i mean, yeah. but you know that an enormous amount of progress has been made. you know that the expenses are coming out. just working through the mortgage problems. he can tell you the numbers or the amount that was costing quarter by quarter and how it's come down. and the balance sheet is incredibly better shape. he's gotten rid of a lot of the high costs and the amount that's coming due in the next few years in terms of debt has gone down considerably. it's just been improved in all kinds of ways. >> let's go to the regulatory issues. jpmorgan is paying $920 million

to settle a lawsuit and make it go away. you're in a position where you're not settling, at least when it comes to some of the mortgage targeters that the government has made in terms of mortgage fraud. why not settle? >> we always make an assessment that is pretty straightforward, which is what's the cost to defend yourself versus the cost of a settlement and whether ramifications of that settlement. unfortunately, we've had to make it more than we like over the last couple of years, but it was always an assessment. to go through a trial, it's tremendously expensive and typically leads you to rational conclusion. unfortunately, it always waits until you get right at the eve of trial so to speak and so we've got the case going on, $8.5 billion as we speak because that one is different because it was a case confirm settlement. we already settled. and that will go through the systems and stuff. that's a judgment we make. a lot of people say why would you pay anything. and the answer typically is we may believe we're absolutely right legally, but if it costs me tens of millions of dollars

to be right or tens of millions to get behind us, that's a judgment you make. disruption cost and just the work. >> would it make a difference if the government was insisting you admit wrong doing? would that be a deal breaker? >> you have to look at the facts and circumstances. i can't get into what j.p.'s case is, i haven't seen it. i've only read what you read. and that's a debate in terms of how papers work and how the lawyers work on that for you. but -- and i think it'd come down to the individual case. >> we had hank paulson on last week, the former treasury secretary and he said he thinks it's unfair what the government is doing in terms of going after banks that helped the o government out by buying companies in trouble and turning around and suing them for bad behavior that was happening before they bought that bank. can either of you weigh in on that? >> well, i think if you think something the government is doing is unfair, it's quite unwise to express it on national television. since i'm not involved, i'll say

it. >> it's nice to have -- >> so, again, that part of the conversation that is one that we've been carrying on for about the last week or so, it started with hank paulson last week. in some of these situations, the companies are being prosecuted for actions that happened at banks they bought in before those units. >> yes, and there is a line of reasoning, legal reasoning that said if i voluntarily bought this in order to make profits that i acquire the liabilities. that's not what happened here. the government pressured the companies, bank of america, for example, to buy these, to solve a problem that faced the country. and so now turn around on them and say, oh, yeah, we told you to buy it, we sort of use our regulatory power to force you to buy it and now we're going to punish you for things you didn't do. that's nothing to do with the

rule of law in my mind. i think it has a lot to do with the prosecutors needing to make headlines for themselves. and frankly all of this has turned into a big revenue source for the government. >> right. >> it's wrong. >> they know they're going to win. >> yeah, because they have unlimited resources behind them. >> there is no fair place. >> $920 million, which makes no sense to me. >> no sense. >> he came out publicly, says we made a mistake, they could have hid that, by the way. they had $8 billion -- you know that $6 billion loss, they had $8 billion in unrealized gains and i never understood why he came out publicly. >> because it's the right thing to do. >> and then look what happens. >> the fight -- >> would you ever do this again? you wouldn't. >> well, that's what moynihan even said. there are times even if you think you've done the right thing and you're in the right, just make it go away. >> let's remember what's going to pay. the next time there's a crisis, everyone is going to remember this. and when the government needs help, this administration has just cost the next crisis

administrator a lot of potential help. >> and by the way. >> not only this administration -- a lot of the times it's -- >> state attorneys general. >> it's our legal process right now, which is ceasing to be a rule by law, it's ruled by lawyers. >> i don't know if you know it, but in dodd/frank, there's a provision that prevents the government if they are bailing somebody out in any kind of case from indemnifying them. >> right. >> what you would think would happen is the next time someone calls jamie dimon and i want to buy this, i can do this, but you have to indemnify me from everything. the law prevents them from doing that. >> and anyone who cares about civil liberty should pay close attention to what warren buffett is saying. it's not a good idea to say it out loud. that says a lot about the state of -- >> they would never use their influence to try to punish you. >> i don't think that's something new. i think government has had a heavy hand for a long time and if they want to come after you, there's a lot -- >> no, the tea -- what happened

recently with i.r.s., that hasn't -- that's been since nixon. >> if you were a company and decided he wanted to go after you, he would and that has been the case. >> hopefully not based on who you gave campaign contributions to. >> i think a lot of bad things have happened in the past. >> i think we set some new -- >> new bar. >> yep. when we come back, we have "squawk box" market master marty feldstein joining us to talk about the fed, the economy and a lot more with our guest host today. wait until you see this, the latest interview with john mcafee, talks drugs, crazy videos and his new wife in an exclusive interview with jane wells. ever wonder how the real magic is made? craving the behind the scenes dirt? do you wonder what we talk about in the commercial breaks? then the talking squawk blog is for you. go to squawk.cnbc.com.

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the market at least for one day welcomed the fed's decision to stay the course this week. but is it cause for concern? joining us now, former chairman of the council of economic advisers under president reagan. and a professor of economics at harvard. and everybody has sort of got an opinion on this. and even buffett yesterday, he said, okay, yeah, i watched what happened. it's not really going to change whether i invest. maybe a couple years from now the fed's balance sheet will be at 3.5 trillion. he didn't really express that much concern or worry about it. but then other people think it just indicates we're never really going to have a clean exit that we're basically addicted at this point or have an economy that's addicted. where are you? >> well, i think the fed has confused things. i think they've talked about

communication, clear messaging. and then what they did was to say we're not enjoying to tell you what we're going to do. and we're going to keep looking at the data and it's anybody's guess as to when we will be begin the tapering. that's a bad thing because it adds confusion to the markets. but to me, the real problem is these abnormally low long-term interest rates, clearly below anything that's sustainable, leading to risk taking that's dangerous for the economy. >> and maybe inflating the next bubble. but you made a good point. if you have the data dependency part in your back pocket, then anything you say that the market is taking signals from that you might do, all bets are off with the next economic report so it doesn't even help to be transparent at this point. >> exactly. it's not transparent about anything. what i've been saying for quite a while is that the fed and ben

in particular has said, look, we have to look at the costs and benefits of continued quantitative easing. the benefits are very small now and the costs in terms of risk taking are getting bigger and bigger. so i think they should say regardless of what's happening in the economy from one week to the next, the cost benefit analysis tells us that the time has come to ramp down. >> that's assuming one of the other things they thought of was the ratcheting down of inflationary expectations, as well. and even if the positive effects are getting smaller and smaller, they have cover. it's like why wouldn't we do this? if there's no, if inflation has actually ratcheted down from where it was before and the economy is still hung over from five years ago. it's still responding to the deleveraging. why wouldn't we do this? people on the left, krugman that think they should even be doing

$100 billion, $200 billion a month. >> the point is not about inflation at this time. it's about the financial risks being taken by investors, banks and by foreign markets. that's the current risk. eventually all of this could come back and bite them in the form of higher invasion. but we don't have to wait for that to see that there are costs that outweigh the very small benefits if any of continued quantitative easing. >> yeah. and since no one can see how that's going to play out, we don't even know where the bubble is and how it would manifest itself if it were to burst. do you have any idea where that would be? can you look -- >> well, you look at the banks, look at the kind of loan conditions that the banks are making. you look at the willingness of banks and other investors to make long-term mortgage loans at very low interest rates. all of that is serious risk taking. we saw what's happened in a number of emerging market countries as investors have

said, well, maybe the time has come to pull back. so it's disrupting those markets. so i think there's a lot going on that really has to -- has to be taken into account by the fed and they're not taking into account. >> we've got to run -- yellen is going to be it. is that worrisome. same policy we'll have, i guess, right. >> well, the fed has been giving us surprises. larry summers has given us a surprise. when the president announces that it's janet yellen, we'll know it's janet yellen. >> all right. thank you. thanks for coming on today. we appreciate it. appreciate your time. >> good to be with you. >> market master, i think. should be. >> he is. >> hard to keep track. coming up, the latest version of apple's iphone now on sale. we get a report from courtney reagan at apple's flagship store in new york city. jane wells' interview with john

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risk includes possible loss of principal. welcome back to "squawk box." apple's latest iphone now on sale. just past 8:00 eastern time here and courtney reagan joining us from apple's flagship store on fifth avenue with more. good morning to you, courtney. >> reporter: good morning. what a morning it's been. less than half an hour ago the apple iphone 5s and the apple

iphone 5c went on sale to the general public. and the lines have been really impressive for these new phones. remember, there was no preorder for the 5s this time. and there are also new features. so the demand has been pretty high. when we stopped by yesterday afternoon, we found about 30 folks in line. the first two in line have been here for two weeks. this morning at about 5:00 a.m., three hours before the doors opened, we estimated there were about 450 people in line. that line has grown by the hundreds. it stretches down 58th street, back up madison, around 59th and then back a little up fifth avenue. and they have been beginning to let the folks in. you can hear the apple employees cheering behind me. separate companies not affiliated with apple have made waiting in line worth it for a number of folks that have been here camping out. passing out things like branded apparel, hats, pins, anything that can get their name out there because they know, they're

attracting the attention of passers by and media alike. they basically offered a deal. we advertise their company, they pay us $800 each to get whatever phone we want. >> we get food, we each get a phone. they provided us with t-shirts, sweatshirts, sleeping bags and they told us, you know, anything you need, let us know. >> they set up an expense account for us and we order whatever we want. >> so they say they all get in line for the experience but, of course, all the free goodies certainly help. we checked out a verizon store a couple of blocks away. it had a small line there too. i think demand for this is going to continue to be high as the sales continue on throughout the day. >> that's interesting. i was wondering as i was looking at the line of people, what in the world makes them do stuff like this. in some cases, there's a big incentive that comes up with it. okay. they're not as crazy as i thought. courtney, thank you. when we come back, a quick

check on the markets as we prepare to close out the trading week. and then one of the most colorful characters in the business world, john mcafee wanted for questioning in belize for murder. he fled to the united states and now he's making internet videos and speaking to cnbc's jane wells. we have that interview right after this. as we head to a break, though, here's what john mcafee said on "squawk box" back in december. >> i've heard about the bath salt stuff but then i heard you haven't done any drugs in 30 years. is the bath salts -- you google it, bath salts enthusiast. is that part of the hoax? >> well, i did a hoax on bath salts once, absolutely. but let's, okay, bath salts are used by people who don't have a lot of money in order to get a high in a way that makes you want to eat people's faces. if i decided to start doing drugs again, i have the resources to do good drugs. ♪

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welcome back to "squawk box," let's check on the markets. rick santelli joins us from the cme in chicago. steve liesman is with us onset. and we had one day, rick and steve, and now -- >> no, that's it, one day, boom. >> why?

>> i don't know. rick, i'm going to let rick give his thing on it, i think it's more important. i don't think the fed gave the guys who would go long the long end any security about how long to go the long end. and plus you got the better economic data. but i'm in rick's department there. i'm going to get out of it. go ahead, rick. >> well, you know, i don't know. simply stated when our discussion is has the fed given enough guidance on whether you can be long the long end? my answer to that is i would hope that we can get back to economic guidance to make that decision. and i really think that says it all. >> rick -- >> and i'll stay in that camp. >> i want to put up what -- we're going to do the fed matrix now. take the blue pill or the red pill as you guys like. let's -- here's the fed matrix. the taper timing here, growth concerns, that's my bad. there shouldn't have been a check mark in october there. anyway, guys that didn't work out as i planned. the bottom line is that when you

look at these three things, larry. when you say fiscal concerns, could they be done by october? could they be done by december? giving the continuing resolution would take you through the middle of december which is three days before the next fed meeting. the growth concerns, october, the end of october, you get the gdp report if current trends hold, you would be below 2%. let's say you get below 2% gdp end of october, would you then in the december meeting taper? okay. and then fiscal concerns is this very difficult to understand feedback movement. the fed says it's going to taper. rates go up and then the fed says it's not going to taper because rates went up. so, larry, how do you solve that problem? give us a sense of how you might in the market today get a feel for when the fed could actually taper? >> well, i don't think they're going to be tapering for quite a

while. and i would focus on the growth issue. and this is something probably the best time for them to thought about it was last december when they went in thinking about what the exit strategy is. they laid out the exit strategy very explicitly in terms of growth and in terms of employment. we're nowhere near close to that. there's nothing on the horizon that suggests we will be anywhere close to that for quite a while. second half of the year is probably going to be two or something like that, not three. >> right. >> right. >> the unemployment rate if you factor out the decline in labor force participation, right, even the age adjusted is nine something, not 7.3, nowhere close to where they would want to be. so, no, if you have the commitments that the fed laid out in december, i don't see an exit as plausible and consistent with those goals for quite some time. >> like not this year? >> it won't be this year. >> he thinks this is way into 2015, i think. >> rick santelli here. let me get your opinion on

something. let's assume as joe and i have been talking about and some of the talking about. if the new normal is what we're looking at, you know, if you look since the last quarter of '08, we've had some spurts in gdp but not sustainable. we've had some really low levels, those weren't sustainable. if we just stay at this immedia mediocre rate. do we go to a $7 trillion balance sheet and none of these fed puppet masters are ever going to be able to remove it because it's just never a really great time? is that possible? should we start looking maybe at the level? maybe they're targeting a $4 trillion balance sheet or $5 trillion balance sheet. your thoughts. >> well, you know, you and i, rick, probably agree on what the december decision should have been. but if you've made the decision that that's the way you're going to proceed, i think there's a case for being consistent about it. and you continue down the road

until you achieve the goals. now, you're suggesting that what they do is they say, well, we really made a mistake last december. this isn't working out. it's not as efficacious as we thought, that's a whole new argument and a whole new communication strategy that the fed miwant adopt at some point. but i don't see that happening any time soon. >> so any bad -- government or nongovernment banking officials are in for a penny, in for a pound right or wrong. that's scary. >> they said they were in until they achieved certain targets. and particularly on the employment side. i think that as far as credibility goes, that is the more credible solution. their credibility isn't a commitment to the market, it's a commitment to the country. and they said we're going to work on it until we are happy with the condition of the labor market. nobody should be happy with the condition of the labor market. >> we've got to go to jane wells, rick. thanks.

let's go to jane wells for her exclusive interview with eccentric internet security pioneer john mcafee. and now for something completely different. you can say like a virus, john mcafee is back. he faked a heart attack to avoid extradition from guatemala. he landed in portland and then, well, he started making cheeky videos. >> reporter: mcafee updates at horrible times almost like the creators want you to die. >> this video mocking his own company, his old company, including bath salts and simulated debalkry. and last week there was a false report he died of a drug overdose. he took to twitter to show he was very much alive. this week we caught up with in an exclusive interview in the bay area with his wife janice. he's meeting potential technology partners about a new

product. warner brothers has optioned a movie on his life. but first, we talked about that unsolved murder in belize. >> who killed him? >> i have no clue. >> no clue at all? >> you know, belize is the murder capital of the world. but it's a very violent, very dangerous place. >> did you murder your neighbor? >> absolutely not. >> were you manufacturing drugs? >> absolutely not. >> are you drug-free? i mean, who's john mcafee right now? >> do i look drugged out? >> no. >> okay. and no one has ever seen me looking drugged out, i've never felt drugged out. >> that's not an answer to the question. >> i've been drug free for 30 something years, i've been alcohol free. >> who do you want to play you in the movie? >> you know, anyone will work. i actually would like the gentleman from "breaking bad." >> stay out of my territory. i think he would be perfect. >> some would argue he's already

sort of playing you. >> all right. as for his next project, mcafee will reveal at an event in silicon valley a type of communication technology product he is self-funding. this is all he would say about it. >> you see these people wandering around the park here, if they were all connected in a way where within 50 feet or 100 feet you could set. if there were people in your group or friend set or what have you, you could all be communicating. and your friend set would constantly change. >> a very localized. >> yes. >> how much are you worth now? >> i don't know. it changes every day. not as much as i used to be. and maybe less than i will be. >> later on "squawk on the street," mcafee on the nsa, google, the nazis and how people should not be paid for their ideas. joe?

>> it's funny you ask him the movie question because i -- before you said that, pacino, they're almost separated at birth. he'd have to dye his hair lighter. >> i think brian cranston is a brilliant choice. >> but he's still out and about. >> yeah. >> i like pacino. >> cranston's done this role. the whole role. >> also if you could age christi christian bale. >> he could do that. think of the way when he -- remember when he was in "the fighter." >> yeah. >> he said on interesting stories about him too. >> he has. he gets mad if, like, if you mess up, walk in front of me when i'm on, did you see that? >> yep. >> is that you joe? >> what's that? >> yeah, you got a short temper sometimes from what i hear. >> really? you're making that up. >> i'm making it up, yes. >> oh, yeah.

>> just walked in. >> that's okay. we need mac, he's great. thanks, jane. i don't have a temper. jane wells, that's bizarre. i remember when we had him on it was sort of similar. he likes the attention, though. that's for sure. >> how did you track him down, jane? >> actually, jeff pohlman our producer tracked him down after i got wind of report of his alleged death of an overdose at the palms casino resort in las vegas. we couldn't get ahold of him at the time. jeff did and finally said, you know, you and jane should meet and why jeff thought that would be a good idea. >> because you two seem like the perfect couple. >> well, anyway, since he's coming out now in silicon valley, he's going to be talking this week and revealing this new product. he is sort of trying to make legitimate reentry into technology and development. we asked him if anyone would

invest in you even if you wanted their money? you'll hear that later. >> jane wells, thank you for that report. what else to say? coming up, we're going to continue our what's working series of pimco's mark kiesel. coming up right after the break. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ]

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decision to put off tapering for now. could that spur a new wave of corporate debt issuance? joining us now is mark kiesel, the global head of corporate bond portfolio management at pimco. thank you for being with us today. >> thank you. >> what we've seen happen in the bond market, you think this is a temporary situation? or that this is going to be the new normal? >> well, i think the new normal is basically below trend growth. pimco sees 2 to 2.5% growth. the fed sees three or higher. we think the fed's going to be on hold for longer. they need higher inflation, they want more jobs. and i think this is very dovish. and the yellen transition we think is going to be good for risk assets near term. overall, i think it's good for equities, good for real estate and good for corporate bonds. >> when it comes to corporate bonds, i know there are some you like above others. what about ford? >> well, we like -- overall we like industries growing fast. ford grew retail sales 20%. they had the highest sales in the last seven years last month.

they actually sold, believe it or not, an f-series truck every 42 seconds. ford's doing very well because the average age of the car on the road is 11 years and there's a huge replacement cycle. so we see ford is a rising star. >> every 42 seconds? when was this time period? >> this was in august. they sold one truck, one f-series truck every 42 seconds. >> when it comes to the housing industry, you like k.b. holmes and toll brothers. we'll be getting news when they start reporting their quarterly results. >> well, in general, there's a land shortage. there's more demand for homes where people want to live than there are supply of land and houses. k.b. homes prices were up 25% year-over-year, toll brothers prices were up 13% year-over-year. k.b. homes has probably one of the premiere land positions in southern california. which is booming. prices up 20%.

they have probably the best land position and their average selling price is almost twice. so they're less interest rate sensitive. >> the one question people still have was were toll brothers and some of the other home builders hurt by the rise of interest rate that happened in june? >> i think the higher interest rates will affect more first-time buyers. the biggest issue going on in housing right now is really bottom up. they simply did not own enough land for forward commitments. so basically there's a land shortage. you're not going to be able to bring the houses on fast enough where people want to live. and that means that prices are going to adjust upward. >> all right. mark, thank you for joining us today. >> thank you. coming up, jim cramer standing by at the new york stock exchange. his comments on warren buffett and a whole lot more from larry lindsey.

ever wonder how the real magic is made? craving the behind the scenes dirt? do you wonder what we talk about in the commercial breaks? then the talking squawk blog is for you. go to squawk.cnbc.com. this week's edition wraps up an amazing week of guests. buffett, moynihan, druckenmiller, dodd/frank and captain underpants. go to squawk.cnbc.com for more.

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when we come back, our guest host has been larry lindsey, former economic director under george w. bush. we will have the "last word." >> the stock of the day is coming up. you're watching "squawk box" on cnbc, first in business worldwide. 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 love having a free checked bag

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welcome back to "squawk box." it's time for the stock of the day. >> which is darden restaurants, restaurant operators, quarterly results missed the mark by a pretty big margin. company is warning shaky sales. >> we were talking during the commercial break what's going to happen this fall with the debt ceiling. i looked at you and said there's really going to be a government shutdown and you said -- >> nobody i know as of a week ago had any clear path to success. that's scary. nobody in either party. they haven't been talking. not only has the president not been talking to the speaker since january, his people

haven't been talking to boehner's people, his people's people haven't been talking to their people. there's logistics involved, that's problem number one. i think what boehner laid out yesterday and they're voting on today or tomorrow is probably the start of the path that avoids the shutdown on the 30th. but what boehner laid out also was the two bites at the apple issue with regard to obama care. obama care is the 800-pound guerrilla sitting in the room. we have a bill that when we passed it we thought wouldn't work, we kept waiting for a technical correction. >> they headed to reconciliation because brown got elected and they lost their -- >> brown got elected. they either had to bring the republicans into the negotiation or pass a senate bill that was passed, written at 3:00 in the morning the day before christmas break that no one thought would work. they passed that bill. it was never corrected. we're ready to implement it. we saw what happened to home

depot, ibm, time warner, the afl-cio of all people actually came close to calling for its repeal. this is a bill with real problems. i think what they may end of doing is actually not in the bill that's going to be voted on to keep the government running after september 30th but in the debt ceiling what boehner did was to tie one-year delay in obama care to a one-year extension of the debt ceiling. if you have a bill that you're about to implement that looks like a train wreck to just about everybody, why don't you take the one-year delay? i do not understand why the president thinks it's in his business to implement a bill that looks like it's not going to work. to me that's the only path out. but that is not a path that looks good. and republicans are not about to back down from that demand because -- >> the president said he won't negotiate over the debt ceiling. >> there's that little snippet that the only people he'll negotiate with it putin and

assad. that ran yesterday. it was a little bit human beingbein being -- humorous, i thought. every debt ceiling issue passed since 1980 -- 70% of the government is automatically funded. if you actually believe in the power of the purse, you're going to have to have a debt ceiling vote. that's where the power of the purse comes into play. sorry, mr. president, you may not want to negotiate on it but that's just the way the constitution works right now. >> do you think it's how the constitution should work? >> there's lots of things we might want to do differently. the problem comes from the 1974 budget act. that's a conversation for another day. by taking most of the spending out of the appropriations process, you have taken away the classic power of the purse. if you've taken that away, the

only chance you have to vote no is at the debt ceiling. >> thank god it works that way is where i'm coming from. >> it's not an elegant way to have it work. >> you go to do something. >> look at what's going to happen with coal and utility. there's plenty of things you can do without congress having a say, which he's doing full force. at least in this case you actually have to get some other people to agree with what you're doing. >> and that's the power of a president. so what legislative power do you have? there remains only one, just like there was in the 1640s. that's where the power of the purse originated, that's where they're coming back to. >> can we read about that in your book? >> you can find out about tax policy, the 1980s, the original growth experience, the 1990s. there are some things in here that happened in the '90s that the "new york times" didn't

cover, why revenue grew and things like that. >> no need to look at me. i wasn't around then. >> he would have covered it. >> absolutely. we had bracket creep and we had the rich getting richer. that's what the book is about. >> larry, thank you for being here today. >> thanks for having me. >> have a good weekend, everybody. thanks for joining us. right now it's time for "squawk on the street." >> good friday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber and kelly evans on the new york stock exchange. cramer is off today. a house vote in washington to strip out health care funding, german elections on sunday. a ton of fed speak. for the time being we're hanging on to some slight green arrows. at least there's apple, building some excitement with lines