cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. in our headlines this morning, wall street is once again paying close attention to washington today as we move closer to the october 1st deadline for congress to pass a resolution to keep the government funded. late yesterday, senate minority leader mitch mcconnell said he would not support the tactics of three tea party backed senators threatening to fund a bill to solve our government. we have former clinton white house press secretary joe lock hart and jim nussle. president obama is going to be addressing the united nations general assembly today in new york. he can expected to speak on syria's chemical weapons, mid-east peace talks and iran's nuclear pursuits. iran's new president will speak today. traders says the oil market will be watching body language between the two men. will they say hello to each other? will they shake hands or will they avoid each other entirely?

also on today's agenda, we have key economic data. last month's reports show price gains slowing in 14 of the 20 cities that were surveyed. >> chrysler filing paperwork for an ipo up to $100 million. the ipo will be underwritten by jpmorg jpmorgan, coming more than four years from the automaker emerging under management. bill fight going on between the unions there which led to this. we'll talk about that. also, the justice department now reportedly preparing to sue jpmorgan in the mortgage bond it sold in the run up to the financial crisis. we should note, as we should whenever we talk about some of the mortgage related sales

precrisis, some of that came from bear stearns and from washington mutual when they acquired. bank of murk now must pay more than $2.2 million for 1100 black job applicants. the decision awards back pay and interest to former candidates for teller and entry level administration and clerical positions in the bank's hometown of charlotte, north carolina. joe, over to you. >> andrew, let's check on the markets this morning. swirl, all this fed speak, which we're going to talk about a lot more. fascinating. but the turchs are not doing much. there was a weak point yesterday. >> it was the third session in a row, though, the markets were lower. >> and with goldman sachs and mikey and visa, it should have been higher.

crude, 103. pooej people talking about 100 to 120 is where we're going to stay. >> a 6 1/2 low yesterday. >> and gold is all the way back down. for a while, i thought that it meant that they were going to taper in october. now i'm reading everything, you know, from dudley and others and it sounds like the roach motel that we're never going to check out of. but we'll see. and the other thing that kills me is fisher. i love the stuff fisher says. but they're so collegial. >> fisher was pretty out there. >> yeah, he was. yellen would make a great chairman. she's dead wrong on all her policies, but she would make a great chairman. well, why would she make a great chairman if she's dead wrong? >> because it's about creating consensus. >> right now they're like blind mice. so we're never going to get out. the dollar is like 1.35 now,

liesman. i blame you for like 90% of this. you meet and talk to all of them all the time. talk some sense into them. >> tell me what to tell them and i'll tell you what -- >> taper. they should have last time. >> i agree, joe. >> that was a huge f up, i think. >> i agree. >> i don't know what "f" stands for there. i guess it's -- >> fouled up. >> fouled up. >> you're right. you're really -- >> it was that english degree coming in handy. >> yes, it is, for the first time i can remember for you. your russian usually comes in more handy. time for the global markets report. all this merkel stuff, too. i saw in this morning. it's a huge victory, 41%. if we tried to run a country

like that over here, 41% and it's a huge victory. you can't run a country like that, ross, you can't. >> it's proportional voting, proportion i can't tellal representation, joe. >> the idea that you could get a majority in one of these foreign countries -- >> you know, the constitution, the anniversary is september 17th. my daughter wrote something about it. 100 different countries have copied our constitution to get it right and some of these major constitutions still haven't seen the light. >> although germany is not going to -- >> we're not doing so well over here, joe. >> we know it's messy. we've said that before, that it's messy, but the results speak for themselves. there's a good piece in the journal today about what now you really have in germany. the gilt is status quo. the hallmark of the german consensus is an all providing state that taxes, spends and

regulate. we'll see. >> not saying i want to trade up, that's for sure. this is the best place, but we have a problem, too. >> well, this is the way it works. and there's another piece in there with warren hatch about how many times previous administrations and it's been the way that it works. you get to a debt ceiling. you get some concessions. you get some revenue. you change some things. it's not no, i'm never going to negotiate. it's never been like that before. >> it's not never shut down the government. >> yeah, but it's not auflt table. this is the way people talk, but there's no talks going on at this point. wes, he's over there just like -- you know, it makes your job easier, doesn't it? you kind of just stand there. >> that's what governments do, isn't it? i just have to work out in what proportions. how much of those things? that's all there is. we are, joe, ahead of the u.s. open right now. european equities, there you can

see. a little firmer on the advancers versus decliners. we're about 6 to 4 at the moment. so slightly weighted to the upside, as well, on those individual numbers. there's a couple of bits of data out today. the german ifo sentiment is probably europe's most important sentiment. the ifo institute survey. it did tick higher, but not by as much as we thought. 107.7. the current conditions index did fall, so some disappointment about that. essentially, though, german growth is on a fairly solid footing. i played a key part in angela merkel's victory, as well. she wasn't only two or three feet shy of getting an overall majority. but we did just see the euro come off as a result of that data. let's show you where the sectors stand right now in this breakdown. that mirrors what we saw on the full screen there. technology, utilities, all firmer. resources are down again today. food and beverages and chemicals. we did hear incredibly bullish contracts from airbus, as well.

the stock eads is now up, boeing up, as well. they're talking thousands -- i haven't got the numbers in front of me, but over the next 20 years, huge aircraft expansion. in 20 years' time, aircraft orders from asia why will be bigger than those from north america. back to you. >> thank you, ross westgate. we appreciate that very much. we're now going to calk to mr. liesman for real this time. in the wake of the controversial decision by the fed not to reduce its stimulus to the economy, he sat down with one of the fomc's most powerful members. he talked no sense into him, we don't know. steve joins us for the first part of his interview with bill dudley. >> always? always dovish or new dovish? >> pretty dovish. we knew him when he was an economist at goldman sachs. but i've known him as a central

banker during the crisis. .it's been a time when a lot of people who -- >> maybe you learned to be dovish. >> earned it during the crisis. so in this wide ranging entry, bill dudley defended last week's decision by the fed and says the markets should not have been surprised. i began by asking him how he would now make a decision to taper. >> i can't speak for the committee, but i can speak for myself. my mind, beginning to decide to reduce the pace of asset purchases from the current $85 billion pace requires sort of two things, in my mind. number one, improvement in the labor market and number two, confidence that the economy is strong enough to support that improvement in the future. >> is that new? and if it's not new, why is it that the market didn't understand that beforehand? >> i don't think it's new. i think that what we did is completely consistent with what the chairman laid out in his press conference. it's data dependant, depends on how the economy is actually

performing. the chairman said we were going the reduce the asset purchases in september. he said later this year. that framework is still intact. we have to see that confidence in the laesh market and twoo, confidence that that is going to condition. so it's suggested you thought there was improvement in the labor market and continued confidence in growth. where did the market get the assessment wrong? >> the economy has been weaker. we haven't seen an acceleration in economic activity. you look at the fed's forecast, it looks for acceleration of economic activity. the problem is that is still a forecast. and if you look at projections in september relative to june, you can see that we're actually expecting somewhat slower groepth in the second half of 2013 than we remember back in june. >> so if i can go back, do you have a reason for why people appeared to be surprised by the

decision on wednesday? >> i think my own personal view is that people jump to cliegzs. i think we're trying to be very clean speaking, we're trying to be transparent, but sometimes people think we're hinting at so something. so the chairman talked about the pass, and he said later this year if the economy evolves with our expectations. and people said, oh, he must mean september. but i think we're trying to be very plain spoken and sometimes people exaggerate. >> so is it possible there wasn't enough communication with markets in the lead up to the september meeting? >> well, i think it's hard to communicate if you're not exactly sure, you know, wa you're going to do at the meeting. i mean, that's one reason why you have the meeting. you know, the data have die verged from our specations, but only modestly. only a little bit waeblger than expected. >> you repeated the marks of

chairman bernanke from june saying that a taper was likely to happen later this year. is that your opinion at this point, still? >> i certainly wouldn't want to rule it out, but it depends on the data. the thing that we have not to emphasize is that it's driven by data, not by time. so when the chairman said later this year, that was conditioned on the economy behaving in a way in line with the fed's forecast. so if the economy were behaving in a way aligned with the fed's june forecast, then it's certainly likely that the fed would begin to taper later this year. but whether that's going to happen or not remains uncertain. >> the next time we'll bring you dudley's answer to the question on whether the fed is perhaps targeting interest rates and how the feds may decide on its next move. joe. >> thanks, steve. we'll get to michelle in just a second. meanwhile, they're calling it a merger, but when one company gets 68%, implied materials is basically combining with tokyo

electron in a deal that will create a country with a $29 billion market cap. amat's market cap is 29 billion there. tokyo electron share holers get 3.75% of the shares. 68% of the xwand. and tokyo electron shareholders will own 32%. >> that's about 63.350 if you were to do it based on applied material is now. >> right. >> techo electron, we don't have a chart on that. >> stock is trading higher, applied materials. it closed at 1599. it's actually up 26 cents on this. really, it's more of a -- in bike tokyo electrons, more or less. >> yes. >> joining us now, michelle gerard. and where is ed? there you are.

>> three times -- so it's up that much? >> 3.25. >> oh, no, i'm sorry win did it wrong. i was looking at the all time highs. >> they don't know where tokyo electron is trading. and it's in yen, anyway. >> you're right. >> how many yen? >> about 52 bucks a share. >> how many yen? >> i don't know. >> i know what the yen is in market caps. >> you do? >> yeah. because they put it in here. 2.8 trillion dollars, yeah. >> should we taper? no. >> yeah, yeah, they can't shoot straight, can anyone here play this game? some people saying this was just horrible, that we have no idea what the fed -- if you're a fed watcher, you're just going to say the stock market is going higher. i know already. but really, there's 20 of them. there's too many and they all

talk too much. >> that's to some extent true. >> aren't there some other ones? what about you and ipp? >> what about them? >> there's 20. >> now we've been talking -- no? >> i'm sorry, you and ipp. >> as much as they talk, nobody coming into these six weeks leading up to the meeting mentioned the fact that, oh, the economic data are somewhat different than our expectations. oh, we're, you know, not being as much of the acceleration as we thought. i mean, the one time there was a lot of quiet going into the meeting. but i will say, you know, for the most part, most of the bank president talks and seem to be on board with the idea that at least some amount of tapering. that's why all of us stud watchers, for the first time even the hawks say maybe a small taper here would be appropriate. >> it's just that after you got the back up in rates and you

took the pain of the beginning of the taper, once you got that priced into the market, you should have done it because you already paid for it. >> and except for the surgery and they said no, we'll come back and do it again. and what surgery, joe? think about it. >> yeah. i also thought ks a want on the first day, i thought maybe they're lowering costs. but i only have one issue now. the fed controls expectations. i felt like you could sort of see the incoming data -- >> before i -- >> maybe the call. but now it's like, i don't think they taper until bernanke says so at this point. and he says so explicitly. >> if they say it's data dependant, they mean it. and it could be data dependent if they get a bad number the day before they're supposed to taper -- >> but wa data is dependent on what? >> not tun employment rate.

it's a broader range. >> this is what she's talking about about trust and credibility. the fed doesn't need the market here, but the fed is going to need the market to do its bidding to bring forward other interest rates and economic activity. and if it doesn't have that trust, it's going to be difficult to achieve. >> so we went down 180 on friday. we were down yesterday. and i thought gold was back to 1500 again. for a while, i thought that would mean until october. but now october might be off the table? it might be off the table until next year. >> i think the fed is haunted by the spectra of 1937. they didn't want to do anything if the economy wasn't strong enough to stand on its own two feet. i think we will see a taper this year. whether it will be next month or not, i don't think anybody knows at this point. but i think that the emphasis will shift. first we have to get through the whole debt ceiling issue.

eventually we're going to shift back to the fundamentals. it will accelerate. >> have we been conditioned to think it's all about the fed? do you remember historically periods where we were at 2% growth for a year or two with unemployment higher than it should be? do you remember periods where we worked through that in the past without 85 billion a month? >> oh, of course. >> then when did these guys get the idea that it's all on their shoulders? >> and i guess do you not even question the efficacy of it. we've had so much stimulus and the economy is markedly different. but they would say why not do it if inflation is so cautious,

anyway? >> we don't necessarily know the time of what's being reported. >> you know what i think they're thinking now? the last two surprises to them are proof of how good qe is. >> what were the last two surprise ones? >> june, where the fed was more hawkish than the market expected. >> right. but that would surprise -- >> and then in september where it was more dovish. when they see both of those surprises and they see the market reaction to both, they say it shows how effective qe is at least in the bond market and the stock market. now -- >> for now. >> whether or not that translates into economic growth is a different story. but the fed would argue, well, those are the things we can effect. >> steve, these are 1% and 2% moves. you're micromanaging a 1% and 2% move in the stock market? >> they started to make it sound like it's not about the markets, it's about the economy. he pushed back a lot at that last press conference saying are they not paying as much

attention to the press market at this point? >> i think they're paying a lot of attention to the market. i think that's what spooked them and to a large extent. but the problem is, it's so circular now. i'm sorry. >> bond markets are paying attention to. >> yields go up, so they're not going to taper. >> i asked that question. his answer to that question in the next hour. i asked him that very question that michelle is talking about. >> what's the answer? >> he lays out something of a framework for where interest rates are okay to taper. >> oh, i'll tell you, it's -- >> 10 billion. geez. they set us up for it and they don't -- to be in that meeting, it seems totally -- bernanke, god love him and he's a great public servant, but i see him scared of his shadow. >> i have to tell you, the comments of fisher and george go further than other members of the fomc go.

they're clearly very frustrated. >> frustrated with bernanke? with the way the board went, yeah. and you can hear that in their language. we know richard fisher to be open speaking and plain speaking, but he was unusually open and plain -- >> when do we get the minutes? october 5th or 3rd. it's right at the beginning of october. >> he didn't like this ridiculous -- the way it has been political with yellen and summers, either. >> but the problem is, the markets, we have no markers. it's exactly like you said. it's hard to even say when will the fed taper? >> is it politicized? >> the fed is more political now in the post crisis trade. >> but they wanted their guy in. >> the fed? >> no.

why not just pick yellen right away? they wanted a guy in there, a white house guy. >> sure. >> it was much more political. >> it's always political. >> sometimes they -- who appointed bernanke? he was appointed by bush. >> joe, let me just -- >> the first bush lost the election. >> but obama wasn't always -- obama liked bernanke only because bernanke -- b. >> it's not like you get a treasury secretary to serve with their -- to implement your policies. >> and i would action that --ite not arguing it's a good thing that it's practical. >> can you guys remember a time when more people had more opinions about the federal reserve than it is now? >> no. that's why the fed is so important. >> because of whaift did in this post crisis period, the fed

became more political. i don't know how the -- would've done it differently. >> volcker was a big deal back then, too, remember? >> but they're doing it to themselves. mean i'm all for transparency, but transparency creates the conversation. >> no, you're right. you have that wrong, andrew. i'm sorry. >> the policy creates the need for the transparency. can you imagine in a democracy that we are, the federal reserve enacting these policies and maintaining the closed door policies you had in the volcker era? that would be more outrageous. >> and you're not for transparency? >> right, right. >> have you figured out your salary versus the average nbc employee? >> i asked you for that last week and my view is that we should have a -- it should be a peer group, the same way that column suggested the other day.

>> i knew you'd think that because you think you have no peer. but you haven't gotten back to me with that number. 650? >> i'm going to come back too that 50 times. just just like the ceo. what's sand ra bullock, she made $25 million this last movie. if you talk to gretchen who wrote another -- >> i'll get -- god, if there were ceos getting overpaid, would she have anything to do? what would she do? >> she would continue writing. >> fantastic. coming up, bill games and jamie diamond are set can you up. plus, the denver broncos beat the oakland raiders on monday night football. peyton manning threw five incomplete passes, racking up 374 yards, 3 touchdowns. in baseball news, the pirates beating the cubs 2-1 in chicago.

meantime, the reds topped the mets, 3-2 in ten innings in cincinnati. combination that with the nationals loss to the cardinals last night and that means the pirates and reds have both clenched playoff spots. congratulations mr. kernen. as we head to a break, check out today's national weather forecast. >> good morning to you. a bit of a wet one for us in florida. we're seeing rain spreading on into the west coast in and around tampa. some of these downpours lk affecting your morning commute. we will be in and out of the rain for a good chunk of the states throughout a good portion of this. at least early week into the wednesday time period. all south of this boundary. we have moisture in place keeping things rather wet here for us. rainfall totals through wednesday, in and around tampa, could be 3 to 5 inches, 2 to 3 for the rest of center florida. while we have rain in florida, some of the first smoke is expected across parts of the

rockies. snow levels will be preheight. we're talking getting up 6,000, 7,000, 8,000 feet. snow will be coming down. a taste of wishts coming into the parts of the northern rockies. "squawk box" is coming up next.

welcome back, everybody. it's time for the executive edge, a daily segment focused on giving business leaders a leg up. first ul, bill gates and jamie dimon are working to launch a fund to help pay for late-stage vaccines of development. the goal is to try and get the things pushed out to african countries faster. the gates foundation will guarantee the first 20% of the losses and share the next 50% of the losses. as a result of that guarantee, the fundamental will pay a return to investors of somewhere between 5% and 7%. jpmorgan addressed clients last night. gentlemen, how do you think this worse works? >> i think it's the most impactful thing is that they are bringing discipline, math, analytics and science. >> we have to help make sure the particularly good -- we have

lots of drug investments wheelchair done that completely failed. lots. so we'll probably put, i guess, four or five things at least in this so that you've got a mix. so, you know, a couple fail, a couple will do okay. one hopefully will pay the whole thing off. and then we're going to be a little bit rude if things go well and say, oh, please roll this over. >> i guess part of the problem is that there are plenty of drugs that have gotten stuck in the very late stages of development. they need some extra funding to get it out the door. >> i know the good news was apparently, according to the piece, they rayed more than $100 million on monday. the question i have as an investor, are people investing in this as an investment onner do they consider this if philanthro philanthropy? >> i think it's great. this way, they're protecting you on the soun sides and you're raising money from outside the coughers of the gates foundation and, you know, you're basically -- it's almost a private/public -- not a

private/public partnership, but sort of a philanthropic -- and in africa, as you know, a time of misery is totally fixable and totally preventable. it's an elegant way and i think it's sort of goes along with wa we've heard gates say years ago about compassionate capitalism and ways of approaching it. it's inknow vaven and it's a great idea. i want him to sit up a little more. i know i slouch. but if melinda had been there, she would have been -- >> he was comfortable. posture, pot temperature, good. >> i think i will just souch and be reap pop right now. let's talk about richard

fisher. speaking to the texas association of independent bankers yesterday, fisher said the white house has mishandled this terribly. it makes it sound like we have a political instrument. we are not. we cannot be. we must never be a political instrument. the comments by a top fed official are an usual public critique of the selection process. we've had talked about this with liesman and michelle and ed a moment ago. but it sets a dangerous precedent to see things play out this way. >> andrew is never cynical. but you're talking political and you say it's always been political. >> i think it has been political. >> i don't think it's always been like this. >> i think that the white house would have loved, frankly, to liar somebody knew if it had been bernanke. they wanted someone always. the reason they had him was because they thought -- >> it's always been political from the admin administration aes the perspective. >> we don't have a lot of data for this. how long was greenspan in there? you've seen one selection process and that's bernanke. >> no.

i was here for advocator. >> i don't remember it. but i was around for it. >> if you were the president, you chose greenspan simply because that was good for the markets and about for the economy and, therefore, it was good for pup. >> he didn't know that back then. he was a clarinet player when he was -- >> no, no, but when he was originally put in, he was put in around an administration. >> there's a reason that the federal reserve chairman is set up on a six-year span that doesn't cohen side with the four years of the president. >> you don't want it to be where they serve with all the other terms. you can't get anything done in congress. >> we love having all these fed guys on the show. do you think that they should just shut up? >> selfishly, we want them to

say things. but do you think -- i lover what they say. >> i just wonder when he decides to come on or anyone does, do they talk about it with each other? >> i don't think so they do. liesman hadn'ted in the past maybe some of the top -- didn't like all the talking, either. let's talk about airbus releasing its global forecast in london. airbus giant is expecting the need for 29,000 aircraft in the next 20 years. phil lebeau joins us with another first on cnbc interview. phil, go ahead. >> thank you, becky. i want to bring in john leahy in charge of slly sales in boeing. john, i'm looking over what you're expecting within the next 20 years.

>> absolutely. we're talking about 29,200 aircraft. we're at $4.4 trillion. in today's dollars. that's an awful lot of growth and the number one market, 29% of all the revenue passengers kilometers are coming out of asia pacific. >> how much of snap, john, is china as well as asia? >> china is a big market. part of it is getting people into the big cities. once you get into the big city, you start becoming middle class. you have reasons to travel. it might be business, it might be vacation, and it might be visiting friends and relatives. you travel back and forth for a lot of holidays during the year. but the number one market today, as you can imagine, is domestic u.s. just take a flight at laguardia and watch the conga line out there trying to wait for takeoff. in 20 years, the number one domestic market by far will be

domestic china. it's quite a shift in demographics. >> the twin aisle mark, i want to break this down by the twinnite versus single market. the twin aisle, you've got the a-350 and the k-320. how much of that will be coming into the u.s. in the american market snch. >> delta just placed an order for ten of our i-330s. one of the most profitable airplanes in their fleet. but when you look to that growth on, you start to see congestion. you look at beijing, shanghai, they're getting congested. so we can't just push all this traffic into more smaller aircraft. we'll have to move on to larmer, wide bodied aircraft. i think we've got the solution

with aircraft like the i-330. >> on the single aisle, this is where 70% of the growth is coming and this is primarily those smaller markets. north america, is this where we're going to see some of those second tier cities increase in terms of traffic? >> not really. i think the u.s. market, which a few years ago when i was doing presentation like this, you'd say the u.s. now it's asia pacific slightly with only about 18% of the demand for air krafl coming to the midwest. it's hard to economically get little aircraft moving from the tiny cities. maybe pure bow props will be the future there.

>> john leahy, thank you very much for joining us there morning, chief operating officer for airbus. as you know, the sales chief, the man who has been leading their surge over the last 15, 20 years. the interesting thing mere, when you look at the next airplane, for their 20-year frart. when we come back, we'll be talking about chrysler filing for an ipo. ♪

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welcome back. chrysler filed paperwork up to $100 million. what are the chances it happens, phil? this will just get people back negotiating in earnest, won't it? >> yes. at the end of the day, you have to look at this ipo. here is the s1. we had a chance yesterday to look through it. essentially what you're looking at here is this is the beginning of continuing the negotiations between fiat and sri va trust which owns 41% of chrysler. keep in mind when this filing happened yesterday, it's been highly anticipated for some time that eventually chrysler would file for an ipo. that's what happened late yesterday after the bell. they dropped it.

and the initial offering is for up to $1100 million. that is likely to rise from here. a lot of people are looking at this saying, what? how many people are we talking about here? the big question is the company valuation. there's still negotiation going on between fiat and svivi corporation. and the ceo of chrysler and of fiat has been trying to get this other 41% from the viva trust. sergio marconi and chrysler value chrysler at about $1.75 billion. compare that with the viva trust. it values the stake much higher at 4.27 billion. big gulf we know the two of them. and they've been trying to figure out -- you know, you get a closer stimgdz on the valuation. once they come up with that,

perhaps then fee ya will be able to close the deal in terms of buying that remaining 41%. i will fought be surprised if they reach some kind of a settlement. but for now, they're moving that train down. >> but do they go on a road show and the banker starts saying what they think the price would be and then they show that to sergio? >> they're going to have to, you would think, at some point. and the other thing is, you can't really go out there and offer shares for sale unless both parties agree on a valuation, or at least a narrow band for valuation. because remember, the shares are coming from the veba trust. >> phil lebeau in chicago, thank you. coming up, we're going to talk about the market implications of a possible government shutdown when "squawk box" returns after this. italy? oh, that's not good. [ man ] by exploring their options, they learned that instead of going to italy, they could use a home equity loan to renovate their yard and have a beautiful wedding right here

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welcome back to "squawk box." the big question, are we headed towards a government shutdown in washington? if so, what are the market implications? layer mcdonald, senior editor of one of my favorite books about lehman brothers. >> let's start with the big question been is there a shutdown? >> i think it's going to be a replay of what happened back in november. joe's point with steve liesman earlier this hour was fascinating around government's impact on market volatility. in other words, we're in a new era. in the 90s, you had a period in the early 2000s where earnings drove, you know, the market movement, sector rotation drove market movement. today it's student body left, student body right. we're going to see the same thing going into next week. i think this deviciveness between ted cruz, senator cornan

and senator mitch mcconnell is terrifying because it will set up for market vol this week. they'll do a deal in the end, but it's going to be shaky. >> they do a deal before we go over or after? >> they'll do a deal before. sometimes before the end of the month. they'll have to extend. probably taking it a month down the road. >> when you see a lot of volatili volatility, what are the implications? >> look at lax week. the vix got down below 80 again. the vix has something spent like above 30, it spent more time since lehman the past four years than it did in the previous 16. so every time we get into this complacent mode, you see a spike in volatility because of politics. >> if you're an investor, beyond going long volatility, what else do you do? you consistently buy fear. instead of chasing rallies, if

you sit in the boat and you buy fear, we've had -- how many moments have we had in the last four years where -- >> and if we all know is fear is coming, there is no fear. >> that's what be so bad. if you were waiting to buy on the chaos in september from the fed tapering and the decision of the next fed chairman, you lost. you lost in a big way. you should have bought earlier. >> look at last november, the fiscal cliff. the most telegraphed piece of volatility i think i've seen in my career. that thing was labeled way out in the spring and then we had almost an 8% correction in november. so the market will -- especially toward year end. the problem is portfolio managers are up 20%, consumer discretionary up 30%, 31, are you kidding me? outperforming the s&p. there's a lot of funds with massive profits and student body left, student body right as we turn to uncertainty. >> thank you for coming in this

morning. >> thanks. when we come back, how facebook and twitter could soon be allowed in china after being blocked for years. ♪ norfolk southern what's your function? ♪

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in order to go visit my family, which means a lot to me. ♪ welcome back to "squawk box," everyone. facebook, twitter and other websites. a planned free trade zone in shanghai. china's ruling communist party

censors the internet, blocking access to websites that it deems inappropriate or politically sensitive. facebook and twitter were blocked by beijing in mid 2009 following deadly riots in a western province that authorities say were helped by the social networking sites. the "new york times" has been blocked since reporting last year that the family of then premier had amassed a huge fortune. today's post says authorities would welcome bids for licenses to provide internet services in the zone. >> the suggestion here is this is going to be some kind of test case to figure out whether they can do this more broadly. >> sounds like a foot in the door. >> foot in the door. it's eventually going to happen it's a matter of when. then the question is if you're a google, what do you do? do you try to get back into the market? do you not? if you're facebook, do you try to get back? do you not? >> i don't think they're going to let this happen. >> you don't think it's going to eventually happen?

>> how can it? >> what do you mean how can it? >> how can they stop it? >> because this is an important part of the way they run things. >> when the "new york times" wrote that story a year ago, even after it was blocked it was being sent around -- people had made pdfs of it and it was being sent around to everybody. people -- >> managing the economy is going to be the least of their problems. >> technology is constantly changing and it's gotten to the point where it's impossible to shut that down. >> this goes to steve liesman's point of transparency -- >> it's going to be a whole new world, then, right? it's not like that now. >> no. but that's the steady march in every sphere of our life. >> it'll be good. in that case transparency is good. coming up, this morning's top stories including applied materials combining with a company called tokyo electron. and among our news makers of the day, the ceo of ericcson.

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washington driving weal street. wall street. fears over another government shutdown playing on the nerves of investors. tech in focus, we take a closer look at what's driving innovation with some of the biggest players in the business. guest host and telecon turn around guru michael price is here. plus interviews with the ceo of ericcson and the head of ibm software group. and defending the fed's decision not to taper. new york fed president bill dudley in an exclusive interview as the second hour of "squawk box" starts right now.

good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernan and andrew ross sorkin. we've been watching the futures this morning. and at least at this point, the equities market looks like it's barely budging waiting to see which direction it's going to move. this comes after three days of losses for equities. semiconductor equipment maker applied materials is combining with tokyo electron, just announced in the past hour. shareholders will own 68% of the combined company. tokyo electron ceo higashi will be the chairman of the combined company, while gary dickerson will keep the ceo job. we're also going to be keeping an eye on shares of blackberry. a deal in place to buy blackberry for $9 a share or total of $4.7 billion.

the shares initially traded above that offer price after the deal was announced yesterday before finishing below. david faber had reported it was questionable whether fairfax actually had lined up. >> i'm very skeptical of this transaction. >> a lot of people are skeptical. there were questions raised by analysts saying, wait a second, this is maybe something to try and stem the losses. >> i think fairfax is trying to create a floor for this on the hope that somebody else comes in and bids for it. they're in, by the way, at $17 a share on average. so they have every incentive in life to try to do something here and try to force some action. and i think that's all that can be said at the moment. maybe they'll come up with the financing, but the question is, what are they doing with the company? and what do they know about doing anything with the company more than anybody else? >> we had an analyst yesterday morning tell us if there was a buyer that stepped in, he couldn't see an offer of above $6.50 before this offer. >> every time now like you check that thing, every time you check in it's like, wow, i haven't

gotten any e-mails in a while. >> is it off? >> i mean yesterday, there was -- >> yeah, i think it was an nbc poll. >> yeah, but you immediately think when it's not working. it's like, uh-oh. >> michael price going to be on in a little bit. >> is he a blackberry guy? >> he's a telecom guy. >> does he still use a blackberry? >> i don't know. do you use a blackberry? he doesn't have a mike on probably. >> oh, sad, sad. >> he says he goes both ways, we'll talk about that in a second. also, kenya's forces say they have secured the westgate mall this morning, though an eruption of activity seen and heard from the nairobi mall where more than 60 people were killed. and there's been some gunfire that could be heard from the complex a day after the government reported had taken control of the mall. soldiers could be seen running at the sight. it is not clear where the gunfire came from. flames and smoke continue to be visible from the building.

and militants from al qaeda's linked al shabab claimed responsibility for the standoff. at least 18 foreigners are among those dead. u.s. officials say they're looking into whether any americans were involved in the attack. dallas fed president richard fisher says the central bank hurt its credibility by not tapering. and investors starting to fear another standoff in washington now over the debt ceiling. here to talk markets in washington worries. we've got -- we're counting down the days and, i don't know if you look at different blogs, websites, drudge report, huffington, it's like six and counting, things like that. that's never good for market sentiment. is it, bill? >> i think we've seen this movie before, right. i mean, last fall seems like a year ago we had a nice 8% pullback when the government was doing its thing kind of during the september to november time frame. whether we see another 8% pullback because of what's going

on this year, we'll see. feels like we're set up for a little bit of a correction with no tapering, the 2% rally, we've come right back to where we started from. and from here, maybe a little bit of a challenge over the next four to six weeks. >> so i wonder whether people that said it made sense not to taper because we were coming into this period, maybe they were on to something there. maybe it wasn't the time. you know, even though it -- the first couple of days it's just based on the perception of tapering that 85 billion, that does do something as it comes into the economy, doesn't it? it is kind of a put. >> i mean, it does, you know, the ten-year went from 3% to under 270. and, you know, there is real money coming into the market when they do their buying. but, you know, i think eventually obviously they have to taper. it's just a question of when they start. data dependency, well, that's nice, they can kind of wait. there's been no sort of negative reason for waiting. so why not wait, i guess? >> well, in your view at cantor

since you do everything, you know a lot about bonds, will it happen at the next meeting? >> i mean, i think it all depends. get to see another month's worth of data. it was a little bit of a political component to this, as well. i think they like sort of stronger equity and bond markets, as well. there's been no pressure from the other side. okay, why, you know, start this program too early. we saw a little bit of a hint of volatility just when they talked about doing it. so we'll see. it depends on what the data's going to be over the next month. >> do you think if they don't start, are they going to be finished in -- don't they want to be done in 2014. do you think in 2015 we're still going to be in qe hell? >> feels like there has to be an end to this at some point. there's an election coming up then. maybe that's an election issue where people make a stand. key drivers are what's going on with employment. do you see a significant improvement in employment and if you look at the data there,

depends what the denominator is. you can get that rate down and still not necessarily be as recovered as you'd like to be. i think, you know, probably if the economy is stronger than we think and, you know, coming out of kind of a soft third quarter, we'll see some hint of that in earnings. you might see beginning of next year, middle of next year and once they start tapering. if there's no real adverse effect, then going from 80 to 40 to 20 may not seem that bad. once you've made that initial step. >> william nichols, thank you. appreciate it. we'll look for 8%. 8%'s a lot. i don't want to see that. eight times -- what's eight times 15,000? >> a lot. >> it's 800, eight times five, it's like 1,200 points, isn't it? >> yeah. >> you ready for that? >> i'd take it. we've got to talk telecom this morning. the sector in the spotlight with a new deal to buy troubled blackberry. and apple with better than

expected sales for the iphone. michael price, senior managing director. good morning. >> good morning. we've got to get tech in this, as well. >> we'll do some tech. i want to talk real quick since you know all the players on this blackberry deal or not deal. there's a lot of people skeptical of what's going on here. >> yep. >> do you believe fairfax is a real buyer for this company? >> sure. but let's frame this. tech as an industry is a $3.5 trillion industry. 40% of it is an enterprise spend and 20% is a consumer spend. and consumer is what all anybody cares about because that gets the headlines. >> what we know. >> that's what you know, right? that's what you know. and so apple and blackberry, you know, get huge visibility for a very good reason. because today it's the consumer innovation i.t. so the consumer innovation is

driving i.t. super computers of 30 years ago, that's going to drive a lot of innovation in i.t. so that's what leads to the fascination with this industry. now, as regards to blackberry, blackberry has a basic problem. they make handsets. and hand sets, their handsets are expected to have a 20% gross margin. and when you spend 10% or 15% on r & d and sg & a and subject that, you lose money. and if you lose money, that's not a sustainable proposition. on the other hand, blackberry has a very successful ndm platform. which sits in 250,000 enterprises. and so while people look at blackberry and say the real asset is 70 million unit customer base of which about a third is enterprise, the real asset that blackberry has is the servers that sit inside enterprises and manage devices.

and in a world where you're bringing your own devices where everybody wants to bring their apple and samsung device, not their blackberry, it's a prolific device of the day, notwithstanding all the people around this table. >> just me. >> just you? >> we'll got to that in a second. the issue with enterprises is how to manage those devices. and that's where blackberry has a great advantage. >> but just so i understand, this piece of it -- i've always understood they manage it at the server level, but i thought they manage it for blackberry, for other people who have blackberries. not that you need it for the iphone. >> that is the current state of the technology, which is not -- which can be easily extended. >> people are trying to bypass that, right? you have the new -- what do you have there? one of if new blackberries? you don't need -- >> you don't need the server. >> they put themselves out of business with the handset and servers. >> that's what they've done but they have this installed base

asset. i'm not justifying blackberry. what i'm saying is if i was a private equity investor in this, i could see a path to creating a lot of value by owning this asset, repositioning the company the right way. it's hard. >> and is fairfax in your mind a real buyer? >> i don't know enough. >> they use insurance -- they're sort of like -- almost like a -- >> if you are ever had him on the show, he's a very, very smart guy and i would not sell him short. but how much of the technology they understand and how much of the repositioning they understand, i don't know. >> i'm getting a little bit of feedback. i don't know if that's one of your multiple phones there. one last piece, byron is representing fairfax. all of a sudden there's this view. he's obviously warren buffett's favorite banker that somehow we're going to see big names all of a sudden jump into this. do you imagine that's going to happen? >> a lot of respect for byron and, you know, we'll just have to watch and see. >> okay. we're going to take a quick break.

you're going to be here for the hour and we're going to talk about transactions, deals, technology and telecom. joe? >> thank you. do you know about these satisfries. >> they create this new thing and they leave off the bar. i'm addicted to the bar, you know, i can drive this car so fast with the bar. they left the bar off. >> what bar? >> this bar over here that's the navigation bar. and this is like you can speed through anything with this. and it's, you know, who wants to criticize? >> we'll call -- who said, he said that apple -- that the apple iphone was old. up next. keeping the big blue in the black. he's one of the main players at ibm, the senior vp of ibm software group. steve miller joins us next to talk tech and the ever changing landscape. and quick stock to watch

facebook, rolled out a mobile payment feature with a handful of retail partners. this and more coming up.

welcome back, everybody.

trends and innovation are shaking up the tech industry. how does a power house stay current and compete successfully in this changing environment? it's not often we get an ibm big wig with us, but we have steven mills for software and systems at ibm. thanks for coming in today. >> good morning. >> let's talk about some of the trends that have been out there. we have a big data segment we've been focusing on for the last six months or so. we hear about it constantly how there are all these changes out there, new things that have come up. and certainly big data is all about the infrastructure and the pipe and is how the system has changing. what does ibm do to play in that arena? >> hunting for ways to predict the future, see where things are going and a number of data sources available keeps going up, which is positive. the challenge is can i collect the data? can i analyze it? can i make a decision in realtime? can i affect my business and where it's going by taking advantage of the connectivity and the potential that exists around all this data? >> there's a lot of money there.

it's a huge amount of industry spend and i know the infrastructure, the pipes of the internet are really big arena and big area. but ibm has struggled just over what they've been looking at with some of the earnings. the last quarter was the fifth consecutive quarter. are trends like this going to be enough to rebuild and really push forward? how do you grasp that? how do you jump on to that? >> we're constantly going through the transitions. the industry we're in is constantly changing. i've been at this for a long time. we have to shift where we're investing. we put a huge amount of money into analytics and big data. we have a very aggressive set of investment plans there. investments in cloud, mobile, security, social software, things that our customers are now doing which doesn't mean they stop doing everything they were doing before. but it's a transitional period. we've been through these before. there's one going on right now. we're putting our money where the industry is moving to. >> just to come back to that

question, who bought into ibm after people never thought he'd buy into a technology company. he sees something there. but there are a lot of questions about whether there's enough new things, enough changing things, whether ibm can keep up. what do you tell people to answer some of those criticisms? >> well, first of all, we invest more than $6 billion a year in r & d, and more than two-thirds goes into new areas. we're constantly mixing our r & d investment to get out in front of where the industry is going. in some areas, we get a great lift off of our existing franchises. we have an enormous presence in the enterprise. enterprises want mobile devices. they want to do social. it's a great base from which to work to build off of. obviously consumerism has some effect on us and we have to keep moving to where the customers are going. not just the corporate buyers that we work with every day, but also their customers, their consumers. they've got to deliver the capability they want and help the corporations enable themselves to take advantage of these trends and shifts. >> how fast does something like

social grow? in terms of revenue. >> well, it's been growing at a double digit rate over the last four to five years. in fact idc has us as the market leader with the technologies we deliver today. so this has been a big growth area for us. i would add to that around social is obviously security. device security, dealing with mobile devices. a lot of social has to do with mobility. these things dovetail and intersect. and everybody who deals with consumers is anxious to try to mine the data associated with the activity. what are people looking at? what are they buying? what are they showing interest in? all those things play into the big data analytics that ties into the idea of consumer effect on business. what kind of money are we talking in terms of what corporations will spend on this type of thing? >> well, if you look at the tech industry, which today is a single digit growth industry, a

couple of percentage points outside of the consumer spaces, there's -- they're in the, you know, 10% to 15% growth rate when you get into these -- >> what's the dollar base? >> they're coming off a dollar base that are in the billions. so these are typically market segments, you know, measured in the, you know, $3 billion to $10 billion size. analytics and big data is hundreds of billions of dollars because you have an enormous base of activity going on there. >> and -- go ahead. >> i was going to say, one of the things that warren buffett says about wanting to buy ibm, he says there is a mote around it. it's a sticky business. what is the switching cost as a customer of either switching to an ibm or switching away from ibm? >> well, the switching cost issues are very much tied up in the sum total of all you've invested in an application and environment and infrastructure and it's more than just the technology, you're changing your business process.

and that's really what makes it sticky is the business process side of what the technology does. you know, particularly on open standards, could i swap one vendor for another? sure, but how did i integrate what that vendor delivered into my business processes? so these incredible systems that companies need to run their business every day, that's typically not where they're going to get great leverage by making a change anyway. why do it? further more, tied to their processes, it'll be hard to do it. where you see the greatest amount of shifting and activity around some of the newest spaces in the industry. social, for example, right? open standards, certainly possible with look at a variety of companies. and in many cases, customers, our customers will use multiple vendor products. >> does that make it harder? that makes it harder to be sticky for you because everything's an open standard. >> so speed matters, got to be out there fast. got to be aggressive with marketing and sales activity and you've got to be on top of what the customers want. so everything has to be driven by the user.

we've practiced user center design techniques and a whole variety of activities. i love to tell me people, we're going to learn more in the market than we're going to learn in the lab. let's get the products out there, innovate. this fast innovation process is incredibly important in those market spaces. >> right. >> but the reason warren buffett likes this company -- the bottom line and ibm has been a shareholder friendly company delivering strong earnings growth. >> okay. steve, thank you very much. >> thank you. >> appreciate it. >> we'll have more from michael in a bit. coming up, our exclusive interview with william dudley. plus the ceo of erickson on the business of innovation, the future of blackberry and much, much more. he's going to join us, it's an interview we can only see here on "squawk box." and before we go, check out the futures right now. you can see a green arrow on the dow, a red arrow on the s&p 500.

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welcome back, everybody. let's get a check on the markets this morning. the futures have been barely budging. of course this is coming after three days of declines for the markets. the dow futures up by about

eight points, s&p down by about two points. oil prices down significantly to a 6 1/2 week low. down another 34 cents to $103.25. the ten-year note at this point is yielding 2.69%. take a look at where the dollar stands this morning, you will see it's up across the board. the euro at 1.3484. and gold prices at this hour are indicated. let's take a look at the board. >> better be down. >> not going to happen. >> maybe we'll flip that board after the commercial break. in the meantime, coming up next, vision of network society, the ceo of ericcson talking telecom and what's driving business around the globe. plus that futures board after the break. the american dream is of a better future, a confident retirement. those dreams, there's just no way we're going to let them die. ♪

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welcome back to "squawk box," everyone. in our headlines this morning, toys r us says it will hire 45,000 holiday season workers this year. that number is about the same as the retailer took on last year.

analysts say that overall, retail holiday season hiring is likely to just about match last year's levels. we'll get some fresh numbers on home prices this morning. the july case shiller report expected to show an increase for the largest cities out at 9:00 eastern time. burger king is trying out a new french fry formula. this is what joe was alluding to earlier. it's launching a new version that has 20% fewer calories. a new batter that doesn't absorb as much of the oil. called satisfries, 270 calories per serving, regular fries have 340 calories. >> different types? >> yeah and they'll differentiate. >> can i say i like burger king fries perhaps more than mcdonald's. >> that's insane. we disagree on everything and this is the worst thing you've ever said. and my point was going to be, why don't you fix your normal fries before you make them taste even worse? >> maybe these taste better?

>> have you ever had anything with 30% less fat that tastes better? >> you can get your body used to it. >> remember when they used to do spicy curly fries. >> burger king? >> those were good. >> arby's -- >> i don't like fat fries and i don't like the ridged fries. >> you with your tofu burgers and everything else. you want me to read the sports stuff? no, let andrew. he'll call it the pittsburgh pirates. >> no. >> it was an additional read. >> it was my read. >> and in sports, pittsburgh pirates are in the playoffs, they clinched their first -- >> since 1992. >> 1992 with a 2-1 victory over the chicago cubs last night. and cincinnati reds secured a spot in the playoffs beating the new york reds 3-2 in ten

innings. >> the last time the pirates won, what was their theme song? if you don't know this, you're the most useless -- >> i start as the most useless every morning. >> do you know this? i don't think i know. >> okay. thank you. >> we are family. >> yeah. >> there you go. >> you're old enough to know. >> yeah. yeah. >> i hope you know a lot about telecom. anyway, ericcson -- because your brain has a lot of space to fill. ericcson is relying on innovation. joining us is the president and ceo of ericcson group. you rang the opening bell? >> yes, i did. >> were you nervous? >> no. >> i haven't done that. have you? >> no. >> what if you did it at 9:29. >> they're very well sketched up. it was a -- >> did you press something?

>> yeah, you press something, and i signed with my -- not my name, i actually signed with the logo. >> you did? high point of your life, would you say? >> i've done it before. >> you've done it before? >> he's jaded. he's done it so many times. another day at the office for him. >> no, it's not like that. but i have done it. >> who are you now? who is ericsson now for our viewers? >> it's a company of 137 years. today, roughly 45% of -- the rest is mobile infrastructure. you can say that roughly 40% of mobile traffic is going through our equipment, 50% of all 4g traffic is going through our equipment. we're the fifth largest company in the world and ibm and the guys ahead of us, the company has transformed tremendously. >> luckily you did too. >> yeah. >> the businesses that you exited are -- as we're seeing

right now, they're difficult. but this is a difficult business, isn't it? >> this is also difficult business and you need to transform all the time. if i look back ten years, what competitors did i have ten years ago? very few of them are left. it's been a tremendous change in our industry. and then, of course, we left our handset business. sony ericsson two years ago. and of course, being number one mobile infrastructure. >> obviously, my biggest interest in this is in lte or long-term evolution technology and your leadership there. help me. i read that. as you know. but you are the leader. >> yep. >> and the u.s. is the leader. >> absolutely. i mean, if you look -- >> you've got to explain this. >> the 4g, the evolution of mobile networks. >> to carry more. >> yes, carry much faster. it's much quicker, you can ping

to the internet much quicker. of course you have higher speed, as well, but speed you can always distribute on different people. it's more about the latency and then, of course, on 4g today surpassed hundreds of millions subscribers, it's 7 billion in the world. of course, 4g in the forefront in three countries in the world, u.s., korea and japan and the u.s. is leading it, i think 65 million subscribers in 4g in the u.s. so, of course, this is the forefront for technology. our expectations by 2018 is going to be roughly 1.5 billion 4g subscriptions in the world. we still have a way to go. 3gs predominant mobile internet access in the world and going to be so for the next five to seven years, but the more developed market will have 4g. >> and then you obviously love apple and samsung, obviously. are you positioned if -- will

that ever change? that duopoly? >> i usually say if i look bake fi back five years ago and look forward five years. >> does it matter to ericsson? >> not really. the more important, do we get new devices that are advanced. using the latest technology, screen size is important because then you -- >> we're not going back. it's out of the -- >> no, nobody's going back on speeds. >> michael had some numbers. >> the little surprise about handset market share is roughly 20% of the units, the smartphone units are apple, 35 samsung, but the rest is people you never heard of that are chinese manufacturers. so the long-term eco system in terms of the profitability, long-term being three years in this industry, two years, a third apple, third samsung and a third manufacturers. >> but just emerging markets. >> so all the growth. the over 300 devices are

basically flat. nobody's -- just the u.s., europe, it's a saturated market. it's the under 300 and the under 100 devices that are going to double and triple over the next five years. >> if you were the ceo of blackberry, is there anything you could do to fix it? >> of course i don't have enough information. but i think like i said before, assets in the company, you need to think of how you use the assets. and when you have a company like ours with a legacy. but you need to -- we have 110,000 in 180 countries. you need to challenge yourself and move on. and this industry's moving with light speed and increasing speed. >> okay. >> i wish, hans, i talked to you beforehand, i would have given you that answer. >> about the pirates? >> yeah, about the pirates. >> absolutely. >> if i'd been able to --

>> we are family, yeah. >> you probably didn't know he climbed mt. kilimanjaro. >> so did kminski. >> is that true? >> okay. >> we are family, but we've got to run this time. coming up, steve liesman's exclusive interview with dudley's decision not to taper. where this economy stands and much, much more when we return. but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. that's why we partnered with hp to build the new nascar fan and media engagement center. hp's technology helps us turn millions of tweets, posts and stories into real-time business insights that help nascar win with our fans.

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that is indicative of something. i don't know. welcome back. on the political front this morning, president obama -- do not -- andrew, how are you going to get home? he's going to address the united nations assembly today in new york. it's horrific, isn't it? the traffic? >> how are you going to get back to your office today? >> the next two weeks is bad, right? >> going to be bad for the next two weeks. >> he's expected to focus on foreign and domestic issues, including syria's chemical weapons, mideast peace talks and iran's nuclear pursuits. and iran's president is also going to speak today. the oil markets going to be watching what we're calling body language between the two men. do they say hi? do they shake hands? i didn't realize this, but apparently that the sanctions

are really biting. and we have no reason to bring this guy to the table other than that. but apparently the economy is so bad in iran right now -- >> inflation is double digits. it's been insane. >> they seem so intent on finally getting nuclear capability. >> i'm still focused on the traffic in new york city. >> i thought you were still focused on burger king's fries. >> they might work for you. >> do you think it'll bring down oil prices? >> probably. if they don't avoid each other in the halls, if there's a simple hello. people are watching. >> that body language could change oil prices, that's a cool story. >> yeah. >> it's been more than 30 years since they've had -- since we've had diplomatic relations. i mean, this is -- >> and obviously the handshaking and the decline in oil prices is obviously more economically beneficial to iran because the sanctions are biting. >> right. >> that's got to be the equation he's making.

>> exactly. >> steve liesman is here because he had an exclusive sit-down with new york fed president dudley. the decision last week not to end the bond buying program. this is an interesting interview. >> yeah, he tries to explain himself and why he says it should not have been a surprise. i asked bill dudley if the fed wouldn't taper because of higher interest rates and rates were higher because the fed said it would taper, how will the fed ever feel comfortable reducing the stimulus to the economy? this is the question i put to bill dudley in this part of the interview. >> i think it's a question of why financial conditions are wising. and is the tightening of financial conditions modest or large relative to your expectations? at the end of the day, we set monetary policy to affect financial conditions and financial conditions affect the real economy. let's imagine that financial conditions tighten by more than what we anticipate. we want to take that into consideration in terms of our economic forecast.

and i think what happened between may and prior to this last meeting, the tightening of financial conditions was quite large, especially in terms of the mortgage market. >> does that mean you're sort of targeting, at least in your heads if not spoken a range for rates that is acceptable for you in order for you to eventually move forward? >> no, absolutely not. we're looking at growth momentum of the economy. we're looking at how financial conditions are likely to affect that growth going forward. that's going to reduce our confidence in the economy growing fast in the future. >> part of the reasons why it would appear financial conditions tighten so much was because markets seem to be forever preempting or running ahead of the federal reserve. in the sense it's going to tighten or bring forward future interest rate hikes. >> we want to be very clear that the decision on asset purchases is pretty independent of the decision about actually raising short-term interest rates.

we have been very clear that we didn't, you know, that the conditions for raising short-term interest rates. we would expect the unemployment rate would have to fall below 6.5%, assuming the inflation outlook is okay and inflation expectations are well anchored. in that case, we're going to wait for it to fall below 6.5%. and that's a threshold, not a trigger. we could wait a long time before we actually raise short-term rates. so people should delink these two choices. the decision on tapering is how fast are we adding accommodation? how much are we increasing our balance sheet? the decision on raising short-term interest rates is a tightening. people shouldn't conflate the two. >> you keep saying that. you said that several times, other members of the fomc have said that several times, but doesn't seem like the market is agreeing with that. they seem to think a taper is a

tighten. >> we're going to communicate in terms of how we're looking at things. it's true, if we do something that's different than the market expectation. for example, follow a less accommodative path than what the market expects. that could cause a rise in long-term rates even though we're still adding accommodations. i think you have to division between a market in expectations about the path of monetary policy as opposed to adding, you know, adding -- buying assets. the decision about whether to taper or not, the market takes that as an independent judgment on monetary policy. there's a taper decision, then there's a signal that the fed has decided to do something differently than it's done in the past. so the market, i think, views it as, okay, if the fed has changed what terhey're doing, they must have seen enough information. you can't really separate those two. >> okay. in the next segment, what happens to fed policy when bernanke leaves and what does dudley think of vice chair janet yellen, we'll bring that in the

8:30 hour, guys. becky? we still go back to the same questions, steve. like do we listen -- >> it's very hard decision to defend, it would seem to me and it's not entirely logical. i think they were spooked and spooked by something he told us about what's going to happen with the budget debate. >> right. >> and the data wasn't there. and i think they also failed to communicate that to -- as you said, a variety of people who might have been able to distribute that information or markets in general. bernanke's silence will go down as a mistake. >> there's no -- you aren't picking up any delusions of grandeur that -- i guess because why? because the legislative branch can't do anything so they think it's all on their shoulders or something? it sickens me to think that the entire u.s. economy is based on that these guys -- >> were they right or wrong, joe? >> i think they're wrong, get out, get out and let's see, let's try. and if we have to clear the

system or whatever it takes, i guess that's heartless, but we can't take care of every single slow period we have. the fed isn't a panacea for everything. >> i don't know if it's delusions of grandeur, joe. that's an interesting question. but they -- they probably think they're responsible for a good part of the growth -- >> well, they're not. >> and they feel like their absence. >> richard fisher has been saying for so long, we have primed the system. there's money there, now it's up to the economy to take what we've done and do what it does. and -- >> let me play devil's advocate -- >> no. >> no? >> just let it go. but what happened last time when the fed said it was going to taper. what happened to interest rates? what happened to housing -- >> they ran up to 2.7. >> what's happened to the housing? >> on an absolute level, it's got to go back. we've got to sooner or later get back to where we -- and

druckenmiller's point, the fed is allowing us to pull off the hardest decisions we need to do. >> like what? >> leveraging. >> now he said we can shut down the government because we've got the fed as a put to what happens. so it actually gives politicians the, you know, if they didn't have the fed with their back, maybe they wouldn't be as serious about closing down -- >> whatever comes after the devil's advocate. so you're advocating higher interest rates, more government cutbacks for the economy. that's the current prescription for the economy. >> yes. >> give me your growth forecast if we get down to a 2% -- >> how are we doing right now? have you seen the forecast the past two years? it's been 3.5% next year every year. and every year it was going to be 3 1/2 next year. it's never -- >> it is true. >> so you think -- >> you need to fix the structural problem. >> you would forecast 3.5% growth. put a number on it, joe. >> i don't remember the fed

being the panacea of my whole life. >> you haven't lived through a financial crisis. >> we did back in the '70s. the late '70s. >> that was not a banking crisis. >> it was just as horrific. and i think there's just as much -- >> i'm with you on this, joe, but you've got to put a number on it. and nobody's put a number on a higher growth number on government cutbacks. >> i just -- >> bernanke is a guy who takes things -- he takes things very seriously and thinks it's all on him, but it's not, it's not. i wish he wasn't so worried about it. let us take the training wheels off. let us fly. >> steve, we'll see you back here at 8:30. >> devil's advocate. >> get your thoughts together. when we come back, a merger in the semiconductor equipment space. we're going to speak to an analyst who covers applied materials. ♪

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welcome back to "squawk box" this morning, semiconductor equipment maker applied materials is combining with tokyo electron. and joining us to talk about, patrick ho. good morning to you. >> good morning. thank you. >> let's talk about this deal. does this make any sense to you at all? >> actually, it does from a fundamental standpoint. i think it's actually a very positive deal for applied materials given there's some good complementary fits in terms of the market segments that they participate in both the semiconductor and the flat panel display markets. >> so we're looking at the stock, it's up on this transaction. stock for stock deal. there's some competitors,

though, who i believe you think are going to get hurt in all this. >> yeah, i think again at first glance, research given they do compete against tokyo electron and applied materials, that's one i would be wary of. and now you have a bigger scale applied materials with an even bigger global footprint. >> can we just talk for a second about the cultural issues of merging a u.s. based company and a japanese company and what that means? let's just talk about the execution risk. how much is there? >> i think that's one of the bigger concerns out there. but in this deal's favor is tokyo electron in the last few years has been more progressive in the standpoint they've acquired two smaller north american companies. they've been more forward thinking than i think we give them credit for. so i think that's one aspect and

i also think from the applied materials standpoint, their new leadership team under ceo gary dickerson is one who is also a progressive thinker and one who is also very highly respected in japan as well as the rest of asia. so while integration is a concern, i think this is something that can be done. >> thank you for your perspective this morning. we'll see how it turns out. >> thank you. >> let's get final thoughts from our guest host michael price. senior managing director, i'm trying to figure out the world we live in, michael, as we want more and more stuff. i don't want that much more stuff. >> yeah, you do. >> i'm using nfl programs and stuff like that. are we going to ever run out of -- these are little squigglies. >> there's 500 million tweets a day and 2.3 billion likes a day. so what happens with all of that data? that gets processed by somebody like an ibm or facebook or twitter. >> do we have the bandwidth?

>> so then the other side of the coin is the bandwidth coin and when you think of the gangnam style youtube video, there's been 1.5 billion watches but it's only stored on ten google servers. it takes up no storage, takes up bandwidth. there are things like tweets and likes, and things like gangnam style, which take up band width. and the good news for the u.s. is that we're a leader in this. and the u.s. regulatory policies have been very favorable in europe. they force you to resell their networks. and if you are forced to resell your network, why would you ever invest in a network? so the regulatory policies here have been very good. and verizon started off with something called cdma 20 years ago. and they were forced to invest into something new. and that decision to invest in lte actually has driven the u.s. to be the leader in this. so i'm pretty positive about the

u.s. -- >> we won't run out of stuff. >> we're going to run out of spectrum and run out of power to drive it all. >> thank you for being here for the hour. >> thank you. coming up, david darsden is here, stock ideas and the market outlook ahead. also a homemade pie for us. avoiding the government shutdown, what congress needs to do to get a deal done on the debt ceiling. that and a lot more coming up.

they always have to schedule at the last minute. >> can congress come to an agreement to avoid a government shutdown? >> this debt ceiling thing is are you te routine? >> both. former white house press secretary joe lockhart. a potential thaw between the u.s. and iran. plus, more of steve liesman's exclusive interview with the new york fed president william dudley. >> what's the message you'd like to send to congress right now?

>> less drama. more certainty would be a good thing. >> the 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. let's see if there's been anything -- no, hasn't been. anyway, call down three on the dow. down three or so on the s&p. the worst performance percentage wise. and there's one reason things aren't going too well over in asia. we'll take a quick look at what's happening in europe in this taperless world. at least we've got some positive action there. but not very much, .5% is the best we've got. >> applied materials is

combining with tokyo electron in an all-stock deal announced earlier this morning. again, this is a deal announced earlier this morning. you can actually see applied materials. shares up by about 4.5%. we're also going to keep an eye on shares of blackberry this morning after fairfax financial has a deal in place to buy blackberry for $9 a share or total of $4.7 billion. the shares initially traded above that price after the deal was announced yesterday before finishing below. david faber had been reporting fairfax had not lined up financing for that. others were questioning whether this deal was for real. fairfax holds a substantial stake in blackberry shares that had been plummeting before this deal was announced. also, president obama's set to address the u.n. general assembly this morning. he is expected to signal willingness to engage with the new iranian government on the condition that iran makes concessions on the nuclear program. a meeting has been officially scheduled.

but if a meeting does happen, it would be the first in over 30 years. we'll keep an eye on energy prices as signs of a thaw between the two nations could mean more crude supply available on the world market. you can see this morning, crude prices down to about 19 cents. $103.40 a barrel after falling yesterday to a 6 1/2 week low. president obama is also expected to call for consequences in syria if bashar al assad's government fails to relinquish chemical weapons. for more on the market action here in the u.s., we turn to david, he's going to be our guest host for the next hour. i don't think we've had you since the non-taper last week. was that a positive for -- did it matter? we'll do it sooner or later. >> no ss, no slackening, no

tapering, no summers and no syria. those three things let the market rise. >> it rose a little. now it seems like -- >> gave it back. you've got eight fed presidents. i love this. eight fed presidents in a cacophony of voices talking this week. >> why do we care what any of them say anymore? >> well, i think people are grasping at straws. the next meeting is october 29th, 30th -- >> you think they'll do it then. >> he said earlier this year, we're going to do it before year end. so there's a lot of room before year end and i think it'll be very much data driven. but you had sloppiness. and i think the nail in the coffin of tapering was that 169,000 job number friday, september 6th as you know and the downward revision of 72,000 of the two previous months. and i think that probably was one that tipped the scales. what did you think of him saying it was a jump ball. it was a close call as to whether to start the tapering?

>> and given what dictates whether someone hires or not. given what dictates it, what is 10 billion a month not taking it out have to do with whether you get hired or not? >> you will love this. the round table. ceo round table. when the ex-head of verizon, they wrote a letter two years ago to the president listing 58 things that need to be done for them to start hiring. they're sitting on almost $2 trillion of cash, they're not hiring because they say you keep moving the regulatory goal posts. we do not have at any certainty and being able to plan. that's the biggest single thing. look at these ism numbers. we're getting more out of what we have, the production, but people are not adding jobs. we're giving people the eat, drink and get sick jobs. waiter, bartender, maitre d'. and that's going to come when we have the ability to plan and

certainty. >> i would think that the upside in the jobs market to keeping the $10 billion there instead of tapering, you can't show me one job that maybe is generated from keeping that 10 billion. and it really did roil market players in not starting the taper. the upside for what you got was zero. >> everybody's dumping on larry summers' stock these days. i would be a buyer. >> larry would've tapered. >> he said that did not do any good. your pal on here, he was phenomenal. >> phenomenal. >> everybody should watch the replay of that show on the website. he was phenomenal. he said it's got me and buffett richer, but it hasn't helped the bottom 80% which has been summers' message. and this is not really the answer. it worked as a crisis calming device, but this is not -- >> if it wasn't for them, maybe we'd have to do some things we needed to do. maybe we'd start fixing some of the things we're glossing over.

>> i think it has been a placebo. it has not been -- >> can you come up with one more that begins with a "p." >> i'm looking for that right now. >> for your clients, it's a great thing, right? >> it's -- >> great for one day. >> we have 4 million customers as you know, andrew, they have 7 million accounts because many people have more than one account. it has helped them. the mainstream, the people that do the real work in this country. people watching this show wearing a tool belt right now, okay, in a coffee shop in tulsa, they have not moved ahead in the last 30 years and this country cannot move ahead unless the middle class and the broad population feels confident about moving ahead. it will happen. september of 1983, this is 30 years ago, '83, we added 1.1 million jobs in one month because of structural reform. and when we get that, we have -- we're like a coiled spring. this country is going to blow people's minds. >> jimmy carter didn't get reelected. >> that was a major thing.

>> this is carter 2.0. >> reagan comes in -- >> i know. didn't happen. >> it went -- it took from '82, took them till '82, and i think this has happened. >> is it the politics right now? >> is it going to happen? >> we're going to have three more years. >> when people are so disgusted, revulsed, this will happen. it's not there yet and we don't have enough. >> we don't have another election for a while. >> it's going to take a while. i think the german election result was more of the same. it's, i think, she will open up the pocketbook a little bit. love to see her connect with the greens, believe it or not, they're the ones that want to give the most aid to help bilaterally, germany, to help others. they've knocked out the free democratic party which has been

the traditional coalition partner. but i don't see the revulsion you've seen in mexico and japan to produce. he speaks today at the united nations. >> you're saying we have to become mexico or japan before you see a situation like that? >> you're a mom and you know how well that you can sometimes reach the child by going through another child. and japan and mexico are reaching us. when we see japan's been down, becky, for 23 years. >> i know, that's what i'm saying. i hope we're not going to be japan. >> they're finally doing it. >> you think it's going to take that long here? >> i don't think it's going to take that long. i think we're closer than we realize. this guy scott walker, chris christie, you've got people, okay, people that are governors that are making the noises that people are responding to. and there's -- they're prophets, okay. they're crying in the wilderness. but we are -- we are started

down that path and it will blow the world's mind. >> there are two kinds of people in the world, really, andrew, people that think the private sector is the answer and there's people that think that the government is the answer. and unfortunately, the government can't run without the tax revenues from the private sector. >> growth fixes everything. i don't disagree with that. but there's other structural issues. >> structural issues, education and infrastructure, the debt. okay, the debt. the education is not just kids in school. it's also parents, okay. and they are beleaguered by the conditions. >> that's a 20, 30-year problem. >> it took 20, 30 years to get down here and it'll take 20, 30 years, but going in that direction will unleash these animal spirits that you've talked about here of entrepreneurship, which is one of the six major things that the united states has.

>> don't do that. don't do that. because if there's six and you only tell us one, we need the other five. >> energy. >> okay. >> energy, we've got entrepreneurship, demographics. >> four more to go. >> housing, recovery, okay, and we've got the reshoring resuscitation, recovery, rejuvenation, renaissance of manufacturing in this country. it's coming back. and 3d printing of these new things, biotechnology, we're going to change the game. >> you said eight. rick perry couldn't remember three. you just got eight. you go, guy. we'll have much more from double d, david darst throughout the show. we're going to talk to former omb director and former white house press secretary joe lockha lockhart. and more of the interview with bill dudley. check out the "squawk box"

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s&p 500 would be off about three points and the nasdaq up about 1.5 points. carlson capital disclosing a 6.7% stake in boise packaging. $12.55 per share. carlson says that the offer doesn't reflect the fair underlying value. it sent a letter to boise's board saying the value of the company is actually between $14 and $17 a share. and we'll see how that moves. it's up about 2% to premarket right now. >> obviously a lot of political wrangling continuing over the debt ceiling. what will happen if the debt ceiling is not raised. joining us now to talk about this is jim nussel the former omb director. and currently a group managing director. gentlemen, welcome to both of you. what happens if we don't raise the debt ceiling? >> well, we saw a little bit about what happened with that 780 days ago i think today. and that's -- you lose your aaa

bond rating. that's what happened last time. markets will react. there will be -- there'll be repercussions that our economy right now doesn't need, doesn't deserve. at a time when it's just trying to get back on its feet. so, you know, i think that's really what's hanging in the balance here. the politicians in washington are, you know doing this for their own personal or political or ideological gain. what's hanging in the balance we saw a little bit about 780 days ago. >> in other words, we don't want to go down this road again. >> we really don't. we can't afford to. we're at a point where -- we're at a positive tipping point. you had that discussion where you could get back to growth, you could get back to creating jobs, you could get back to economic development creating small businesses, all sorts of things. we're on that verge, but we can't do that if there's no certainty, if there's no predictability. if people don't believe in the future of our economy. >> joe, we've had more and more

guests who say this looks to be at this point an inevitability. is that what you think? >> well, you know, i think it probably is. and we probably have to go through this pain. you normally come on these things and want to violently disagree. but i couldn't agree more, possibly with what jim just said. you know, we're holding a fragile recovery hostage to something that has already been settled by the voters twice and by the supreme court. it has a crazy thing. you know, i heard somebody recently say that when the republican party it's like the tail wagging the dog. this is actually like the fleas on the tail wagging the dog. not even the leadership agrees with this. no one sensible agrees with this, but we're still going down this road because for whatever reason the leadership particularly in the house, you know, can't stand up and take -- get control of things. >> go ahead. >> you know, i'm trying to figure out -- were you really in a democratic -- i'm trying to remember.

was that a democratic -- i guess we're splitting hairs here. not all democratic administrations are created equal as we know now. let me ask you -- i will concede, okay. it was nominally, i guess, a democratic administration. now we know what a real democratic administration is. as far as not negotiating, there's a piece in the journal today going back in time and showing how many times previous presidents with congress have used it to arrive at some type of concession on either side. that it has typically been used as a negotiating tactic in the past when you're raising the debt ceiling. and you're quick to blame the fleas, you know, the republicans are fleas. at best, they're a tail on a dog, but isn't -- there's no blame to be ascribed to the other side that will not negotiate, won't talk about anything as bad as our long-term problems are in terms of the budget? >> i think, you know, i wouldn't say it's typical. there have been a couple of times. and frankly if you look at the

times, it really didn't it didn't result in anything real as far as deficit reduction. but this is -- >> negotiating going on during a debt ceiling. that both sides realize that you've got to talk and give something prid -- >> nothing to do with the debt ceiling, it has to do with obama care and the health care system a law that passed. in the past, no one said that we were going to use -- we were going to raise the threat of actually defaulting. and at this time, very explicitly, you know, senator cruz and his allies in the house have said we are willing to let the government default and take all the consequences over this ability to defund obama care. it's very different. it's a good republican talking point this has been done before, but it's really not -- >> they're not talking about defaulting. no one -- no one is saying they want to default.

you're just leading to that, you're connecting the dots of that eventual -- >> well, no, basically what they're saying is they won't raise the debt ceiling. >> right. >> unless obama care is de-funded. and, again, what a lot of people don't understand is this isn't about what we're going to spend in the future. it's about what we've already spent and the obligations we. we're not going to pay our bills unless we get our way. that's no way to run the government. >> do you see, jim, the path to getting through this? a path to some sort of reconciliation or some sort of an agreement? >> well, of course i do because i've done it and i've seen it happen in the past, but let me tell you why this is a little different, joe, and both joes for that matter. in this instance, what does victory look like for the republicans? think about that for a moment. what happens if they get their way? >> they get -- we've talked about that. >> so they get a year of nothing. >> no, they get a year -- >> let me finish. the difference between -- >> the individual mandates for a

year. >> but wait a minute, the difference between this government shutdown, if you will, or this brinksmanship is that in the past, republicans had a plan. there was something hanging in the balance. there was -- there was a welfare reform, a five-year budget to get us back to balance, back with the clintons. there's nothing here. >> you weren't watching larry lindsey on the other day. he said the next negotiation -- >> larry lindsey doesn't have a vote. he wasn't elected dogcatcher of anything. what do the elected republicans have as a plan to put forward right now? that's what's so frustrating to me. to so many other republicans. >> all right. >> that have watched this. joe, seriously, they don't have a plan. >> they want to go a year on the individual mandate. to get a yearlong delay. >> in other words, we're going to shut down the government in order to get to what? to get to nothing. >> with the end result being in the next negotiation, there's one that comes after this too, right? >> so what do we do in the meantime? what does the economy do in the

meantime? what do people who have no health care in the meantime? what do people who have no job? people waiting for a tax code reform supposed to do in the meantime? they're waiting for the republicans or they're waiting for somebody to lead. and right now, saying nothing or saying stop or saying shut down the government to me is not leadership. in the past, when this tactic has been used, it's been used because there was a plan waiting on the sideline that was ready to be put in place. >> that is a good point. it gets us to more uncertainty, which has been a huge hang over the markets. >> that's right. >> and that's the -- i think that's why so many republicans on the outside and even the "wall street journal" today and so many others, they're waiting, this is -- this is -- to me, at least, without a plan of what you're going to do, this is a tactic that is used for a personal and sometimes political gain of one or two senators' parts because they want to run for higher office and march

people out there so they can go back and raise money on the fact that those people are not as pure ideologues as i am. and you've got to vote for people like me. i mean, that's what's going on here. it's not because there's a positive plan to actually save the economy or create jobs or reform the tax code. nothing -- nothing's waiting on the sideline. >> joe, you can finish with what he said. and that's all you need to do. >> the craziest part of this is it is a tactic, but the dumbest one i've ever seen. there's a legitimate argument about the role of government. whether government should be large or small. and republicans have traditionally argued for smaller government. you shut the government down and immediately remind people exactly why they depend on the government. and it's like the most -- it's just dumb. >> all right. gentlemen, we'll be watching. see what happens. i don't think it's going to shut down. like the journal says, we wish

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this one is for joe kernan. do you know about this, joe? >> no. >> if you are behind on episodes of "breaking bad," perhaps you can't watch the series finale or another program, netflix now has your back. the company launching spoilerfoiler.com yesterday. it's a site that will sensor your twitter feed and redact "breaking bad" spoilers. it uses keyword searches to filter out mentions of "breaking bad." designed to protect viewers in the uk or u.s. west coast where the series finale will air later on the east coast. and there's a view this could be used for other programs. >> during the british open and -- i wouldn't look -- >> you wouldn't look. >> i don't check my e-mail either about any sporting events. i'm going to see, oh, sorry about the bengals or see that, so i don't check twitter or e-mail. >> i hadn't thought that. when we come back, we have more of steve liesman's

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welcome back to "squawk box," everyone. let's take a look at the stocks on the move this morning. applied materials shares are higher after the semiconductor equipment maker announced a deal to combine with tokyo electron. carmax reported second quarter profit of 62 cents a share. 5 cents better than the street was expecting. carmax is the nation's largest retailer of used vehicles. and national oil well varco will spin off the distribution business into a separately publicly traded company. the company expects to complete the spinoff for the first half of this year -- i'm sorry, first half of next year. cypress semiconductor has slashed the current quarter outlook, looked for earnings of 12 cents a share, that compares with 17 to 18 cents. the company is citing greater than expected weakness in mobile handset revenue from asia. all morning we've been bringing you steve leaseman's

exclusive rare interview with bill dudley. is there a surprise in here? >> it's interesting what he says. the bernanke led fed making forecasts of how it'll behave in the future, why should investors believe the promises for bernanke's leaving. i threw that question to bill dudley. >> i think that the market should have reasonable confidence in the forward guidance because the reality is the federal reserve is not just about the chair. there's a lot of other people that participate in the process of the other members of the fomc. the staff, and the fed's mandate is very clear. maximum sustainable employment in the context of price stability. and all the members of the fomc are facing the same data set. i'd be very surprised if the -- if monetary policy were to change its approach on a going forward basis. >> regardless of who the next chairman is? >> regardless. >> and janet yellen is among those who is mentioned as a potential nominee from president obama. you worked with her for a while.

what kind of monetary policy might you expect from janet yellen? >> i would not see it as any large, you know, change in the monetary policy regime. i've known janet for many, many years. i'm a huge supporter. she's smart, she's tough, i think she'd be a very fine choice if that's the way the president decides to go. >> what is your outlook right now for what's going on in washington in terms of the debate over the continuing resolution and the debate over the debt ceiling. do you think it's going to be worse than last time? >> i don't know how it's going to be resolved, but i do agree it's creating a high level of uncertainty. and i think people are worried about the possibility of a bad outcome. so it does create a little bit of a cloud right now over the economy. and you can certainly imagine that can cause businesses and households to hold off on the spending decisions. even with a good outcome, it could have a negative effect in the near term. >> is that one of the areas when you get a little clarity on that, it would make you clear

the way for reducing the amount of kwan at a timive easing? >> i think clarity there assuming clarity, i think that would remove one potential obstacle. >> what's the message you'd like to send to congress right now as a monetary policy maker trying to help the economy? what would you like to say to them about what they should do with fiscal policy? >> i'm not going to tell them how to conduct fiscal policy. but i think less drama, more certainty would be a very good thing. >> yeah. either way was what we discussed. make it higher, make it lower, do this, but don't keep going to the brink every now -- every time that we do this is what dudley would like as a fed policy. >> i think he likes janet yellen. i think they have been part of the same team that steered policy over the last several years. but i think they see the world in similar eyes and have similar views of the efficacy of policy and what the fed should be doing.

and you can -- by the way, you can read about this on dot com. >> more video? >> well, yeah, there's a 20-minute interview and we brought you ten minutes of it this morning. >> what's in there we haven't seen? >> his discussions about bank -- about bank regulations and derivatives and it's stuff that guys in the banking sector would be very interested in. we talked a bit about the volcker rule and the interaction between the volcker rule and fed policy. >> okay. >> in other words, once they limit the ability of banks to take on liquidity, does that limit the effectiveness of monetary policy? that's an issue that's been out there. >> okay. >> some guy calls me an idiot, he says on twitter about the -- >> you're an idiot for reading the twitter. >> why are you reading the twitter? >> why are you an idiot? >> he was much better than joe lockhart for the democratic cause. >> are you kidding? >> no, this guy says, no plan, question mark, to me, you idiot.

how about eliminating a $1 trillion unconstitutional entitlement which is going to bankrupt the united states. which is -- i just read that, obama care which i read for rick. >> you're not getting rid of it, you're putting it off for a year. >> you're giving it time to collapse under its own weight. >> are you trying to stir the pot? because mr. santelli is going to be joining us. joining us from the cme in chicago. would you like to respond to the twitter mafia? >> say what they said again. i really didn't catch it. >> no, we had what was supposed to be a debate between a republican and democrat on what the republicans. >> not all republicans feel the same. >> they decided the fleas on the tail of the dog are the ones that had the party backed into this -- >> yeah, backed in. >> because i didn't come up we limb nating a $1 trillion unconstitutional entitlement which will bankrupt the u.s. they called me an idiot for

saying that's the plan. >> everybody's upset we have a couple of senators with an opinion. they're not like the borg where they're all supposed to have the same ideas where it's under ben, greenspan -- they never go against the crowd. the borg of congress. every democrat has to see it exactly like the president. whether i disagree or agree with cruz and associates, i give them my kudos for actually using their brain. whether you agree or not, you know, what is this wind-up toy? everybody's got to come from the same stencil? you know what, he was duly elected. he is doing things within the purview of being a senator, okay. unlike executive orders i would question. >> his point was the last time we ran up against this, we're dealing with a situation where the u.s. was downgraded from the aaa status. markets went into turmoil, and that's the type of thing he

wants avoided. >> i'm going to challenge you on everything. first of all, the fact they were downgraded, everybody assumes it was the messiness. the messiness may have been an influence, there would be no mess if there wasn't -- >> that's laid out explicitly in the reasons it was downgraded. >> yeah, well, i'll tell you what, i don't think that many countries deserve the super aaa credit rating. but i do think that the u.s. credit is the best. and it's all relative, put any letters on you want. and the market has acted appropriately. what's the issue? >> the issue is the -- if we're ton t on the verge -- >> becky, you have kids -- i'll argue with you if i feel. >> we do hear from ceos -- >> what did the ceos tell us before the credit crisis? >> because you know what -- >> because i dared tell you to answer your questions. >> the only thing i see in the media is one-sided. one-sided. that's why.

>> all of this, andrew, becky, joe, rick, all of this, steve liesman, all of this in my opinion is gradually eroding foreigners' confidence in the united states of america. >> oh, give me a break. give me a break. >> okay. >> that's the most anecdotal -- >> the inability to come to an agreement and operate. i think this -- we're chipping and chinking away at the united states' position financially. we exist by the -- >> but the argument, rick, what is the eventual plan? what is the plan? what's the end game? >> what's the eventual plan on 17 trillion of debt and counting? what's the plan there? >> right. but my point was larry lindsey said this was a negotiating tactic to start with to get the white house to concede for its own good you should put off the individual mandate for obama care for a year and that's how you get to the next step after you don't shut the government down but to get the actual budget done that's what you

decide on. >> do we have this type of discussion when they change the rules allowing their own insurance to have supplemental additions of funding or changing the rules? do we give that much debate? you know what, everybody understands this thing isn't ready for prime time. so we have a couple of guys that seem to be in a minority trying to do something about it. do i think it's the best strategy? what i think doesn't matter. i think that they're within their purview of their duties and i think all of this discussion is because we're all supposed to follow and march along. i don't think that's necessarily the way i believe. >> okay, rick, we're going to leave it there. marching to your own drummer. everyone's marching to their own drummers. maybe that's a good thing. becky? >> no one's marching to their own drummer and when you try to, this is what you get. >> welcome to group. >> right. >> smart guy, by the way. >> he is smart. >> cruz missile.

>> nice. when we come back, signs of a thawed developing between the united states and iran. we'll learn more later after speeches at the u.n. by president obama and his iranian counterpart today. michelle caruso-cabrera will join us with a preview after this.

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good morning. >> hey there, andrew, good morning. it's not often that events at the u.n. can directly impact the markets. but that is quite the possibility today. we are waiting to see whether president obama will somehow meet up with iranian president. will they happen to meet up in the hallway? will they sit next to each other at an event? will they shake hands? understand, though, in symbolic language of diplomacy, nothing is happenstance. if they do meet up in a hallway, it will be highly controlled, it will be predesigned and we'll wait to see whether or not there is a picture that is actually released. if such an event occurs, it will be the highest level engagement with iran since the iranian revolution of 1979 that deposed the shaw of iran and led to the tougher moments in american history, the taking of american hostages. now the perception of possibility of a thaw with iran has led to a drop in the price of oil over the last month which is down about 8%.

it's not just iran. we, of course, are not going to bomb syria. that's one reason the price has fallen. increased supply from libya, as well. but additionally, the falling of tensions with iran could mean the lifting of sanctions. that could mean another million barrels per day eventually coming online. both of these leaders are here today because both are making speeches. we are expecting president obama to speak some time after 10:00. we are already told by the white house he will talk about the removal of chemical weapons in syria. engagement with iran, the mission being, of course, for them to abandon their pursuit of a nuclear bomb and then the pursuit of peace in the middle east. much sought after and never achieved. and yet in another demonstration of the pervasiveness and the influence of social media, his twitter account has been tweeting out pictures of his arrival here in new york. we expect him to speak later on

today at the later session which starts a the 3:00, he's the seventh speaker, it's hard to know when he will speak, but those are the events of today. and we're waiting to see, will we get a picture? that could potentially move the oil markets. we might be overstating it, but i don't think so. back to you guys. >> i don't know what to make of this. >> oil's down 3% for the month, andrew. oil's down 3% for the month, partly because -- listen to this, libya production has gone from 150,000 barrels a day, it used to be 1.5 million, it dropped 90%, back up to 800,000 barrels a day. these outages have increased the supply. so if they shake hands, that's basically a downward pressure on oil prices which should be a little bit of atonic and moxie to stocks. >> this is going to be different than what we used to see from ahmadinejad when he would come to the u.n. those were crazy sort of speeches. >> absolutely, becky, yes. yeah, we expect a completely

different tonality from rouhani. when ahmadinejad would speak, many would get up and leave and wouldn't listen, we'll wait and see what could happen today. that could potentially be a different signal about the potential engagement with iran. >> you think israel will stand and listen to hear what he has to say? >> well -- that is a very good question. i doubt it, we'll see. >> okay. michelle caruso-cabrera in the heart of traffic zones in new york city right now. it's going to be bad all week. getting some -- it's interesting, the social media network. someone's writing in, is anyone wondering whether the president should meet with someone who didn't -- who doesn't believe in the holocaust. so i checked to see is rouhani a holocaust denier? >> what's the answer. >> the answer is that ahmadinejad was. and in the "washington post" interview they asked him do you agree with ahmadinejad about the holocaust and he said, i'm not a

historian, i'm a politician. so he -- he avoided the answer. so he wasn't even man enough to step up to the plate and say -- well, say -- don't you think he should say, well, you know -- >> you don't need to be an historian -- >> yeah, exactly. >> this is my source, the huffington post. i love the huffington post. but i'll get news wherever i can. should you be rubbing elbows? i guess you have to. >> he doesn't answer the question. >> no, he didn't. >> you're saying because he didn't he wasn't affirmative. >> that's the point that he didn't -- he wasn't even -- he's western educated, smooth talking, made no attempt whatsoever, even implicitly to distance himself from that position. we'll check in with jim cramer with the new york stock exchange next. that's him right there. talking, moving his hands, he moves his hands.

don't miss "squawk box" tomorrow. much more on the debt debate in congress. might actually get people on opposing sides for the debate tomorrow. tomorrow, judd gregg, ed rendell, bob corker and mark warner. [ man ] on december 17, 1903,

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welcome back to "squawk box." futures right now, we've been doing a lot today, a lot of hard work and we've got them up three points, they were down earlier. oops, i better shut up. >> moody's said it expects the debt ceiling to be increased and it believes the u.s. government will continue to pay interest on treasuries in a debt ceiling impasse. notice how it's conflated immediately? jim cramer joins us from the new york stock exchange. i promised you do some really big hand movements in talking to

us about stuff today. you know what, you got a lot of passion and that's the most important thing in life i think, don't you? >> well, look, i got passion for what you said about iran. i think you raised the questions no one -- everyone is acting like this is a man of peace. there was a fabulous article talking about how this man's right-hand man is masterminding the whole syrian war. it's great he comes bearing gifts, as did others in munich that bore a lot of gifts. >> i'm going to start using the social media because i can see it brings up some interesting things. do we engage people? i don't know, what do we do with a guy like that? ahmadinejad used to come here and didn't he give a lecture at some college when he was here last time? he was invited by the provost or something? why? >> let's go back to reagan, verify while we trust, if we choose to possibly trust.

you guys are saying a lot of great staph. david darst this morning talking about who would trust the u.s. government from far away? wouldn't you nail any bid in 10-year treasuries if you owned them and you're from a foreign country? a foreign central bank. just a lot of great points you guys are making that are real common sense and that's why i love the show. >> jim, a quick question, apple up 5%, the stock is yielding 11 times early, $50 billion market cap -- $50 billion market buyback, largest in history. how do you see apple going forward? we like the stock. how do you see it? >> i got confused because the analysts -- there were three down grades, ubs, credit suisse, a lot of people downgraded. they were wrong. the guys that matter said this is a major upgrade. they like it in china. a lot of people said they didn't like it in china.

guys caught flat footed and have to raise price targets and reverse. >> did you see the gene monster note where he said he's worried that the numbers are somewhat misleading in that they are stuffing the channel and when they talk about 9 million and main apple can clarify this today, but jean says he's believes a good portion of those were not only sold to consumers but were sold to at&t and others and they're taking on their own books. >> i think you can't get enough. i've got sprint on tonight, they'll tell you the same thing, whatever you can get, they'll sell. sometimes people don't get it right. >> so you think this is just a justification of that? >> i just think that if i were -- if i had made his call, which was so opposite of what the headlines say, i would be scrambling. it's entirely possible there could be inventory but how about a lot of the teleco companies

are saying they wish they had more. i'm with cook on this. my mind changed the moment -- 450 when those analysts said this is the greatest and what do you do this weekend? you either bought a weekend or you upgraded and anyone who upgraded loves this. the analysts should have listened to what the critics say. they jumped too quickly and the critics like the phone and therefore the people love the phone. this is a jump ahead of samsung. right now i'm with darst. >> jim, i wouldn't want to be short apple with the china mobile contract, 600 million, 700 million users that don't have iphone right now. >> credibility coming back to the company. >> i'm with cook, i'm with you. they did lower expectations, now it looks like they're going to overdeliver.

>> thanks, jim. we'll see new about three and a half minutes. >> coming up, our guest host has been david darst, we're going to give him the last word. you can probably have five words. >> we got six. i love having a free checked bag with my united mileageplus explorer card. i've saved $75 in checked bag fees. [ delavane ] priority boarding is really important to us.

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let's gets back to david

darst for the last word. >> buy japan, we raised japan last week by 2%, took it out of cash, 40% growth in earnings, structural reform continues. back to you, becky, in under 20 seconds. >> way to go, david, we love you. >> he's good. >> "squawk on the street" begins right now. good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber at the new york stock exchange and jim cramer. home prices at the bottom of your screen, all 40 cities higher for the fourth straight month in a row. futures are mild after the market's first three-day losing streak in a month and in europe, german business confidence ring