good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. stocks are slumping amid no development in the shutdown fight in washington. futures this morning are just slightly weaker. you did see a sell-off yesterday. this morning, dow futures down by just about four points below fair value. joe mentioned china and japan. uncle sam's biggest critters are increasingly worried about the standoff and the shutdown in the debt ceiling. beijing and tokyo have both publicly called on the white house and congress to resolve this dispute. japanese officials reportedly held several emergency telephone comps from u.s. treasury officials yesterday. their concern is if the dollar weakens, it will mean a big surge in the yen and that has been part of what they've been trying to do with their recovery. china's finance minister says beijing has been in touch with

the standoff, as well. china is worried about getting paid back on its investments. the yields on one-month treasury yields continue to head higher this week. it's just another sign that investors are getting increasingly worry worried about the government defaulting on its locations i would argue they're not worried enough, but we can talk about that in a mip. china and japan aren't the only ones calling for a solution out of washington. howard schultz is urging leaders to push for a shutdown. he says the following, utterly disappointed by the level of ir responsibility and dysfunction we are witness to with our elected political leadership. it is our responsibility to address this crisis of competent that is needlessly being set in motion. during the last debt ceiling

debate, you'll remember schultz made headlines by calling for americans to stop making political contributions until lawmakers struck a bipartisan deal on the country's debt revenue and spending. dallas fed president richard fisher is urging the same message for those in washington. he warnings that the standoff in congress could drive the country to the edge of defaulting on its sovereign debt. in speaking in texas yesterday, he said i deeply hope and i don't think we'll default, but it will come down to the wire. it's an embarrassment for my country and, guys, i wrote a column about this today. one of the things i worry about most is a lot of people talking about saying we're going to have a problem, but unless the markets truly do crater and send that message, my worry is there's a proversion, but ultimately we don't get there because we won't have the pressure applied to congress to do anything about it. >> how does it work at the "new york times" when -- is there a meth or something where you all talk about this? >> no, not particularly. >> no.

the first paragraph of the lead story in the "new york times," with increasing anxiety that the united states might actually default. and then your whole column is that the united states might actually default. >> right. >> .it's like the whole paper seems to be -- i don't know, it's not doing the president's handy work saying, you know, you really should be -- he said when he was interviewed by john harwood, this time it's different and you should really worry because these markets are going to start getting -- it's almost like are you all on the same page in terms of forcing republicans to come to the bargaining table? is it like some -- i got my karl rove talking points yesterday, but did you get them today? >> no, no, no. look, there's a real worry around this country that we're not going to get there. >> but it's in the lead story of the times and it's your column. it's like you're all on the same page. >> i think we're all thinking a lot of the same thoughts. if it does happen -- or at some

point, who does -- >> if it does happen, i go to -- >> but who do you think controls whether or not it happens right now? >> i think there's two issue going on. >> it's the crazy republicans? >> within of the things that we've heard in the past 24 hours is actually that president obama -- and i was reading this in ben white's newsletter this morning -- that president obama biogene sperling suggested that perhaps they could reach some kind of very short-term deal just for a couple weeks. if the president were to extend that, then what had what happens? the question then becomes -- are you held hostage all over again? >> but what if the president did say, you know what? there is some merit to the idea that we do a lot bit here with -- i want the sequester, i don't like it. let's work on that a little. i agree that long-term entitlements, we should take one step or develop a plan to get a plan for that.

let's talk about that. so we'll delay this for three weeks or six weeks. let's get this -- our ducks in a row on how we're going to approach that. >> the president wouldn't say that unless it's. >> would anybody be in the. >> the guy if he doesn't play ball and it does happen, that the first time it happened in u.s. -- well, it did happen one or time. but it would be president obama. >> they might think that it -- and also if it doesn't work out well, the rest of his agenda for the next three years is off the table. this would be paramount for everybody we're talking about.

>> what do you think is the prevailing view? who would take responsibility? >> i think that the dangerous view is that maybe they could pin it on president obama. but then again -- >> but the president can present a very united front. npr was talking about this. he's one guy. the republicans have a much more difficult position. i think there are two schools of thought. i don't think they're united. >> even the most raf yid tea party -- i know they're characterized as being anti-american and not caring about their country. you would have to take a cynical view of what they're talking about. if it was just to tarnish president obama, i would they want want to default on debt. i think they're both deep down patriot. >> it's just different means of how you get there. >> i don't think you could find a single person that would admit that they would want to default for any political reason. >> but here i think you -- on

both sides, there are a lot of political subcontexts. >> right. i still -- i'm with fisher, though. i think that if we go further along, but i -- and also -- >> and we go further along and then we get there? >> and then we get there. but even if it was the 17th. i'm seeing everyone saying we can't prioritize. it might not be -- under the rule of law, you might not be able to pay china. >> and do you want to pay china before you pay your social security? >> no. but between the 17th and the 30th, or whatever it is, if you went over on the 17th, there would be such pressure. i just don't think anyone -- my prediction. and i don't think you're really predicting that someone doesn't get an interest payment, andrew. >> no, no. >> my prediction is -- >> i suspect what happens is i'm not sure we get there at 11:59 with 59 seconds. it may take another day or two, but the payments get made. >> and it may take that long.

you may have to go over the october 17th day to get a strong reaction in the markets. >> i get the feeling what they're basically saying is, look, don't assume that these guys on the far right aren't crazy enough to do this. that's what i think they're kind of saying. don't assume that they're not crazy enough to put us in default. >> i thought we would never -- >> i don't want to speak for the paper, but that's a personal view. >> and honestly, look, we have crossed these lines of no return in the last few years. the sequestration was supposed to be such a horrible outcome that neither side would get up to that line and not blink. we get never want sequestration to take place it off the top where you would want to cut things in a more measured and rationale way. >> but the davenlg of the sequestration hasn't been -- even the democrats like it. >> and i think that's part of the reason the markets have not reacted more. >> and, you know, putin, you saw

putin. >> any opportunity, right? >> every chance he gets, he goes, i wouldn't show up, either, if i had his problem. things are going swimmingly over there with you two. especially in terms of -- i'm not going to say anything. i'm worried about the umbrella at night. let's check on the markets this morning. yesterday, i saw it stabilize down about 80 and into the close as nothing happened. it went near its lows, down 136. this is wait and see today on both sides. you can see there's not a whole lot down, but not a whole lot happening. just the slightest thing could get us -- because the slightest olive branch on either side, how oil should be going down, although the dollar keeps weakening. i thought that was one of the most interesting things barry knapp said yesterday was that the closer we get to screwing up, the more valuable bonds become because the economy slows even more. in a per verse way, the stock market could go down, but the

bond market could go up. let's look at the ten year. are off for me. 3%, 2%, i have no idea which comes first at this point. the dollar, just for me, joe kernen, i wish it would go -- you know, i wish it would be under 1.30 on the euro. this is as high as we've been rooently. you have to think long and hard about the euro. just this year for one percenters. i may go to the poconos. i'm not saying that i'd go either europe or cabo. that's your thing. >> what do you think about tokyo? >> how is the -- the yen has gotten stronger, too. the yen has gotten a little bit stronger. argentina. what about argentina? i think people down there go down there to hide, don't you? what goes on there? >> buenos aries. >> you've been? >> i have been.

it's beautiful down there. >> but you have not been to randy and george's complex. >> no. >> george clooney and randy gerber. finally, let's check gold. what do you do with gold? >> i don't know. >> you figure you buy it b don't you? aren't we a super power any more? putin say the says we're not. we're in the low 1300s. time for the global markets report. i know russia likes what's happening here because they're laughing. what about -- are you guys still burned from the 18th -- you know, i know what happened back then. you're not taking any -- you don't like what's happening there, do you, ross? you're not over there snickering. >> no, no, i don't think anybody is snickering, joe. look, we like business and markets and i don't think anybody likes politicians a huge

amount. so, you know, they're all the same. right? >> right. and you've had some experience with, you know, partisan people on far left and far right trying to come to some type of agreement. it's not easy. it's like "w" said, it's laughed, it's hard work. >> the important thing is, here in the uk, we've had a coalition government that has survived. run british politics is in itself an extraordinary fact as we are not set up for coalition government. we are set up for opposing parties. everybody watched the prime minister's question times as punching judy. so the fact that we've had a partnership government is extraordinary to us over here because we used to be quite divided in politics, as you know. and in terms of markets, because we have deviivisive politics ine states, we're down to the session lows right now in europe. the ftse 100 was down, what swb 16 points yesterday?

we're currently 7 to 3, decliners outpacing advancers. losses ashdz 0.75% for the ftse today. 0.5% or less for the rest of the european equity markets right now. the ftse mib still the outperformer. it's been a pretty good week for the ftse mib. it looks like it has the plan to get state aproflt or eu approval for a state bailout. the ftse is underperforming, mainly because of the retail sector. we had a survey out overnight in the british retail consortium, which wasn't quite as positive as we might have thought. we have had had huge rosters and positive data. maybe suggesting the boost we've seen in consumption recently has been drawn down from savings. and on the back of that negative broker downgrades to the likes of martin & expenser.

>> basically underwriting lenders loan from about 75% of the loan to value up 95% for people getting worried the housing market is now getting frothy, as well. as far as debt markets are concerned, you just put treasury yields up there. yields a little higher today. nothing to shout home about. eye at that timan yields, 4.3% is where we stand. you get the sense right now essentially what we've got is something of a buyer's strike rather than anybody else deciding they're going to put any sales into the equity markets. back to you. >> ross, maybe you want to listen because maybe john knows exactly what's possible here. let's get to washington and john harwood. when someone from the white house starts introducing a

short-term deal and negotiating, in the meantime, the president probably knew that he was going to propose that, right, john? they talk about this. is that -- >> yeah, but that's always been on the table. >> the republicans won't do that, either. how long are they talking about? a month? six weeks? >> the white house hasn't said. i think they're trying to figure out any way to get it raised. the other thing that they said, jay carney at the briefing yesterday was that he was pressed on whether there could be some sort of a process solution in the fashion of what congress did in january. we've been up against the debt limit before in january, and republicans will willing to not do anything, just to say, well, we'll suspension enforcement of the debt limit for a few months on the condition that the senate pass a budget. and if they don't pass a budget, they won't get paid. no budget, no pay, which they did. that kind of an agreement for

some sort of process tweak at the same time is something that jay carney didn't rule out yesterday. so you could have a debt limit increase and then some agreement that we're going to have a budget conversation. >> did you say tweak or twerk? >> tweet. by the way, on the question you asked earlier about people not wanting the debt limit to go up or -- anybody agreeing o debt limit to go up, there was a member of the republican caucus yesterday who said that a failure to raise the debt limit would actually bring stability to the world financial system because it would be that moment where we say to the world and everybody gets it straight, we're broke. >> yeah. we had joe barton on yesterday. it sounded to me like joe barton would be very willing -- >> it is acknowledging the noegdz that we do owe china one -- that struck me that, wow,

we do owe those guys $1.3 trillion. but not raising the debt limit is different than not making a debt payment. if you can ease fine the craziest guy in the tea party, i don't think you'll find one guy that wants the u.s. to miss a debt payment. >> yeah, i don't care. >> until they think it would -- >> wait until they have to choose between sending the social security recipients a check and sending if checks to chinese banks. >> my kwn is, when we wake up on the 18th. is it waking up on the 17th or the 18th? >> i believe it's the 18th. >> i don't think that amount of precision exists. >> i think that's the point. i think that certain people who negotiate this think this deadline, we can force it and that's why we can play chicken. >> if you're really, really stoop and you don't have any

brains in your head, is to -- is a negotiator to say, well, we don't know if it's midnight on the 16th or the 17th or is 18th, so let's push it. and with a potential -- with the potential consequence of a market crash, that's dumb. >> i don't care anybody really probably wants that, either. i'm still trying. you don't have the button. i keep forgetting to put my button on. but i have a way to do this, john. what the what is it? yesterday, after i was talking about it, i figured you could transmit this ip foe to the people that matter and get something done. >> what's that idea inspect. >> let's talk about what the white house wants to do with sequestration. discretionary spending knot the republicans' big beef now. >> i'm not sure about that, but

that discussion is going to happen. yes, it will. >> and supposedly the stuff is still on the table, still -- >> yes. >> and that's still something that we could plan to have a plan for. >> yep. >> so instead of being just set in stone that you won't negotiate at all, just give some body language. >> no, no, no, joe, you're misinterpreting. it's not set in stone not to negotiate, it's not to negotiate until you do x, until you put the fire and then we'll negotiate. >> it's a gray area. but he can do it. he's the one that has to do it, isn't he? maybe the call. say look, john -- >> here is the irony about this, joe. the republicans are saying, please negotiate. i believe that that negotiation will happen. and when it happens, i suspect it will go better for republicans than it goes for the administration and democrats because i think the white house may well be willing to accept a deal that alleviates some

sequestration, that puts long-term cuts on entitlement without tax increases. that -- because, remember, the core demand for democrats is when you do these things, you get tax increases. but the party that is saying please negotiate wbl they've ruled out the democratic solution already. they've said over the weekend, we're not going to raise taxes. there's a fundamental contradiction within their position. please negotiate, but only on our terms. and, you know, the admin straegz has to figure out how much of that they can take. >> how much animosity or bad feelings are there from the 2011 thing that biden brokered? does the president really feel like he -- that was the worst decision or the worst thing that's happened in his presidency? >> i think he feels like that was a very -- i think if you asked him the worst day in his presidency, he would say newtown. but beyond that, i think what

happened on 2011 was a bit of a tripwire for him. his attitude, both publicly and privately has changed since then. he felt like he was being pushed by people who were being unreasonable with consequences, you know, the downgrade and the consequences that have lasted. now, the flip side of that, of course, is it helped him politically, helped him win re-election. but that episode is why he has drawn such a firm line about negotiating under this particular threat. and i do think it was important. since then, you were talking about biden being -- most democrats think that the deal they cut with republicans on the fiscal cliff at the end of last year was a bad deal from their point of view, that the white house settled for not enough revenue. in fact, this they had gotten some more revenue, they may not need my more right now. >> the republicans think that was an awful position for them to be put in, which is why don't they want to come --

>> what was awful? >> the idea of raising taxes without getting any of their entitlement issues pushed through. they felt like they got taken on that. >> but their entitlement issues are not really their issues. how much have you been hearing them talk about intiethsment this year? not at all. >> i do feel like the president got snookered back in 20121. >> that is crazy. >> it's why they want to come back and raise taxes. >> it's impossible for you to see the other side. >> no. >> but the other side -- >> talk to mitch mcconnell about the fiscal deal. >> you have a drink with mitch mcconnell. >> they still think he took the administration to the cleaners on the fiscal cliff deal and that's what most democrats in the senate think. >> the president still feels burned from when he did the extension on the bush tax cuts for a year or two. so noib can do anything --

>> i have to say, though, the idea of just kicking this -- and i hate the term of kicking the can down the road. but to put this off for a month or who months, main streets wants certainty. >> becky, i want to go back to the underlying point you were making a grand bargains. a grand bargain would clearly be in the best interest of the country. when you look at who wanted a grand bargain more than the other side, the president wants a grand bargain more than anybody else. the reason the grand bargain didn't happen was that republicans could not accept at the fiscal cliff when there was no alternative because taxes were going to go up for everybody, they could not get their members to accept tax increases. could not. and as a matter of fact, i'm not sure -- i'm not sure they could now. they certainly couldn't in 2011.

and look what happened in the fiscal cliff negotiations. when the president got to the end of december, he was trying to negotiate a deal with boehner. i believe boehner wants a deal want as well. when boehner decided he had to walk away and he tried to sell a deal that was only tacks over $1 million, his own members killed it. that's why we don't have a grand bargain. >> john, thank you very much. great talking to you this morning. when we come back, ben frankly like you have never seen him before. we're going to get our hands on the new $100 bill. >> i think they're going to -- >> one word, ben bernanke. >> anyway, we have the new hundred dollar bills and bernanke is responsible. >> he may be on a bill some day. >> we may. in fox sports news, the

falcons beat the jets, the jets improve to 3-2 over the falcons while dropping the falcons to 1-4. >> good goody.

welcome back, everybody. the new $100 bill will be released today. the federal reserve sent would of the bills to our set this morning. look, look. >> i have a pile of them in the bank. no, i don't. >> these are the new $100 bills and they are pretty cool. check it out. >> so we should show, here is the issue, right inspect this is this new line, this blue ribbon, a three dimensional security ribbon. and the other thing is the liberty bell, right? >> it's a disappearing liberty bell. >> well, it doesn't seem to disappear. >> it does a little bit, but there's no crack. >> in the liberty bell? >> maybe there is. i do see it, i think. >> this line is pretty cool. >> anyway, the $100 bill is the most counterfeited bill outside of the united states. you can see there's a water mark right here. oh, it's sparkly, too. >> and it is the most used.

now, the big issue apparently is foreign countries, there is a worry about a run on these bills because there is a worry that foreigners are going to decide they need to have the latest bill because they don't realize or don't know that old bills will still be accepted. >> for now. >> but historically, early on, anytime we've issued new currently, the foreigners run in to get -- >> i want one. they're cool. i want one to show it off. it's pay $105 for one. >> let's see what goes on here. >> i don't know f just heard what -- becky just said she'd willing to pay $105 to get one of the early ones. >> yeah. >> they will pay -- i think i should be extra to take this home .show the kids? >> no. >> you wouldn't pay extra to see you're go the going to see this before anybody else does? >> 95. >> no. >> you can get one of these, can't you, for par?

>> maybe if you showed up at a bank. if i go to the pnc down the street, no. >> in the next couple of weeks. >> if i would pay $105 -- >> how much would you pay for ads 2 bill? >> three. >> there are people who do that, actually. >> i save them. i have a bunch of them. >> i've drive 0 miles to save two cents a gallon. >> that makes sense. >> i'll drive . $5? >> maybe to take this home and -- >> oh, my goodness. then it's only worth $95. >> where is the collectors? the sense of a collector and it's cool and -- >> i'll get one of these if i go to collect eventually. >> i want one today. anyway -- >> no, privilege lutz. frivolous. >> i'm not frivolous about everything, but this is pretty neat.

>> it is neat. >> anyway, when we come back, we're -- >> what about george? >> when we come back, we often talk about analyst calls. but who should you really believe? the all-american research team is right after this. i love having a free checked bag

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welcome back to "squawk box" this morning. institutional investor releasing its all-american research snooud institute today. we have the maiden voyage. >> this is my debut. it's very happy. how about we kick this off, how does a portfolio manager trader decide what stock to buy or sell? there's tons of experience, but who should you listen to? enter institutional investor. each year, ii compiles a list of all the best brightest from wall street. thousands of investment specials were pulled, included including representatives at 90 of the 100 biggest asset managers in america. cnbc got a exclusive first look at these results. the fourth year in a row, jpmorgan tops the firm's i.i. all-american rankings. then bank of america merrill

lynch, morgan stanry, barclay's capital, rounded out by deutsche bank. these have more analysts, more people. some of the individual standouts include jp morlgan's health care tech and dieft bugz analyst lisa gill who has made a total of nine appearances on this list over the years. she's been rapgd the top coverage universityist which will stem from more prescriptions being billed. on the energy front, pay attention to paul sankey. among his top picks are hess and when it comes to hardware, this is tony saginaki. he has held the crown since 2002 for hardware. his top picks are apple and hewlett packard. he likes the risk he ward there. that is just a handful of the

research teams. we bring you more of the best and brightest analysts on the street, guys. >> there's month correlation between stock picking and whether you're an i.i. analyst, is there? >> it's interesting because if you talk about stock picking, yes, these guys are analysts. but there might be more avenue a premium put on the skills of these guys because correlations are coming down. >> no, but i don't think the rankings are based on stocks that they pick and whether they go up and down. they're based on how they blanket their product knowledge of all the industries they cover, aren't they? >> they poll investment professionals. they've made some picks. all of these guys have made picks over the course of this past year that have done well. not all of these picks are going to do great, but still, you would figure if you're a professional investor and you're

using these guys for they research, thoeflly you don't poll them high. >> i don't think it's correlated. >> no, but it goes back. remember all those analysts and the issue was they put out a report on the stock. that's one issue. >> and you can know everything about a company or an industry. and the market does things on its own on. a lot of times their rankings are based on if the market goes down, it will go less bad. so what is the other thing? oh, and then you look every year at which firms are the stock pickers. it's not jpmorgan. it's a firm like raymond james. you find the lesser known firms have the best in terms of actually picking stocks, too. >> it depends on which industry you cover or some of the more company specific issues. a lot of these guys, jpmorgan,

the reason why they got the number one on this list is because they had the most first place, second place, they got an army of analysts. but some of the smaller guys, maybe the ihss of the world, the sanford bernsteins, they get good mentions because they're great at what they do. they noent ranked as high because they don't have as many of them. >> and if you follow a company for years, you do all the groundwork, and that year it doesn't do well, but two or three years from now, if you're right about it, that might not show up just in s&p gains. so it's weird the way that they do it. it has to do with how good you are, but that doesn't necessarily correlate with the terms. >> dominick, you made it through. you're no longer a squawk virgin. we appreciate it this morning. at 8:15 eastern, we're going to talk to one of the ii's top credit analysts. first boston. his take on the financial services sector, still ahead. ♪

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joins us right knew is richard steinberg. jim o'sullivan is joining us from new york. rich, let's start with you. the t market reaction to this has tended to waiver.

this morning, the futures are barely lower. what's the market really thinking about all this, that this will be an agreement reached or is that it doesn't matter if there's not one? >> i do think it does matter if there's one, becky. i think right now investors are experiencing headline fatigue and it's not unusual after a long weekend of hope that something would happen that you could get off the -- a sell-off on monday. .then i think we'll trend and kind of watch kind of how it plays out. last night i was with ken stein from emory. in a vacuum, he said people lack clarity. i don't think anybody in washington wants to be in front of voters saying i let the u.s. government default. in general, even though we may get real close, investors have to be ready to get past the headline fatigue and be ready to

buy stocks into the weakness if that happened. >> but, rich, what's the market deadline on this? the treasury secretary has said october 17th. if we wake up on the 17th and there's not an agreement, how does the market react at that point? >> i think we'll have a relatively vicious sell-off. i don't think it's going to come to that. but if it does, think about rip van winkel for a minute. you could fall on the sleep on the 16th, wake up on the 18th, this whole thing can cycle through. you could have a sell-off. the you could wake up and say what happened. you wouldn't know. i think in the short run, there may be some pain and traders will take advantage of it. but investors should be looking at trying to pick up bargains if, in fact, that would happen. >> but that entire mentality might be why we haven't seen a sell-off in stocks up to this point. yesterday, barry knapp brought up the stock market and how it's reacted in previous times. you might think the interest rates would spike. but he thinks they might

actually drop because it looks like a safer investment. >> i think barry is a smart guy. he's been bearish all through this cycle. so i think when you look at the context of people's comments, you have to kind of think about where we are in their position prior to this big market move sxp so, you know, i think like today, people are talking about the tee bills spiking to six basis points. well, you know, from zero to six, if you're a short-term corporate guy trying to make a decision, maybe you just get out of the way so you have a short-term spike, but it's not meaningful in the long run. >> jim, let's talk about the economics of this entire situation. we know the longer this goes on, the more of an impact it's going to have in the market. where do you think things stand right now? what's the potential impact on the economy? >> well, i mean, certainly, becky, ultimately, i think it's a question of confidence. obviously, the direct effects are not huge in terms of effect on government spending, etcetera. but the confidence in terms of consumer confidence, business confidence, the equity market,

all those accumulating. but if it's relatively short-term and everything bounces back fairly quickly, then it won't have a lasting effect. certainly there are negative effects here. but i'd add that october 17th in some ways unfortunately is not the real deadline. they will still have cash on hand on october 17th and they will probably have enough to get through the month. we could possibly go through several weeks of this. if confidence continues to fall, that's a negative for the economy, for sure. >> jim, ub of the potential solutions that's been out there was the idea that you could get a temporary agreement, maybe to push us through a month, six weeks, eight weeks so you could work on a longer term deal. but to me, that seems like it could be disaster justice in terms of consierm confidence, especially if you don't know what's going to happen and we continue on this sort of a crazy path through the holidays. what do you think? >> yes. although on the other hand you might say that's a suggestion

they aren't serious about defaulting here. ultimately, certainly people on wall street feel they're not that irresponsible. it's not clear that main street in general, when you look at consumer confidence, is quite as convinced. you look at the numbers right now, the equity market has held up relatively well so far. but the consumer numbers seem to be slipping more. this is similar to the pattern we saw back in 2011 when the consumer confidence started to crack before the equity market did. >> jim, richard, thank you both for joining us this morning. >> thank you. still to come, check out who's in the squawk green room this morning. sam zell rolling in from the windy city. itoesn't have his motorcycle, but find out what he thinks is more important than his real estate right now. as the debt ceiling deadline looms, what's the solution to the deadline shutdown? the compromise be reached in

washington? we'll have former giver mitch daniels. but first, do you remember what happened during the last debt ceiling debate? michelle will bring us an important refresher when we return. geoff: i'm the kind of guy who doesn't like being sold to. the last thing i want is to feel like someone is giving me a sales pitch, especially when it comes to my investments. you want a broker you can trust. a lot of guys at the other firms seemed more focused on selling than their clients. that's why i stopped working at my old brokerage and became a financial consultant with charles schwab. avo: what kind of financial consultant are you looking for? talk to us today.

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we've been through a debt ceiling crisis before in the summer of 2011. and the markets were, as you would imagine volatile all that summer. but it wasn't all due to the debt ceiling. and that's something we pointed out yesterday. europe was happening. and, you know, for international

things, we have an international correspondent michelle caruso-cabrera joins us now with more on what happened that summer. isn't it time for you to go to greece? >> or rome? i was with berlusconi recently, thought, i'm going to go back to italy. >> you've got to stay away from him. greece, they're buying the banks. >> yeah. >> but nobody -- greece doesn't move the markets anymore. it's such a shame. i would love to be in athens for the wintertime. >> the quiet before the storm. >> summer 2011. so the white house, a lot of people are making much of the volatility that happened in the summer of 2011 when we had a debt ceiling debate and debt downgrade. happens on a friday, on the following monday, the dow falls more than 600 points. that should tell you it's about the debt crisis, right? it's not the whole story. because while the u.s. market was volatile, take a look at what was happening in the

italian stock market. so from august 1st to august 8th, august 10th, the italian stock market fell roughly 4,000 points. august 1st, before the downgrade, 700 points, can you bring that back for me? can you bring back the full screen, please? i can read through it. august 1st, 713 points, 447 points, 266 points. august 4th, 877 points. next page, holy smokes, 376 points on august 8th, 1,045 points on august 10th. >> because of stuff happening in italy. not because of things happening here. >> right. because as we were talking about a downgrade, look at this headline from the telegraph that occurred at the time. it said the ecb jean claud throws italy and spain to the wolves. remember, their interest rates were approaching 7%. they were begging -- >> i remember. >> they were begging the ecb to

buy their debt and he said, forget it, no way. >> that was completely unrelated. i remember their treasury yields going 7%. >> finally that weekend relents after berlusconi promises he's going to do all of these things he never subsequently did and we were doing a special sunday night because of the downgrade. but we were doing just as much coverage of the downgrade as we were of europe. here is a self-serving sound bite. >> your mean leaders tonight are taking decisive and unprecedented action to stem the crisis. michelle caruso-cabrera is live right now in rome. michelle? >> it's 2:30 in the morning here, maria, it was just a couple of hours ago that the european central bank made a major announcement signaling it's going to help out two new countries, italy and spain. and the financial crisis here is entering a new phase. >> so monday morning after the debt downgrade, what happened to u.s. debt? it rallied. do you remember this? bring up the ten-year for the united states. our interest rates went down

even as the s&p said our debt was less safe. >> is that a reflection of what was happening in italy? >> yes. absolutely. >> that was the point yesterday. when we've done this in the past, our rates have actually dropped. >> yes. >> but it could be a reflection of the broader chaos that's out there. i don't know what happens. >> i think, absolutely. i think the point we learned back then is when push comes to shove and investors around the world are terrified, unbelievable, even though we complain about all the debt we have in the world, what do they run to? they run to u.s. treasuries. this debt ceiling debate, we don't have that tail wind for treasuries anymore, right? you don't necessarily have that desire. but the question is, what's going to happen now? >> people know the safest. >> i agree. >> we still have the safest. >> yeah, we are. >> why do you say supposedly? >> the world's relative. >> do we have the greatest economy? >> do we have the greatest economy? >> we have legendary investor

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it's an issue on the mind of every investor, "squawk box" is rising above the showdown in washington and giving investors the information they need to make sound investment decisions. today, outspoken private equity guru sam zell is here. plus, find out what small businesses are taking away from the washington drama. results of the latest small business optimism index will be out and we have the results as the second hour of "squawk box" begins right now. good morning, everybody, welcome back to "squawk box" on cnbc. i'm becky quick along with joe

kernan and andrew ross sorkin. dow futures down but only by about five points. in our headlines this morning, the government shutdown and the debt limit battle dominating wall street's attention. the shutdown is now into its eighth day. house speaker john boehner is still insisting that the president agree to talk about changes in the health care reform law. howard schultz is urging business leaders to turn up the heat on lawmakers. he said he was utterly disappointed with the level of irresponsibility and dysfunction in washington. during the debt ceiling battle of 2011, schultz called on americans to stop making political contributions until a deal was made. >> he stopped making all of his to democrats. that's the only person he ever, ever made a contribution to was democrats and stop -- okay, howard.

>> top u.s. bankers are warning against any move to prioritize interest payments. some lawmakers say paying interest on u.s. debt before other obligations like social security would calm the debt markets but bankers told the papers a move like that would create uncertainty. it would drive up interest rates, they say, and disrupt markets. >> our special guest host this morning, a "squawk" market master, real estate investing legend sam zell chairman of equity group investments and all the obvious questions we're going to get to, sam. i want to start with one that's not quite as obvious and that is here we are with a symptom market that is qe juiced in your view. and this is just going to make the qe last maybe even longer because you know maybe we don't -- maybe it hurts the recovery. the stock market is how much of a bubble in your view? >> well, i would raise the

question as to whether or not the events that are going on right now are an excuse. for the stock market to correct. i run a lot of businesses. it's true business is better than it was in '09. but that's like comparing l leprosy to cancer. >> you know what it puts off, sam, in my view, it puts off a lot of the structural things we need to fix like too much regulation and our tax policy and our entitlement problem and our debt -- it gives an excuse for, oh, the economy because of, you know, the white house policy. it almost gives them an excuse for why we're at subpar growth and why unemployment is still high. >> there's no substitute for dealing with uncertainty.

>> the first thing we should do. >> yeah. >>. >> you blame the tea party for this? >> no, i think the tea party is a reaction to an imperial white house. and i think that we're seeing. come on, how does the president deal with his daughters? i'm not going to negotiate. that's the way you deal with your children? my experience with my children is that never worked too well. i can't imagine it's going to work too well here. the president is elected to negotiate. that's his job. >> you know, the tea party has their base that is inducing them to do certain things. you've got to have some eampath for the president because every time he negotiates, his base is all over him. >> isn't that the same thing happening on the republican side? the republicans are trying to resolve something and their base is all over the place.

somebody's got to pull everything together and say i represent everybody. not just the left. not just the right. >> yeah. i'm not a big tea party fan at all. and there are issues they have that i don't agree with at all. but they are a significant percentage of the voting population. they have a right to have a view. and the idea that they are treated as though they are crazy is ridiculous and not very reflective of a democratic society. >> do you believe they actually represent a huge part of the population? or do you think they represent -- no, this is the issue. >> no, i -- i just -- i just can -- i know you so well. >> or is it a slice? >> you out yourself on what you're thinking. >> no, this is what i'm thinking. or is it just a slice -- >> because you've never been west of the hudson.

there's a lot of people like that. >> first of all, there are lots of people like that, obviously. but even more important. i mean, you know, can you imagine the press vilifying the aclu? >> right. >> can you imagine the press whatever the latest obama organization -- >> elizabeth warren or sanders. you have a socialist -- >> they get vilified all the time. >> no, they don't. >> well, whether they do or don't, all i'm saying is we treat the tea party as though there's some kind of a disease. and the very same thing on the other side, the press doesn't even cover. >> is your paper vilifying a guy who is going to be the mayor of new york? that's fine in this city. that's fine. hey, oh, that's fine. >> hold on, wouldn't you agree that the majority of the republican party acts -- see, i would argue that a majority of

the republican party actually treats the tea party as the sort of separate thing off to the side. you don't think so? >> what's wrong with that? what's wrong with various segments -- you have it on both sides. >> yeah. >> the difference is, we've in effect let the press identify the tea party as those crazies -- >> we're more polarized than ever, ever, on both sides. >> i agree. >> i argue the reason for that is not that the country itself is more polarized, but actually the way we've redistricted it and all the gerrymandering taking place on both sides has created this bizarre polarization so that you have these extremes that have created this horrible conversation without an ability to compromise. >> and the president makes appointments right and left changing rules and that's not polarization. come on. the epa decides that coal

doesn't matter anymore? ask the people in west virginia. ask the people in wyoming. ask the people who get 40% of their electricity from coal. >> the reconciliation, the way obama care was passed, krauthammer wrote a piece last week, you shouldn't be surprised there was this much. >> my view is simple. i'm not sure obama care is perfect. >> the way it was done. >> i don't know whether it's perfect either, but the way it was done. >> and by the way, there's reforms that need to take place. entitlement, all of these things have to happen. the question is, does it have to happen with the threat of this debt ceiling debacle? >> the problem is it hasn't. >> well, but if you have one side that says we won't negotiate, how do you bring them to the table other than through a crisis? explain that to me. i negotiate for a living, okay. my whole goal is to figure out exactly what you want. >> right. >> and what i can give you. >> how do both sides win? >> or not lose.

that's just as important. not lose. but the way in which this is being postured is as though the president sits on high and says i will not negotiate. and everybody's supposed to lay down. i don't understand that. bush never got away with that. eisenhower never got away with that. clinton never got away with that. what makes this man different than everybody else? >> a different question. and this was something that becky raised earlier, is it acceptable -- and something that gene raised. is it acceptable. if the president called up john boehner and said, look, let's take a time-out. let's push this thing for three or four weeks and continue to negotiate during that period. >> they haven't been negotiating until now. >> is that a better alternative to this? are we any -- is there any better chance we get to a solution that way? >> i think it's been done four weeks ago, it would have been a great avenue to a solution.

the question is, how much breakage has occurred between then and now that in effect will make it that much more difficult to bring people together? but people get brought together by other people who they perceive have a perception and an agreement as to what -- where to go. that hasn't been the case here. >> yeah, sam, i disagree with holding the nation up like this for the debt ceiling. but i understand it. i understand, i have two brothers 18 months apart and the younger one used to bite the older one. and he cried, he said, if i can't bite, i can't win. i get why you're using tactics. we need to have negotiations. >> and all i'm saying is if you have a true back and forth scenario -- and that's really what joe said, okay. you pass a piece of legislation representing 18 to 20% of the gdp and you did it without a single vote from the other side,

never been done before, and then you wonder why it relates in the kind of vociferous action that has occurred? it's like -- it's like -- and particularly the press, the press is just so biased it's unbelievable. >> i assume there are times when you -- when somebody comes to you and you don't believe they deserve to negotiate. right? there are times -- >> deserve to -- what's the word deserve got to do with it? >> a buyer asks you for something absolutely crazy and you say you know what, i'm walking away from this. >> that has nothing to do -- >> it's clear -- >> that has nothing to do with deserve. okay. buyers ask for things all the time. and i ask for things all the time. then the two of us sit down and say what are we trying to accomplish? and if we're trying to get from here to there, what are we going to have to do in order to get

from here to there? and it ain't, i want to run over you. >> when do you walk? >> you walk when there is a basic difference that is unbridgeable and where the objective of the buyer and the objective of the seller is not the same. i do not think that's the case here at all. >> do you -- have there been negotiations in the past where you wouldn't negotiate. i think the well has been poisoned on both sides and i don't think there's any trust. >> yeah, but the answer is, if i had a bad experience, i can choose not to deal with them again. >> these people can't. >> these people -- you weren't elected to pick those issues you wanted to deal with. you were elected to lead the country on all issues. all of the people in the country. not just your constituents. and until we get that kind of broad understanding of the

leadership that this country needs, we're going to be in deep doo-doo and that's where you are. >> you see the editorials on both sides and it almost seems like the actual dirty job of getting this stuff done is almost beneath the president in certain ways and he's not going to become -- not going to be part of it. i think both sides need to hold their nose and go in and in good faith try to come to some agreement for the good of the country. >> there have been hundreds of examples over time of doing exactly that. i mean, in 1940, we passed lend lease by one vote. an enormous issue relative to the future and world war ii. we did that by bringing everybody together. as we have done over and over again. and what we have today is divisive scenario and as

divisive leadership as i've seen. >> sometimes i wonder if it's personal too. there's personal issues where he feels burned in the past for -- and then gets a lot of flak from the progressives for the extension of the -- >> let me ask you a question. are you married? >> i am. i got -- >> do you ever get burned at home? >> you say, i'm not going to negotiate? >> no. >> unlike the last negotiation, you're not going to -- >> you know this a happy life is a happy wife. >> a happy wife -- >> and guess what, you start every sentence with i'm ready to negotiate. >> yes. >> and that's how you end up with a happy wife and a happy life. >> sort of. >> well, i'm not asking for -- >> you don't really need to know. >> well, you have to go home -- >> i don't really negotiate. i don't really negotiate. >> he just lays down. we all do. >> speak for yourself. >> in the last election, there

was a landslide. i know where i stand on most of this stuff. anyway, we're going to -- we're going to continue this conversation. i love -- you don't listen to me when i say some of these things. >> i'm listening to him. >> i know you are. but i try to tell you about the way the media has sort of portrayed the crazies. and it's amazing that somehow they survive and actually still do have some bargaining -- because i'm amazed. if you listen to the media, it'd be all the president's way all the time. and it's amazing there must be some backing somewhere. >> look how the media has done a good job of unbiased presentation. newspaper sales are going up across the country. >> all right. >> sam zell is sticking around for the next two hours and we are thrilled to have him. coming up next -- >> you have to say that -- >> i wanted to make sure he knew. i'm very happy.

>> he's one of our favorites. >> he is one of our favorites. >> up next, can the senate get a debt deal passed. we're going to hear from former indiana governor, now president of purdue university, mitch daniels. how small business is handling obama care and the shutdown. "squawk box" returns right after this. ♪ [ male announcer ] eeny, meeny, miny, go. ♪ ♪ more adventures await in the new seven-passenger lexus gx. lease the 2014 gx 460 for $499 a month for 27 months. see your lexus dealer. for $499 a month for 27 months. they're the days to take care of business.. when possibilities become reality. with centurylink as your trusted partner,

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capitol hill plays the blame game while the shutdown enters week two. what will it take for congress and the white house to rise above the politics? mitch daniels is currently the president of purdue university. he's in town this week for nbc's education nation. and governor, it is great to see you today. thank you for joining us. >> nice to be back. >> so let's get your take, first of all, of what's happening in washington. how do we get to some sort of agreement on this? >> is something going on in washington i need to know about? >> there's a little bit of a dispute taking place, little bit of a government shutdown. >> how long did it take you to become an academic? >> well, i heard a rumor. it didn't take me too long to fasten my attention elsewhere. i'll just say that very hopeful, of course that they all move past this immediate problem that we have. but quickly get serious about a problem with a lot more zeros attached.

one that really, i think, concerns me as i see bright young people hoping to build great futures in this country. they're the victims, really, not just the current controversy, but many, many years of irresponsibility by their elders. so i hope that one way or another we'll get on to the real issue, which is redeeming the promise of this country by beginning to discipline our debts. >> one of the ways you're trying to tackle this is by directly coming after higher education, which has been a massive problem, governor. i know that at purdue you have a pay for performance package. you believe it's the only one in the nation. what is that pay for performance? what performance metrics do you have to meet? >> there's nothing remarkable about it in most of life. but it's been unusual if not unique. i asked our board at the time i said yes to the job.

first of all to trim the pay. i think it's been a legitimate criticism that elsewhere in the economy, ceo pay has not always been treated responsibly. we trimmed it a little, took 30% of that and put it at risk for performance on measures like how affordable is our school? this will be a major goal of ours to make sure that the doors of this great research university remain open to students of all income brackets. measures of the excellence of our school and we are working on those now honestly, another category will be how much private money we raise to go along with that that our taxpayers provide. >> what is the problem with higher education, governor? what happened to make it so expensive for these costs to skyrocket probably even faster than health care. >> becky, it's a lot like, i guess, the broader national debt question. plenty of blame could be

apportioned all around. i think among the big contributors were the structure of higher ed which has been described by people inside the system as spend everything you get your hands on. by a very, very large, well-intentioned, very large subsidy of the system. as money has poured in from federal and state grant loan programs, much of higher ed raised tuition and pocketed the money and students weren't much better off. so, you know, at purdue, we've said we're going a different route. we're a land grant school. we have always been there for the first generation student and low-income student. and yet, we're one of the great research universities of the world. and we think you can have it both ways. we froze tuition for two years. we're working every day to make sure the sticker price, we're off the sticker price escalator. and we're going to try to prove you can have a world class education and accessible price point.

>> you know, governor, when you look at washington, i know it's really tough to think of some way to reach an agreement, but how do you think that ultimately happens? do you think we cross over the debt limit? or do you think there's an agreement that's reached before then? >> oh, my guess is there'll be one. it's not as though we haven't been this way before. there seems to be a little extra amount of it on both sides right now. young people in this country to force this issue as they occasionally have major social controversies of the past. and it's -- it's a really, really cruel thing, the inner generational plunder, honestly, that's going on most clearly manifested in the debts that have been piled up. these young people i see every day had nothing to do with. and we saddled with. the very structure of many of the programs that keep driving

that debt take from the young, give to the old, take from the future and spend in the present. i'm seeing more and more young people realize really how unfair this is and what it means not just to them, but to the future of the country, the dream of upward mobility. and i hope maybe those who are in decision making positions will start to think a little more clearly about what it means to future generation. and their reputations in history if they don't do something about it. >> governor, sam zell is our guest host and has a question for you, as well. >> i'm curious, changing subjects on you. i've had some experience with major universities and observed how they spend money or how they pour money as the case might be. and we've obviously seen a lot of activity in the last few

years in online courses. and when it's all said and done, isn't that what's going to force the universities to in effect create tuition and value in the same sentence? >> sam, i think you're exactly right. an hour from now, i'll be on a program here thanks to nbc with among others one of the brilliant people who is driving one of the so-called mook companies. you know, sometimes when i talk about this subject to my fellow citizens these days, i start by showing them a picture of joseph, if anybody knows who it is and talk about the fact that many people believe that just new breakthrough disruptive technologies have totally transformed or even ended industries in the past, this could happen to higher ed now.

purdue, we think it's our job to add plenty of value the other end of the value equation to keep doing things you can't learn at home in your pajamas. and most of our undergrads undertake research projects. we are transforming our classrooms very quickly so they take advantage of online technologies. go to class, its projects, it's working in teams, working with a professor on things you didn't understand from the lecture which he already knows thanks to the technology. so it's a race. it may well be that as the record stores were and maybe newspapers today higher ed will be utterly transformed. but we think there's a place for

great research university like ours, and there better be, that's where so much of the innovation comes from. >> governor, thank you so much for joining us today. good luck with everything at purdue. we'll be watching and appreciate your time. >> thanks. when we come back, much more from our guest host sam zell. plus, how small business is feeling about the situation in washington right now. and if you missed it last night, the jets beating the falcons with six seconds left in the game. the new york jets are now 3-2 on the season. the falcons fall to 1-4. "squawk box" will be right back. time now for today's aflac trivia question. on friday, "squawk" released its own jobs report. what did steve liesman say should have been september's nonfarm payroll number? the answer when cnbc "squawk box" continues. okay, who helps you focus on your recovery? yo, yo, yo. aflac. wow. [ under his breath ] that was horrible. pays you cash when you're sick or hurt?

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in charge of long weekends and longer retirements. ♪ ask your financial professional how lincoln financial can help you take charge of your future. ♪ now the answer to today's aflac trivia question. on friday, "squawk" released its own jobs report. what did steve liesman say should have been september's nonfarm payroll number? the answer, 158,000.

welcome back to "squawk box." we've got a big debate at this table which we're going to get to in a minute. in the headlines this morning, several pieces of economic data won't be coming out today thanks to the ongoing government shutdown. figures had been set for release at 8:30 a.m. eastern time this morning. also sidelined, the monthly report on job opportunities and labor turnover. the supreme court today takes up the challenge to campaign contribution limits. senate minority leader mitch mcconnell is among those asking court to turn over limits on individual contributions over a two-year federal election cycle currently at just over $123,000. while the u.s. postal service struggles with its finances. get this, britain's royal mail is proving popular for

investors. selling a majority stake in the service. today is the last day investors can put in orders for the stock the privatization is valuing royal mail at an estimated $5.3 billion. u.p.s. taking steps to expand the natural gas fueled fleet. coming out that it's investing $59 million in fueling stations that's going to give u.p.s. a total of 13 stations which will be operational by the end of next year. when all is in place, the company's use of natural gas is about 1,000 trucks that will be displacing more than 20,000 gallons of diesel fuel each year. that's the future, right? this is where it's all going. we can say the guest tomorrow is going to be boone pickens who has been championing the use of natural gas in america.

he's going to be joining us tomorrow morning. >> and how are small businesses handling all of these issues including obama care, debt ceiling and a slow growing economy. >> we should have an off camera -- we should record things and then play them back. mitch daniels brought up who was writing related to karl marx. >> so arguing in favor of progressive taxism is -- >> no, i think what you said was 90% -- that the 90%. >> we grew in the 50s. >> do you think they've taken that much away from the entrepreneurial class? >> i don't think that's right, joe. i'm saying an argument that redistribution, which sam's argument, and growth are opposites.

it's true to a point. do you want the small business report or do you want me to defend myself against you? >> here's the tag team. >> what do you want, joe? it's your show. >> dunkleberg and zell versus sorkin. and we're going to sit back here and watch. >> here's what i want. i want to praise the private sector right now because it's the only data we got. they're the ones coming out with the data. we don't have any government data. i am in praise of the private sector, the small business report, which unfortunately fell 0.2 points in september. thank you, joe, for letting me do this. this is what i do for a living here. early signs, perhaps, showing up in data, with business conditions declining by eight points, earnings trends down by two. but some of the components kind of held up. good time to expand up to and up

one. andrew, why are you laughing so hysterically. let's bring in bill here. what do you make of this? >> well, we're still in the trading range so to speak. we haven't been able to break out of the 95 index. just to put it in perspective. going into the recession for 35 yo years. by the way, this is our 40th anniversary. in 1973 in october, we mailed our first surveys out. we've got a lot of data. >> that's one of the things that makes the nfib a report that the fed follows, everybody follows on the street because among other things good survey, it has a lot of history to it. >> all of those good things and we have 350,000 member firms, so it's not like -- >> big sample size. >> big sample size. that all works out well. so going into 2008, the average on the index was 100 and change. and here we are at 94. and a good expansion like 1983, which was a great year. you'd be up 105, 106, 107 with

the numbers and we're so far away from that. >> let me ask you one more question and open it up to the ideological brawl that i'm sure is simmering below the surface here. >> it's coming. >> just give me one question here. because we're kind of flying blind here without the government data. can you help us out here? this down two at a level of 93.3. what does it tell you about the direction of the economy right now? >> well, it's crawling forward. >> is it a 1% economy? is it a 2% economy? 2.5%? you can go from your number to a gdp number? >> oh, sure, there's a pretty good correlation between our index and what happens with a gdp growth and we're looking at a 1.7, 1.8. >> was a component of mine in my now famous calculated jobs report on friday, but your jobs numbers were lower than everybody else. you had about 100,000.

>> 120, 130. not good. >> you don't have any definitive data that says obama care's been negative. >> well, definitive, no. >> according to steve and zandy and everyone else it doesn't exist. >> we started a panel a while ago of about 1,000 firms and we'll track them for three years. same people, a panel. we're collecting data on what they're doing and ask did you do that because of the health care bill? or because of the economy or whatever. next month we'll have good data for you. >> what percentage of business will be out of business in the next three years? isn't that the relevant question? >> that is and one, unfortunately, we can't answer with our data. you know, there's a fair amount of turnover in our membership every year. we can't really tell you about births and deaths, so to speak. we'll have to wait for a long lag time. assuming the government's open,

we'll get the bls report on starts and terminations. so we'll see in the meantime, though, the big adjustments are going to be in the employment numbers. go back to june which was supposed to be the beginning of the measurement period for how many part-timers and full-timers you had. we lost 240,000 full-time jobs. that works out to be about the same. we swapped part-time hours for full-time hours and we'll see how much of that. >> and of course, it's harder to manage two people to do the work of one than have one person doing the work of one. it's not really great. but if the government pays you to do that by setting up these prices that say you should do this, we'll do it. i mean, we're not crazy. >> okay. thank you for this. >> andrew, thank you. >> appreciate it. still to come, much more from our guest host this morning, chairman of the equity group investments. sam zell.

a lot more from him in a second. take a look at the futures right now. we do have red arrows. but all marginal stuff. the dow looks like it'll open up about two points. "squawk box" coming right back. and this will be your premium right here. sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. love this guy. okay, does it bother anybody else that the mime is talking? frrreeeeaky! [ male announcer ] bundle home and auto

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check out shares of jc penney, everybody. the company offering an update. the retailer says september comp store sales are continuing to show an improving trend and sees this continuing through the remainder of the year. traffic trends have improved during the quarter. the company's year end liquidity expected to be in excess of $2 billion. the stock up about 6% on this news. "squawk box" will be right back. this week, "squawk box" is rising above the debt threat. tomorrow, bp capital founder boone pickens talks energy. friday, we wrap up the week with former ge chairman and ceo jack welsh. the biggest names in business are here. and it's only on "squawk box." rise above. revolutionizing an industry can be a tough act to follow,

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welcome back to "squawk box," let's get back to our guest host, sam zell. and we can talk about real estate. do you think -- and i've raised this question before and joe always, i think, gives me a hard time. do you think the american dream

whatever you think the american dream is still alive and well and the opportunity that used to exist or that has existed for so many years exists in the same way today? >> i think the american dream still exists because i think this country is unique in terms of the opportunity it creates for its people. having said that, the degradation of our educational system. the dumbing down of our minorities is having an enormously negative impact. and i think it's one of the biggest reasons for this enormous disparity of wealth. it's not that the people at the top are so unbelievably greedy, it's the people at the bottom aren't getting educated. and as a result, they can't compete. and in the end, the american dream is all about -- give me the tools to compete and i'll show you. >> is it an education story or a

technology story or a globalization story? because those are the other two pieces of this that make it tougher. >> it comes down to, who runs the schools? what is the objectives of the school? what is the responsibility of our society to educate all of our children? and to what extent does the unionization of our educational system impair the success of our students? and we're seeing that all over the country, particularly in urban areas. we're basically graduating cripples. i mean, there was a study in chicago a few weeks ago and found that, you know, juniors or something can barely read. that's a failure of our society. and if we don't fix it, we will really become a bifurcated society. wealth is a way of keeping

score, it's really about are you delivering the skill levels? are you giving people a chance? people came to this country and saw they had a chance. they worked to take advantage of that chance. we've softened those requirements dramatically. but this is still a place where we have to create that kind of opportunity. >> what's the solution? i mean, we go round and rouabou every one of our guest hosts comes in and thinks it's a problem and we want to fix it and so little progress has been done. there are millions and millions and millions of dollars poured into this problem. how does it change? >> all i can tell you is that if i run a company, its earnings are the measure of my success. if i'm a teacher, the measure of my success is not my salary. but the performance of my

children and the teaching profession has failed miserably. the colleges that prepare teachers have failed miserably. let's acknowledge that and recognize the fact that if we don't fix it and fix it now we are creating -- we've already created a permanent underclass that's only going to get worse. >> teachers unions. >> now, but they're all related. it's the board of education that bends over to the teachers unions it's the teachers unions that fight an extra 12 minutes a day. >> we talked about the president's former chief of staff rahm emanuel could not be more in your camp. look at the way -- when he tried to do something, tried to break the strangle hold of the unions in chicago, look at the way he was portrayed. look at the way the media portrays someone that is well-intentioned trying to -- the end result is he wants the kids to get a decent education.

instead, he's vilified as someone who wants to hurt teachers that are compensated fairly. >> you know my view. >> what's your -- >> i think the union issue is a very, very complicated issue. >> it's very complicated issue. >> tenure, two years. >> tenure doesn't belong in school systems. >> tenure, two years, first and last, whatever it is. >> i think it becomes very hard to hire teachers at the prices we pay, which i think everyone agrees is too low. i don't know if you agree with that. >> i don't agree. >> you don't agree with that? >> $80,000 a year for nine months, not a bad deal. >> i don't think it ultimately becomes nine months. i think it's one of those jobs that's a 24-hour a day job. >> i only wish it was. think how much better our kids would be educated if it was --

>> no, the teachers that are doing it well are doing it 24 hours a day. >> which one are you talking about? >> my mom was a teacher, she worked long days and had the summer off and that's why she did it. >> the average pay in the country is 52,000 or whatever it is. nine months. >> but i'd pay them more. if you saw -- >> if you saw better outcomes. >> you can't -- they will chafe at any kind of accountable. it's like, what? and the two-year tenure. to try and fire someone in new york city, you've seen the people -- >> it's very difficult. and it shouldn't be. >> almost as hard as firing a reporter. >> thank you. touche. no, you need to have accountability. but at the same time, the question is, do you think you have to eradicate all unions to do that? >> i don't know, okay. you'd think you could have a union that would put kids first. i mean, that's the objective. >> right. and unfortunately -- >> that's the objective.

>> said it perfectly. when the students start paying our dues, then we'll start representing the students. and that's like bringing a foreign country -- or foreign entity into the deal. i mean, the goal is not to pay teachers. the goal is to teach students. and train our society for the future. >> although, the way we've gone about trying to find some of the testing is crazy too. i talked to my daughters' teachers for back to school night and there's an entirely new testing system that's coming in. so they're trying to prepare the kids for the tests that are out there for this year and the tests coming for next year. and it's a little bit crazy the way everything's taught for the tests. >> but it's all function. what you're describing is a system that doesn't know what to do. let's try this, let's try that. >> and it's the nature of public unions. >> oh, completely, no, no -- >> your dues -- >> you should not be allowed -- >> going to perpetuate. >> we could all hold hands and

kumbayah. to me if you're republican, you should not be able to use that money to make political donations. it only creates this vicious cycle. >> a lot of civil service laws in effect to protect workers from, you know, practices that are unfair. whether your average municipal or local employee needs to -- is the local government really going to have their knee on the throat? >> we agree on a lot more than you think. >> that's a good conversation. >> sam's going to be sticking around. >> we will continue this conversation and many others. he's with us for the next hour too. by the way, check this out, boone pickens tweeting yesterday. been too long, i can't wait to guest host this wednesday morning. we p can't wait either, boone. we'll see you tomorrow. plenty to talk about with the government shutdown, debt ceiling and much more. boone pickens tomorrow morning 8:00 to 9:00 a.m. "squawk box" will be right back. [ banker ] sydney needed some financial guidance

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still to come this morning, much more from sam zell. plus, trade data is supposed to be out, but thanks to the government shutdown, those numbers have been delayed. have no fear, though, steve liesman is here and he has his own trade data to share with us. we'll get wells fargo and jpmorgan this friday. what you can expect the banks to say about the situation in washington and what could happen if the debt ceiling is breached. right now, check out the ten-year note yielding 2.64%.

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sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. we have not solved the government debt crisis yet. >> the way in which this is being postured is as though the president sits on high and says i will not negotiate.

and everybody's supposed to lay down. i don't understand that. >> but we still have one more hour with sam zell to work on it. >> and the answer is, somebody's got to pull everything together and say, i represent everybody. plus, jane wells brings us a new way to fund education. social impact bonds that only pay off when students succeed. and your regularly scheduled international trade data will not be shown today thanks to the government shutdown. instead, steve liesman is crunching the numbers to give you an estimate of what the trade numbers would show. it's "squawk" trade tuesday and it starts right now.

>> welcome back to "squawk box" here on cnbc. our guest host this morning is sam ze will, l. we're going to get much more from sam in just a minute. first, though, here are some of your morning headlines. futures down less than ten points earlier. now they're actually up. we have solved, we've solved about ten points worth of our problems. green arrows across the board. shanghai composite was up more than 1%. and japan's nikkei rose .3% in europe. we had some relatively muted reaction to everything going on over here. maybe they haven't seen the "new york times" and andrew's column that have served to tell us don't assume. don't assume. you know.

because of the complacency we won't go past. >> the more complacent we are and the markets are, the less pressure there is on the folks in congress and therefore greater chance we do go over. >> same thing goes for qe-2, qe-3. whatever we're on. keeping it going also gave cover. >> that's true. >> to some of the policy makers, as well. that was another one of the points. don't look at they did the right thing predicting the problem. you enabled the problem to happen when you got the fed, you know, basically with a put. >> we do have some people shouting from the rooftops. the government shutdown continuing, of course. and howard schultz urging fellow business leaders to ratchet up the pressure on business leaders. he says, he's, quote, utterly disappointed by the level of irresponsibility and dysfunction we are witness to with our elected political leadership.

schultz also says this weekend i heard from several business leaders who shared their concern about our relative silence and impact in urging the political leadership to act on behalf of the citizenry. it is our responsibility to address the crisis of confidence that is needlessly being set in motion. >> house speaker boehner and president obama taking shots at each other yesterday. speaker boehner continuing to call for negotiations while president obama called for congress to vote on a clean bill to end the shutdown. >> now, the american people expect when their leaders have differences in a time of crisis that will sit down and at least have a conversation. really, mr. president, it's time to have that conversation before our economy is put further at risk. >> the truth of the matter is, there are enough republican and democratic votes to end the shutdown immediately with no partisan strings attached. the house should hold that vote today.

if republicans and speaker boehner are saying there's not enough votes, they should prove it. >> our guest host this morning is sam zell, the chairman of equity group investments. we talked about this an hour ago, is there a way to actually rise above? or would you advocate that? what do you think needs to happen in washington right now? >> i think there is only one solution. and the solution is dialogue. and frankly, i think it'd be terrible for our democracy if effectively one branch of the government laid down the law to the other branch. we have, you know, the founding fathers created a republic, not a democracy, a republic. with all kinds of checks and balances. part of the problem we're dealing with is the lines have been blurred. and it's led to i think some people presuming they have more power than they have.

and trying to bully things through as oppose reach consensus. ultimately, if we do not reach consensus and bipartisan scenarios, we're going to have problems. the whole obama care scenario is about the fact it wasn't bipartisan. and as a result, 50% of the country minimum thinks it sucks. and i'm part of that group. >> it's interesting. i completely agree that dialogue is the solution. john harwood pointed out that the republicans not only say they want to negotiate, but they are not open to the idea of raising revenues. they want to negotiate, but they are taking certain things off the table they won't talk about. >> were you on vacation? january? >> no, i pointed that out to john. >> we raised the huge amount of money in january. >> i pointed that out to john. i thought the republicans wanted that.

>> i didn't think the republicans -- i think we all lost it because we ended up with significantly higher taxes and no cuts in in operations. >> no cuts to entitlements. >> yeah. who's kidding who? every word out of the democratic party mouths is raise taxes. and do what? >> there's still the potential for a grand bargain and i wonder if there is because of what happened in january. where taxes were raised and nothing else came along. one side thinking only half the deal was brought. and i just wonder, is there a potential for a grand bargain beyond this? or is it too late with the players that are in power on both sides at this point? >> i don't think it's ever too late for reality to overcome ideology. that's a good line. i like that. let's talk about real estate. we haven't gotten into that. how does real estate fair up and how are apartments doing?

people thought as housing started to pick up it would be at the -- >> expense. >> at the expense of apartments. is that the case? >> no. apartment business, you know, i'm chairman of the largest department in the country, if anything, all we see right now is continued strength, and we're running 96% occupancy. and you almost can't run any higher occupancy. and the demand continues to be there. we have not seen the predicted leaving of the multifamily sector to take advantage of all of these quote, unquote cheap houses. >> why do you think that is? >> because, number one, i don't necessarily think the houses are cheap. and number two, i think we have seen a pretty major change in what i'd call the reurbanization of america.

and 24/7 cities and the impact those 24/7 cities are having. you get -- you're drawing all of the young people of america to these 24/7 cities. and the last thing they want to do is live in the suburbs. so in that respect, you're increasing demand for housing in the urban markets, number one. number two, to the extent there is new supply, the majority of that new supply is outside of -- what we call the areas where development is much more difficult. >> inside what areas? >> the central district. core, you know, chicago, new york, san francisco, los angeles, et cetera. and if you own apartments and suburban some place, i think you have more vulnerability. generally speaking, i think the demand for multihousing has

weathered this entire issue with houses. >> you gave us a great statistic earlier where, what do you have? 18,000 apartments here in new york city? >> yes. >> how many are occupied by one person and one person alone? >> 45%. >> that tells you about the changing demographics in america. >> what it's also telling you is there's increasing demand for multifamily housing. one of the things you're going to see and it's probably going to happen here in new york first. you're going to see 300-square foot apartments. directly related to that one person wanting to live alone and saying i'll give up space for privacy. and that's going to create a whole new dimension of the definition of multifamily housing. >> what does it ultimately mean for the suburbs? we had lee gallagher wrote the book from fortune. would you have buy a property or

multiproperties in the suburbs anymore? >> i don't understand the word never. that's like saying i would never negotiate. but the reality is, you know, the demand for the suburban lifestyle was very much a function of the unholy lifestyle that existed in the '60s and '70s, or '50s and '60s and we went to ticky tackiville. >> unholy, i like that. >> a lot of it was driven. a lot of it was driven by safety in schools. if you wanted to see the end of suburb suburbia, all you'd need to do was make the school systems in the city aaa. and why would anybody live in the suburbs? why would 90% of the people live in the suburbs if they weren't moving there to provide schools to their kids? >> i like my yard.

you're not going to get me back into the city. >> well, there are actually yards in cities. and all, you know, there are amenities that are available and i'm not challenging your -- >> forget it. >> hey, as long as you make the choice as opposed to having no choice. >> that's true. >> if you couldn't afford to send your kids to private school and you weren't going to send them to new york public school xyz, then you didn't have a choice. you had to move the suburbs. and that's a different set of circumstances than if you see i want my land. i want my vegetables or whatever the case might be. >> is there a city you think is hot that we don't realize and is there a city people think is hot that isn't? >> that's too -- that's too definitive a question for me. i think that -- i don't think -- i mean obviously san francisco

is currently -- no, san francisco, silicon valley is probably the hottest market in the country. >> do you own property there? >> yeah. but i don't think you have the have and have not unless you want to compare san francisco to detroit. >> does what's happening in washington right now have any impact on your business? does it affect real estate? does it move things one way or another? >> take the multifamily market, it's become extraordinarily dependent on the gses fannie and freddie. raising questions about what kind of future fannie and freddie will be. which by definition means what's the future of multifamily housing and the role if any the government is going to play in it. again, it comes back to the famous word, uncertainty.

uncertainty is the death now of everything. >> things come full circle. we're going to take a break. i checked huffington post. they put a new lead up. jimmy carter making some comments that the middle class is now like the poor of old in the united states. and the reason is years of tax breaks for the wealthy. a minimum wage untethered from the inflation rate. gerrymandering with the districts. what happened was to narrow this, you need to spread everything out. you need fair taxation, equity of taxation and treating the middle class with a great deal -- but the classic thing here is we are taking now economic tips from jimmy carter. >> one of the greatest economic presidents since milliard fillmore. >> i don't want to be snarky about it. but the idea -- >> don't be. >> no, i'm not going to be snarky about it. but we need to thank him. he ushered in an environment that allowed, you know, the reagan revolution to take hold.

but it just -- nothing is, you know, this is put forth with no hint -- it was, he had sneakers and a sweater on. no hint of irony in the story here. >> here's a little bit of news without irony this morning. we're going to take a quick look at shares of nuance communications because investor carl icahn had an approximately 17% station had agreed to place two members on the company's board of directors. revealed the agreement in several tweets a short time ago. the two new members are dave schechter and brett icahn. the stock nearly quadrupled. for those of you who don't know what nuance does, they make the speech recognition technology and software in part behind siri on apple's iphone and other services, as well. >> and hain makes your juice. kale juice. >> just drinking some water

right now. but we can pretend. anyway, also, earnings season kicking off this week. up next, we'll give you a preview of the results of the major investment banks. we'll talk to howard chen just named 2013 all american research team. congratulations, he'll be coming to the table as we speak. and as we head to a break, take a look at shares of jc penney. shares getting a boost. company seeing improved sales trends. year end liquidity now expected to be in excess of $2 billion. but, boy, bill ackman probably got out at the right time. [ indistinct shouting ]

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welcome back to "squawk box." releasing the roster of all star analysts today. we have one of the men featured in the middle of this year's cover. there he is right there. but also right here. howard chen, a top chair analyst

from credit suisse with his insight into the health of the financial services sector. thanks for being here. and congratulations on this win. before we get into financials because we were all debating this in the 6:00 hour. when you get selected like this -- >> sure. >> it's not solely -- part of it is the picks, stock picks. >> is it? >> part of it is service to the client, what people think of you, how you work with them. how does this all happen? >> well, first, thanks so much for having me on. good morning, everybody. so, i think, on this and the broader ranking, i think it's as you said, andrew, we try to service our clients. a lot of that is stock picks, fundamental -- >> no one looks at your records for buys and sells -- >> sure they do. >> i'm a big yankees fan, joe. and paul o'neil -- >> he was a red, my friend. >> only guy who thought he could

bat. i try to do a little bit of everything. >> you stole him and a lot of other reds. i still haven't forgiven you. >> let's talk about some stocks. goldman sachs, morgan stanley coming out with earnings next week. what do you think? >> well, we reduced our estimates in a material way last week. clearly a lot's been discussed about the weakness in fixed income. i think there's an interesting thing, a few things to talk about here. you know, one is, i think we're all used to a very active summer since the financial crisis. and i think what we saw in the last few months is, you know, more of a return to traditional summer seasonality that we saw prefinancial crisis. >> thank you always relies heavily on a pickup in september and we didn't see that from client activity perspective across the fixed income cluster. add to that positioning and issues around the fed tapering or lack thereof, it's going to pull into earnings period.

>> i mention goldman sachs and morgan stanley in the same breath, i don't know if they should be in the same breath. what do you think of the strategy shift and where they are in all of this? >> i think they've done a really excellent job under ceo and chairman james gorman. i think the stock is closer to fair value than when we were recommending it this time last year in the low teens. i think their positioning and strategic evolution into more of a global wealth manager, more of a client focused fixed income and trading business is a good one. >> jpmorgan, jamie dimon, potential $11 billion settlement, some say could be 12, could be less, could be more, what do you think? >> well, my clear actually covers jpmorgan and he -- you know, we can talk to him about his estimate. i think in general, it's an ongoing issue, five years after the financial crisis, i think we're still going to have to deal with this and that's shareholders capital. i don't think we're at the end

of that. obviously a lot of announcements over the last few weeks, i think there's a lot to go here for the broader banks. >> how do you -- there are those who say if they pay the biggest fine ever, they're obviously the most crooked, poorly managed bank ever. and i'm talking about certain people on the left, that write about giant squids and called jpmorgan a major international organized crime syndicate. which is how they referred to it and they all laugh and chortle. is it possible -- i tie some of this litigation to the people that are doing the litigating and they have their own ax to grind. should we assume that jpmorgan is basically a criminal endeavor because they paid the largest fine ever? >> i don't think so, joe. i think these are highly complex large institutions. we all know there are a lot of things to reform going forward that, you know, maybe weren't perfect in the system over the last five years. >> for example, the spitzer period. how much did he shake down?

how much was generated and how much was due to criminal, you know, a lot of it can be extortion. >> and i think it's difficult to say at the end of the day. >> who's doing the extorting? bank or regulator? >> right. again, i'm not a lawyer by trade, it's difficult to kind of assess how much, you know -- >> the reputation is definitely tarnished for jpmorgan at this point. and you would think the government needs capital formation and needs a strong financial system too, right? >> yeah, i agree, a large part of the capital markets. it's real simple in my mind. it's about growth and confidence. we're going to talk about the government shutdown as you've been speaking about this morning and the upcoming debates and all those things don't help growth and confidence over time. >> thank you. congratulations. >> thanks so much for having me on. >> you bet. and coming up, no government trade data today. >> none. >> how much do we look forward to that because of the shutdown. >> so exciting usually. >> but steve liesman. he will bring us the "squawk"

trade data at 8:30 a.m. eastern. and jane wells with a new way to invest in education. >> i'm jane wells in salt lake city, utah. what if you could fund education, save taxpayers money and make a profit? we are going to look at a uni e uniquely capitalistic experiment in improving america's schools. weekdays are for rising to the challenge.

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it's tuesday and that means

in 3 1/2 minutes, we should be getting regularly scheduled international trade data. yeah, not so fast. it's not happening because the government shutdown. but steve liesman will bring us his estimate at 8:30. he's been crunching some numbers. this is "squawk" trade tuesday after a quick break. clients are always learning more

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welcome back to "squawk box," the government shutdown continues. so there's no real international trade data, but we won't leave you hanging because we're going to have steve liesman with his number. but he's so much like the government now he's not ready. he's still -- it's not positive enough for the administration. so he's working on it to get it -- >> these are fake numbers. >> actually crunching numbers. >> crunching fake numbers. >> he's crunching fake numbers and still late. >> right? they're not good enough. so he's -- >> he's got somebody from the omb consultant. >> oh, man. welch is tweeting about it right now. we'll have -- well, he'll be on friday. it's not real. we'll have liesman's trade data in a few minutes. let's first get to rick santelli

to react to steve crunching the numbers but not being ready on the trade data yet. rick? >> well, he'd better be careful, they might come and lock him up. from what i'm understanding, even volunteering to do something where the shutdown prohibits it, you really better be careful. you know, i find it fascinating. if we look at june's number, what was it $34 billion and change, $34.5 billion. that was the smallest going back to october '09. the energy complex in particular has been just a bonanza for pretty much every metric. even for the one the government calculates as rough as they may be. and i continue to look at the energy sectors, the orphan kind of like the u.s. dollar. i'd be interested in seeing what steve comes up with on this, of course. and, you know, when he's done with that, maybe we can all volunteer to guard a few monuments, as well. >> when is the next major data

point we're going to miss if this continues, rick? where, you know, the fed would really like to see it so they can gauge, you know, whether they go up or down on their -- now i'm actually saying that, whether they go up or down. because you don't -- don't put it past these people to say you know what, maybe we need 100 a month. >> which brings me to the big story, the japanese have joined the chinese saying you better watch out. the debt we buy that the fed guarantees is always going to be firm forever and who would lend uncle sam their money for ten years for the rates they've lent them? i say buyer beware! >> no, not like rinehart -- i didn't go public with my spread sheet problem. >> i can't believe you were late. you knew it had to be at 8:30. >> it was a nightmare, joe. it was a nightmare. for anything that correlated

with trade data from the private sector and i did come up with one. >> yeah? you're taking this seriously. >> i'm taking it seriously. >> what came up with it? >> the long beach port tonnage data year-over-year percentage change. >> that's good. >> i worked month over month, worked three month average. you guys got the chart? you have the chart? if you don't have the chart -- come on, they don't have the chart. there's a nice chart. they work together. >> if you -- >> here it is. how about that? can i get a little applause here? to find something that correlates from the private sector with government trade data -- >> pretty good. >> it's not -- >> recently. >> this is why i was late. do you see that thing where they diverge? >> in 2013. >> in 2013. now, here's what happens, when the tonnage goes up, the deficit goes up. this is not an inverse relationship, this is higher, more tonnage at long beach port means higher deficit.

i am calling the deficit at $45 billion. adjusting for the fact they seemed to diverged recently. is that crazy? >> no, as a matter of fact, i would agree with your trend. i would agree with your handle. i'm pretty much in agreement on this. i think the trade balance are most likely going to continue to deteriorate in the next several months in my opinion because of demand from the u.s. perspective. >> this is a really hard number to forecast. in part because stuff comes in and that can be good, right? and then it's also very sensitive to oil prices and then when stuff comes in and you detract from gdp because of it, you end up increasing it because stuff has to go somewhere. this is also a tricky month because august, but in september, we'll start to get stuff shipped in for christmas. it's another reason to watch the trade.

i don't think there's a metric for forecasting this number. it's important, which is why we miss it today. >> i ask rick real quick, what's the number you want that we might not get? >> yeah, no -- >> retail sales. >> retail sales. and i will bring you, i think, on thursday the johnson redbook monthly data, which doesn't correlate badly with one component of retail sales. and then you could probably build a decent picture of the consumer. >> right. >> by doing that plus the private sector data on motor vehicles. >> my question is, who out there in the private world is benefitting from the fact that there's not real public numbers but actually knows numbers on their own because they're doing better research than everybody else but they're keeping it to themselves. >> big agriculture at the expense of small agriculture. the lack of crop data, it's not incredibly significant right now. because during the harvest, it's not that big of a deal.

it's the planting and that kind of stuff but you could imagine a situation where because we don't have the right crop data, farmers misprice their products right now. who has an advantage in that case? i talked yesterday to a commodity trader about the lack of this data and their point was if you're a big agricultural company, you have essentially insider information, you have your big farms and the silos on the mississippi will call you up, will take you up when you call and say, you know, this is so and so calling. oh, whereas little farmer joe out in kansas, not going to really take that call. >> so why don't you do crop report for us? >> well, you know what, to andrew's question, there are guys now, they fly over the fields to take pictures of the crops. >> that's old. steve -- and satellites now. >> 10, 15 years ago, they could tell the difference between soybeans and marijuana from

30,000 square feet. i'll tell you what, anybody -- i'm serious, anybody who thinks the usda data is good, it makes the bls data look like fine tuned pencil. >> okay. i agree. but, again, it's one of those situations where there isn't necessarily anything better. there's private sector data that you can pay for and you can get from different services. >> i'm arguing that right now -- >> in terms of a public good, it's not. and maybe even sam zell agrees the position of a public good from the government of data is something the government should be doing, no? >> well, i think it's something the government should be doing. >> thank you. no further questions. no, sorry. go ahead. no, what were you saying, sam? i'm joking. >> but the real answer is everybody uses the government data as a reference point. >> right, everybody has their own numbers.

>> right. >> they are not dramatically impacted by the loss of this information. >> sam zell -- >> go ahead, rick. >> listen, i have a question for sam and this is a very serious question. many traders look at icons like you and listen to what you say to get their gps on the housing industry, the markets -- they also look to big bankers historically whether you like or don't like them. after the $125 billion, they were forced down, the rapture going on, where it seems as though jamie dimon is the new target of everything evil. down here when they hear some of these big bank guys talk about, you know, like the "wall street journal" quoted that what's going on with the republicans and what's going on with funding and what's going on with prioritizing. these are all really bad things. people down here want to know, mr. zell, should we still listen to these voices?

or have they been kind of squelched because everybody needs to march the same? are their voices impaired because they're nervous about the phone ringing after they get done expressing their individual opinions? do you see where i'm going? this bothers traders on the floor. >> yeah, i think what you're really asking is how honest somebody like -- like me is when he opines on a program like this. >> yeah. >> i can't speak for anybody else. but i don't think anybody has ever had a problem saying what does he mean? i think that, you know, am i being too subtle with my comments. i'm not sure everybody else feels that way or may have exposures that they're worried about by publicly criticizing or opining about various people in the public sector.

i guess my attitude is that one has to be honest 100% of the time as best as possible. >> thank you, mr. zell. >> one more thing, we're coming up on maybe missing out on at least the collection of the october jobs data. saturday is the day they would collect it. i was told yesterday by the -- some sources familiar with the situation they need about three days to put the september report together. >> right. >> there could be two months -- >> anyone here under 40? >> andrew is. >> i am. >> you're the only one? miley cyrus -- nobody over 40 has sex anymore. >> in the sorkin house it's all good. >> you're the only one. >> you can live vicariously. >> you're the only one. steve -- >> that's why he's late. >> do you know what we're talking about? >> i'm loving --

>> miley cyrus of matt lauer said no one over 40 has -- poor thing. >> you can't say the word? >> sex? >> miley's probably stuck with men under 40 and suffering accordingly. >> she hasn't had real -- >> until she gets to 40 and figures out how to do it right. >> exactly. appreciate that. when we come back, jane wells is going to bring us a story on social impact bonds. an investment that only pays off if the students succeed. when does your work end?

does it end after you've expanded your business? after your company's gone public? and the capital's been invested? or when your company's bought another? is it over after you've given back?

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there's an experiment in funding preschool that saves taxpayers money up front. it also happens to turn a profit for investors but only if the kids succeed. jane wells with a very different sort of school bond. one that doesn't invest in buildings, but the students themselves. jane, good morning. >> hi, becky. yeah, this is really sort of a work in progress. it is an experiment which as you say saves taxpayers money up front, may save them money later. can the profit motive avoid shuttle kids into remedial special education when all a lot of them really needed was quality preschool. >> some people invest in stocks, and some invest in preschool. goldman sachs is doing both, committing millions of dollars

to fund high-quality preschool in salt lake city. goldman doesn't want to just give money, it wants to make money. >> the first time ever invested directly in the actual program, the education services itself. >> the wall street giant has the second largest u.s. office in salt lake city has joined the chicago investor to offer the local school district $7 million to fund preschool for children from low-income areas. the hope, better prepare them for kindergarten. >> in the past, maybe 15% of the kids in a program like this would end up in special education even though half of them didn't really need to be there, they just needed to learn. and the challenge with special ed is once you check in, you almost never check out. >> we need to be good listeners. >> the new money is coming through what's called a social impact bond. if the children get through third grade without needing special ed, investors will get their money back plus 5%

interest. director of preschool services is used to winning grants, not repaying bonds. >> my heart just sunk. i'm in a public school system. there's no way. how would i ever find the funds to be able to do that? >> what sound does it make? >> for now, the county and the united way will repay the bond, but eventually the state will need to be convinced to take over. but social impact bonds are new and untried and she says she's heard from skeptics. >> who's getting rich off of this? >> teagan, are you here today? >> reporter: teagan is one of three brothers to go through preschool, all have had delayed speech. >> my oldest, that was in the program, he was caught up by kindergarten. >> teagan e's brother is now reading a grade level ahead. what is hoped that investing in a for profit also works. >> now, goldman has also been

trying this at ryker's island. if it drops 10%, mayor bloomberg's charity along with taxpayers pay back the money. if it drops more, goldman gets paid more, if it's less, it gets paid less. it's all this sort of interesting experiment. and if you can introduce the profit motive, which some say it's controversial, guys, can you at least save some money up front, make some money down the road? we'll have to see. >> jane, that's a pretty fascinating story. i think it's great they're trying and experimenting with anything. we had a conversation with sam zell, our guest host earlier this morning about how the system in a lot of ways is broken right now. i think if you're trying new ways, anything's a good idea. >> you know what amazed me is that goldman sachs, second largest office in the country is in salt lake city. >> i didn't realize that. >> no, that was wild. >> must be processing. >> processing. >> yeah. there aren't that many mormons

at goldman sachs. >> well, there you have it. hey, jane, thank you for joining us. >> you got it. >> and we really appreciate you bringing this incredibly innovative idea. again, jane wells. and jim cramer getting ready for the new york stock exchange in the open. we'll take a look at stocks to watch when we return. ♪

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to make sof the -- some of the

speech recognition signed siri. what's your idea on that stock? >> it's another one of the players -- i've been going over what they're doing. a lot of people hate them but it has been really trying to ramp up oil. i'm surprised carl feels they need more pressure to do that. the scariest thing i've read in the last 24 hours, your column, andrew. you're the first guy that comes out and says, hey, listen week could indeed default. >> look, i get nervous about it just because i think there's this perverse backwards incentive system on congress and that to me is the hard part. i hope we don't get there and i hope we don't default. my worry is we might go over a day or two and is that day a real day over what really happens? >> a point that you made and there's some obvious -- a ton of hyperbole, but the point is we're not down. until there's more pain, it

doesn't seem like there can be a resolution. if we're go into october 17th and we're knocked down and bonds are fine, everybody is complacent and that's exactly how you get shocked. >> how many days do you think we can go after the 17th, do panic and force the hand of congress? >> it is halloween. the november 1 checks that go out are devastating. you have to be able to fund november 1 or we do have an economic contraction. our economy will indeed fall apart november 2. >> you said until congress does something. jim, wouldn't you suggest that the president should call someone and get a dialogue going at this point? >> well, i mean, you're either going to call someone or you got go do the 14th amendment. something has to give. i thought howard schultz made some good points, which is stop

the posture, start the talking. >> i think at this point it's so ridiculous where i'm not calling them, they're calling me. i think boehner isn't calling obama and obama's not calling boehner. it's stupid because i made the last call, i'm not doing it this time. >> we need reagan. chris matthews is right, look, i hate you but we have to go out for a beer. >> what's the reaction if we get a conversation but the conversation is let's put this off for a couple of weeks, we're going to increase the ceiling, call it a month. is that acceptable, is that less acceptable? >> that shows that there's willing to have bread broken. right now we just kind of feel like, well, there's lot of people who -- there was a great piece in the "washington post" about a congressman yolo from

florida. the guy really wants to teach the american people a lesson and the government a lesson. that guy is not going to sit down with president obama but boehner can sit down with president obama. >> you don't think people are saying it's going to create more uncertainty? >> uncertainty, as my colleague david faber did yesterday, when you mention social security, that is uncertainty. there's a great graphic in the wall street journal today about what doesn't get paid. there's like $71 billion and other. now, the federal government is reimbursing people who took time off but not the private people dependent on government. that's who i'm worried about. >> we'll see you a couple of minutes on "squawk on the street." >> coming up, we'll give sam zell the last word when we return.

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centurylink. your link to what's next. welcome back to "squawk box." let's go to sam zell for our

last word. do you agree that we go past the 17th? or do you think something happens between now and then? >> i think there's a reasonable possibility. i think my final word is that all of this screaming and yelling is interesting. seems like there was a lot of screaming and welling before the sequester and the sequester has been a pretty much nonevent. i think this is a much more serious event. my only comment to everybody is that this is everybody's problem. this isn't the democrats' problem, isn't the republicans' problem, it isn't the president's problem, it isn't boehner's problem. everybody has to get in a room and say what is the solution without counting who got what

last -- >> who got what last time. >> but there's got to be negotiation and discussion. >> sam, thanks a lot for coming in today. we'll appreciate your time. >> that does it for us today. make sure you join us tomorrow. right now it's time for "squawk on the street". good morning. welcome to "squawk on the street." i'm here david faber here with james cramer. ca carl is off today. we're looking at