"squawk box" here on cnbc. i'm michelle caruso cabrera along with joe kernen and scott wapner. becky and andrew are off today. stocks take a run after yesterday. on the corporate front, we're going to hear from alcoa, bob evans and the container store. as is for the economy, 7:15 eastern time, the survey of small bus sentiment. at 10:00 a.m., the labor department releases labor turnover survey. this afternoon, the consumer credit data comes out. we're going to have more on the markets in the next half hour. deutsche bank's david vianco and jim russell of u.s. bank wealth management.. first, though, skos scott has some of the morning's top stories. the ceo of walmart says the improving employment picture has so far failed to raise cash

register receipts at the retailer. don't miss the walmart exec on cnbc later this morning at 11:45 eastern time. samsung is on track to have its worst results in two years. the company says it saw better business conditions in the third quarter, but cautions it faces slowing market growth and intensifying price competition at the lower end and a looming threat of apple's next iphone. in other tech news, at&t announcing it will be the first carrier to sell the lg smartwatch. it answers to voice commands. it goes on sale friday. >> i saw this the first thing this morning when i opened up "the wall street journal." 125 years. what a great editorial page. three people, freeway markets, ideas for renewing america's prosperity, really good stuff.

>> articles by peter huber on molecular medicine and paul on getting out and away and, you know, peter darker saying -- listen to peopler drucker. but really good for the environment we're in right now which apparently is spurring young people to become conservative. >> according to the "new york times." >> what we're thinking -- oh, here is what i was going to say. you know, i saw that and i was thinking, i don't know, incident doesn't -- man you'd like one of those. it looks like you're carrying a tv set around on your wrist. it may be functional, but see how they put it with some bangles. i feel feel like you -- there's two different back pages on the journal today.

>> oh. yeah. >> they have to figures this out, don't you think? >> three pages samsung paid for. >> but you don't want to buy the first one. that is hidzus your wrist. i wouldn't be caught dead with that thing. not that i'd care. not that i would care whether i look good or not. but they're trying to say, hey, wear this and you can wear it with your bangles and people are going to say, that's good. but that is ugly. anyway, a new government survey finds roughly samsung is going to be a sponsor? did i just -- >> not any more. >> let me just rethink this. no, i would never -- unless it's comcast or universal. 4 out of 10 people have dropped their landline and now use only cell phones. the report finds that the pace

of dropping landlines does seem to be slowing. we move to another place. we did not do anything with the phone line. >> no landline? >> no landline. so we're fully a wireless -- >> the only reason to have a landline is during a blackout. even then, you need to have the original old style phones that will work -- >> you need a landline. you need a lapped line. >> a landline and a glock. you don't even thinking you're allowed to even imply that that would be okay these days, so i'm going to take it -- take it back. >> no. . >> second amendment still in force? >> is it?

>> they're saying because he wants nationally to look more conservative, but he says he looked at it and thought about it long and hard. >> i love that. >> you know who i have for delivering -- >> i do. >> they don't put him -- i mean, those are good people, but i'm sorry, who do you have -- >> carl. >> how did you get him? >> i have pull. >> you must be doing late afternoons. >> he's a closer. >> no, but what i mean about later, he doesn't get out early because he's up every night. i love carl. but, you know -- >> why christine? >> that's awesome. that's unbelievable. let's check on the markets this morning. a lot of people talking about 40 points yesterday and having a hissy fit on 40 points.

it bridges us down on the dow to 17,024. we do have to talk about this "new york times" piece, which i'm not immediately going to dispassenger, by the way. >> are you going to give it a few seconds? >> i'm not going to say they're wrong. i think it's interesting that from stock to farmland to assets, everywhere around the world -- >> yep. >> where he surprised inspect giv? given the question of how this money has been spent -- >> this is what they ask. >> is this equities -- i wouldn't say that. i think they make a legitimate observation.

>> i think it's interesting that the journal, on the same day -- it's a 125 year anniversary. but the journal focusing on where he righting the ship in terms of getting back the private sector and small government. >> on the editorial page. >> on the editorial page. and at the same time they're related. the reason that the "new york times" is able to write this story in a balance sheet recovery, this is a balance sheet induced recovery, right? that doesn't cause productivity, doesn't cause wage growth. i thought walmart, be careful what he says. because the consumer doesn't have any money. it's like, what do you pay your people? they're immediately going to ask that question. you have a million employees you're paying just above minimum

wage. and you wonder why the economy is not better? >> and a question in the context of that, here we are at 17,000 plus on the dow. how can this be? is it justified to be where we are relative to the where the economy is and how people are filing fwhr own existence? every time she does that, you don't know whether that's addressing the problem or causing the problem, right? >> or leading to this. this is an incredible -- urban office towers, fireland, you name it and it is trading at prices high by historic standards relative to fundamentals. that's the "new york times." >> holy smokes. >> on the same day they write among people might be done servive.

that's not just an observation, that's a warning. we need to do something quickly to stem this. >> yes. >> we need to do something quickly to make sure it doesn't contin continue. where is our "new york times" defender? you're not sorkin. >> nope. >> you're wapner. that's really weird. okay. no, i think he and becky are out for the rest of the week. you don't mind getting up? >> that's another story. president obama -- >> did they present it to me as a choice? >> president obama is heading out west on a three-day trip with stops to denver and washington where on thursday he'll deliver an economic speech.

i know this morning opening up all the paces. you got the journal. then you've got the "new york times" with this asset bubble story, which i often wonder what the times, john, i understand if there's some horrible event that that becomes the lead. i don't know how you decide to make this the lead. what causes this on any given day, now we're going to watch the lead story that assets are too high? how do they determine that, when to do that? >> you've got "new york times" on the brain, man. >> can you just answer the question? >> you're obsessed with decisions made by the "new york times." >> this is a financial network. they're saying every asset is

overvalued and ready to pop. what do you want to talk about? maybe get the approval ratings up a little bit? what do you want to do? >> i want to see whether washington is going to do anything about this child migrant issue and also about the va. we've got what hearing about whist whistle you're going to have this back and forth about whether or not we have to change the immigration law to slow the flow of children coming from central american countries and -- >> did you read the front page of the "new york times"? i have the "new york times" on the brain, john, but they actually do a big article on the surge in children isn't that there's more children, it's an

unintended consequence of this trafficking legislation which gives them more. so it's not that there's more kids, it's just that, i guess, we don't do to them what they used to do to them. >> well, it's a bunch of things. it's the law, it's maybe that the consequence of the administration's -- to stop people. so it's a whole lot of things and it's an argument for why we need comprehensive immigration reform. we're not going to get it soop, but the pressure over time to make that happen, whether it's under this president or earn the next president. every time he is that's coming.

going to do something. every time seems to know that. >> he's got an argument with some members of his own party as well as republicans, dianne feinstein in the story that michelle was just talking about mention dollars that she believes there is discretion they're saying if you got into the company through central america, let's say, you have the right to the least possible. the administration says no, wait, we have not procedures for sending those people back. the secretary says most of those kids will not meet the

humanitarian guideline toes stay. does the administration need a laub to send them back or can they do it on their own? >> we've seen the authorities do this. now they're going to do so now we don't quite know. >> there are numbers about what previously -- how many -- what percentage had been sent back and recently had been september back. >> is that as simple as what's happening? >> well, the trick has started over the last few years. so it's not just since years

out. >> what knows what countries are wondering and trying to get across the border while president obama is in office as opposed to a different kind of president on or someone with a different policy. i can't pretend to understand exactly how this slow is going and i don't care the administration starts, either. >> john, how does the white house manage the political risk in all of this? mainly the president picking a fight with his inn party. >> you know, there's political risks everywhere you look for the administration these days. the -- diane fine tien social security congress to handle it,

to beat up the proceedings. reb, the criticism of them, which has now come on a broad front, which is when it comes to foreign policy, was going on in syr syria, what's going on in iraq, when it comes to the veteran's administration, when it comes to this situation, the administration is unable to command and control and it's being sort of overrun by events and it's not confident elite. we saw that in the last poll, the minority of paying they can't -- >> how old are your with it within john? service southbound 20, 24, why teenagers today may grow up conservative. now, i don't know what type of values you've instill -- they're at an age where they're probably

making some decisions. i'm doing my -- >> what are you trying to do? >> just trying to in still inst market, private sector, small government. at the end of the century, the 20th century, it was 7% of gdp zb john. it seems like we've expanded a little bit here. but i says they're, team are look young to remember w. bush. they instead -- and you're not going to like this, john, they instead are coming of age with the democrat president who often seems unable to fix the world each problems. and as a result, in her

consumer. but although at what ronald regularace said pa years ago. hispanics are republican, rejust don't know it. >> i think most -- >> when they have a chaps to do much better with the latino vote for the reason that ronald reagan taungd about. there is an underlying and michelle can speak to this better than i can, but there's an underlying -- >> yes. >> conservativism. if they think republicans are not on their side, they're not going to activate those sentiments. >> interesting piece in the in, times this morning, john. anyway, doesn't he workport

did. >> i take my queues from my own experience and not necessarily from the front page decisions or inside the paper decisions. >> we're going to focus on your day-to-day at 7:00. >> fairway wsh risky business for the ce of of bernburge ron,. during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and make this the summer of style.

news on the m&a front this morning. doug buergeron, founder of opis global holdings is joining us. he's executive chairman of hyperios. good to have you on. >> good morning. hyperios is the leader in third party oversight, which is a real gel we're doing there. >> we just adwyered them. and they allow the fortune 500 to have better oversight, included oversight over their third parties. if you look at companies likes goldman sachs, they have 20,000 or 30,000 third quarter that do their core business for them. >> interesting. >> so it's comply wrans with

compliance based on those third parties. you don't actually run those businesses, yet they bring with you because you're doing business with them. >> it's the concept of a few things. number one, american corporations have joutd sourced almost everything but their core competencies to pb if they don't what you say you're going to do, they're going to fine you and put you in jail. it's an ability to model and see what your third party is doing. >> i got a little depressed riding about your company. >> i got excited reading -- >> et no, alcoa, charles schwabb, condoleezza, microsoft, you a those people i get

involved with. hyperios is heading for a number of other companies. >> was opus anything before you -- you put it together recently. >> sure. >> so was it like a shell backed by private equity to ir choir things and build something new? >> the management started off with a $4 billion fund in chicago and myself. >> and we've been looking for hot fast growing risk and compliance assets for the past month. >> i would like to start a firm where me, with your money, they decided to do illustrate. >> do you dream for an elizabeth warrant compliancesies? >> the concept of it makes me a

little bit ill. but i think we are living in a world where fines are increasing, regulations are increasing, and penalties are increasing. but it's tough to live in a big builder's society as a corporation when you've outscattered showersed everything. big brother is watching everything you're doing, but what you're doing isbying done by others and you're responsible for it. >> how much do you have left to buy other things or is this going to be your main asset? >> no. we're going to redy employ $500 million in capital. >> other companies that you want to buy inspect. >> the interesting thing about risking compliance is most of the new companies are smaller, they're just gaping transaction, they're under $100 million in

revenue because of the most requirements are new. todd frank is only -- a pew presence. >> i dream of creating a great broad shouldered pits. >> between facebook, apple, twitter, haas has the biggest chance of making a dent. >> apple has the largest number of users. however, to predict that apple is going to do from the outside is absolutely impossible because they're so obsessed with privacy and keeping things to themselves. but i think apple -- perhaps they -- i don't think twitter. >> dealing with compliance

regulations, it's different than writing them and enabling them. that's like a firm that does your tax work, making them for the taxes or something. the poor guy feels ill and -- >> i'm handling that. >> they give you as much -- >> i thought it was weird the other day when the president said we need to reign in financial firms. >> didn't they do that already? >> i hear lots of stuff out of washington that just makes me turn -- in fact, they -- >> i think it's cool to be able

to. >> we could go together and -- >> we celebrate our sickness, we do. >> thank you. we should buying a hoagie together today and split it. >> weir hungry. coming up. the bulls, will they get next to the area. "the wall street journal" turns 125. we're mark that occasion at 7:00 a.m. eastern time. as we head to break, we take a look at yesterday's winners & losers. (horn, ding, ding)

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good morning and welcome back to cnbc. joe kernen with scott wapner and michelle caruso cabrera. becky and andrew are both off today. homeowners have received about 1.3 billion in cash under the federal mortgage settlement. the firm settled over alleged misconduct in the processing

mortgages business that may have resulted in foreclosures. it sounds like a big number, but how much did they collect? >> i was going to say, i think it's a small percentage of the outstanding fines. >> where did the rest of it go? >> to risk and compliance, i'm sure. >> i often wonder. because the fines have been huge. bnp, 9 billion. jpmorgan, how much was the total of fines there? where did that go? >> they need to administer things. >> you know what? there's no limiting -- if i ask -- if i ask somebody else, i would get a more -- i'll have to ask you. >> you would get a less clear, less honest answer. >> so people might not share this perspective, there may be -- scott, step up to the plate, buddy. i thought it was my read. >> today, washington street will become only the second state in the country to allow people to buy marijuana legally without a

doctor's note. lines are forming in from the stores that got last-minute approval to sell. eventually, there will be more than 300 recreational pot shops across the state of washington. but only about six licensed stores will open today. first mover advantage. stock markets closing lower on monday with the dow and the s&p 500 logging their biggest one-day trop in about two weeks. despite the s&p nearing the 2,000 mark, they say they won't scale that level until the end of the next year. dave is joini ining us now, jim russell, as well. it's great to have you both with us. david, i'll begin with you. we're not that far from 2000 on the s&p. was 17 resistance for a while on the dow? >> i think 2,000 on the dow and

the 17,000 for the s&p. i don't think the s&p makes it to 2000 in the next several months. i think it's at the end of the year or early next year. my official target is that we don't hit 2000 until the end of 2015. really? >> yeah. i think the market is a good year ahead of itself. i think we have a few years of climbing to the equity market to do. but i think it's ahead of itself and i wish i -- >> it's largely a valuation issue. and the val you auuations are a% premium to history. and i can't find any signs of sales growth likely to exceed historical norms. it's interest rates. the equity market standing on the shoulders of bonds. it's fearful that we could have a long-term jump in rates.

>> they say booming -- >> it's 2000. but, yeah, no, i don't think it's a bubble. i don't want to be lumped into that category. i think the market is just in need of a -- >> no. it's the indicators. >> it is contrariacontrarian. they were right that central bankers have orchestrated a huge move. >> well, that is my concern, that there are too many investors that believe the emergency monetary policies or the zero interest rates they're going to monitor that. without an uptick in the participation rate, i think we'll have less than 6% unemployment and i think the fed will talk about hiking rates earlier and faster than the market believes right now. >> that might be good. there's a lot of metrics that if you were to measure, they should have already --

>> i agree with that. >> and then you look at, you know, you wonder why, when they intimated that labor was coming, you saw what happened in the emerging markets, they're awash in this liquidity too. it's scary. if they are behind the curve and it should be higher than they are, when they start, if they go to a quarter or something and it really should be at 3% or 3.5%, the market is going to tell them, you're still way behind the curve and it could go up much more quickly than people think. >> that's precisely my concern and why i'm being vocal about it lately. maybe the new normal ten-year treasury yield is four, not five or higher. but when they start hiking, it could be faster and to higher level us because they need to make up for being behind the curve. >> david, how do you see things? >> we look for a higher s&p 500

probably peaking in the third quarter. we think that the fed discussion regarding higher rates is going to matter. we think it's going to be a headwind psychologically to wall street, probably beginning in the fourth quarter this year perhaps the first quarter next year. unemployment rate falling dramatically, so we do think the fed enters the discussion probably in a negative way for the markets before too much longer. our price target is 2030 for this year, we see ta being achieved sooner rather than later. >> before the end of the year? >> right, before the end of the year. perhaps even peaking in the third quarter, again, with a little choppiness in the fourth quarter. what we're cognizant of, though, is that everybody is talking about the fed. we're all wondering about what they do and when they do it. we're wondering if so much focus

represents a surprise. >> they've already -- >> we do have geopolitical risks. >> no question about it. and we think that the second quarter earnings matter very much and, of course, what the guidance is for third and fourth quarter. specations for third and fourth quarter earnings are pretty heightened relative to where we've been. >> democrats might have some political risk in 2014. i'm not sure that that equate toes risks for the country as a whole, though. >> i know i got my man there. did you sweep milwaukee or just two out of three? now five games out, have you noticed? >> yeah. certainly we have noticed. we have a rivalry with them. it was two out of three with milwaukee. they're playing good ball. we'll see what happens. >> even the cups at 9-4 is

just -- that just seems mean to do. they're in last place. the last time they were five games out, and they were four games above .500. he's going to be rookie of the year, hamilton, don't you think? >> they have two against the cubs today. >> awesome. you know, i need something and i'm going to -- they're both sides and i'm back on board. >> there you go. and brazil plays -- one thing about soccer -- and thanks, jim and david. one thing about soccer, i don't know how they did it, but the four best teams are the ones that are left. >> have you been watching the world cup? >> i have. i know, i happen, it takes a village. i'm a liberal in terms of -- i need contact. still to come, restauranteur

and tv personal jim love and/vyi against each other. we have a sneak peek at a cool cnbc show in just a few minutes.

welcome back. time now for the squawk planner. at 7:30 a.m. eastern time, mark will have some fed speak to deal with this afternoon. 1:00 p.m. eastern time. rich manned fed president jeffrey lacker expected to give a speech on the economy. and one of the times earnings season is almost upon us once again. expected to roll out results after the closing bell today.

that's today's squawk planner. joe, back to you. >> thanks, michelle. coming up, a popular bakery chain crumbles. plus, are you impressed? they invest. restaurant start-up premiers tonight. he will give us a taste of what we can expect, coming up at 10:00 a.m. eastern time. imple question: in retirement, will you outlive your money? uhhh. no, that can't happen. that's the thing, you don't know how long it has to last. everyone has retirement questions. so ameriprise created the exclusive.. confident retirement approach. now you and your ameripise advisor can get the real answers you need. well, knowing gives you confidence. start building your confident retirement today. [ girl ] my mom, she makes underwater fans that are powered by the moon.

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welcome back to "squawk box." c cup cake lovers across the country are crying this morning. crumbs is closing its stores. crumbs will file for chapter 7 bankruptcy liquidation. >> they were dry. they were terrible cup cakes. there's a reason. >> they were huge cup cakes. they were terrible. nobody is crying. >> are there some in new york? >> yeah. >> never had one. >> never? >> never. >> magnolia is great. >> i like red velvet. >> speaking of trying to do this, which, you know, restaurants are tough, but so

much fun to watch, it happened. cnbc's newest edition, it's prime time reality lineup, restaurant start-up debuts tonight at 10:00 p.m. eastern. it stars texas native tim love, type-a personalities vying against each other to invest their own money and food ideas they believe will make them millions. >> uh-oh. first one down. >> boom. >> this is the signature dish in the middle. >> pork belly adobe. >> give us a minute. >> enjoy, guys. >> all right. this is the signature cracking conji. >> we did our best. >> the last dish goes out. the emotions are running hard. >> it's my fault. i let you guys down. >> oh, man. >> we're a team, doug. >> joe's right. we're three [ bleep ] blind cooks from seattle. we proved it today. it's a hard pill to swallow. >> i love the consistency of

this, the contrast of the flavor, the acidity. full-on power. >> flavor of that is awesome. i would eat the whole bowl. this is the best of the day. i love the seafood brianiness it has. >> on one hand you have the food. on the other hand you have those three guys. and between those two realities an investment decision will be made. >> i don't think they're going to invest. i want them to. but i feel i let them down. i let my family down. >> joining us one of the stars of the show celebrity chef tim love. first thing we got to talk about, tim, to have it on melrose, every time you do it, i used to live in l.a., and that's like if it's on melrose you're going to get a shot, but that's where everybody goes to eat. so that's just a great concept to start with. then i'm trying to figure out how you do it. is it all about whether the food

is good? or you got to have the good-looking people at the door when you're going in? is it about the service? because, you know, you got to have people that are sufficiently snooty to make you feel important to be there, right? i mean there's a lot of things that go in to running this, aren't there? >> yeah, there's a lot. i agree. you know, opening a restaurant is a combination of all those things. like you said. and it's really -- for me it's always food first, and you'll hear that on the show a lot. i talk about the fact that the food's got to be good. and you start there. and then there's a million other things that you build from. but you know, the food's terrible then clearly you can't have a restaurant with terrible food. >> okay. so you got to get your suppliers right. you got to make sure that the guy is a decent chef but he can't send out food that takes like 35 minutes to make, either, right? i mean -- thinking about trying to do this as one of the chefs. >> i think that's what's compelling about the show. most people have seen all these food shows over time which we've kind of almost become numb to and the fact that, you know, we

know that this cook goes versus this cook and which food comes out better. this show is not about that. this show is about making a smart investment into a business that we've always looked at as being sexy but not as a business. and restaurant start-up actually shows you why it's a business and what it takes to really make it happen. >> i'm shocked the show doesn't exist already. it seems like such a natural. so many americans dream of starting a restaurant. >> that's right. you know, it is -- i said the same thing when we shot the show. it's such a simplistic concept of what we're trying to show people the world and what it is to open a restaurant. this is not a show about, hey, who's got the sexiest food. this is a show about looking at -- taking a look at people who have a dream of opening a restaurant and going you have the talent, we're going to give you the money and we're going to make some money with you. that's what we're going to do. it's here to show how to make money in the restaurant business and also shows very easily how you don't make money in the restaurant business, which happens a lot. >> we saw -- i'm sorry joe.

we read the story leading up to the interview with you, tim, about crumbs closing its doors. i mean if that's not a wake-up call for how difficult it is to succeed in the restaurant or food concept business, that's a slap in the face right there for everybody. >> i agree. you know, crumb is a well-capitalized business that grew quickly. and but the problem, and i look at something like crumb as you're looking at a concept that's based on a trendy food. and trendy foods are not restaurants that succeed. restaurants that succeed are ones that build on a basis of very good business, knowing what your costs are, and expanding on a slow basis to make things happen quickly. when you look at a business like a cupcake business, you can't base in the food world on a trend because trends change every day in our business for sure. just like you watch the market and the market trends, right? in the food world you need to start a business based on things that are successful, and that people like over time. and you can slowly build that better and better and better. >> yeah.

i mean everybody's been warned. you know, do not be a passive investor or you're going to lose your shirt. >> doctors and dentists. >> most of the time -- then you look at mario -- if you don't think you can get rich in the restaurant business you haven't been to babo or i can't keep track. it can be done in a big way. l.a. i was thinking about it, though, i was joking about the, you know, the aloof sort of people that you need to, you know, to deal sufficiently bad about yourself. in an l.a. restaurant. do you -- do you interview? it's a different place l.a. than maybe somewhere in the midwest. right? a little bit different. >> you know, every section of the country is different. so when we have these different concepts that approach us, because we're shooting in l.a., they have to transcend into that

crowd a little bit so when they open up that day they're feeding people from l.a., not feeding people from say, seattle, or from portland where we've had concepts from new york. some from st. louis, like, so, and that's really where joe and i are great together and the fact that he is from the coast and i'm from middle america. so we understand different things. >> i want to talk, i was going to bring up l.a. story because you've probably seen it. steve martin is going to go to la id yolt which is on melrose and he has to have an interview before he goes to dinner to get a reservation and captain piccard is there saying what do you think you're going to order? and he goes duck. and he's looking at his financial statement and going oh, no, no, no, you're not ordering duck. you're getting chicken. tim, thank you. we'll be watching tonight. sounds great. >> thank you very much. >> join tim premiere tonight on "restaurant startup" at 10:00 on cnbc. >> this is l.a.'s historic district. some of these buildings are 20 years old. coming up "the wall street journal" celebrating its 125th anniversary, editor in chief

jerry baker will be our special guest. on his way to the set right now our guest host for the next two hours star wood capital chairman and ceo barry sternlicht. when "squawk box" returns.

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welcome back to "squawk box." today's guest host, "squawk" market master barry sternlicht, chairman and ceo of starwood capital. his view of the markets, the economy, and the state of leadership on capitol hill. the baby boomer effect on medications and research. find out which companies are leading the charge. plus, look who's turning 125. "the wall street journal." celebrating this amazing milestone.

editor in jeff jerry baker on the next frontier for the news business. the second hour of "squawk box" begins right now. good morning and welcome to "squawk box." i'm joe kernen along with michelle caruso-cabrera and wapner. still above 17,000 on the dow but we're indicated down about 18 or so points. that could change before we do see the open and the ten-year still worth watching, as we live in this weird, never-never-land of central bank action around the world. especially here, 2.59. how that makes sense with where a lot of other things are, well we know that makes sense because

the fed is buying everything that they can get their hands on most of the time. so 2.59 you just wonder where all these markets would be -- >> i feel like they outlawed recessions. nobody's allowed to suffer any pain anymore. >> you know what grant says, the fed can make things appear to look better. they just can't make things actually better. sooner or later you just wonder. you like volatility. goldman sachs -- >> we all like volatility. >> citigroup can't make any money trading. >> they're all talking about it. >> i know. your show is called fast money. half hour report and the money -- molasses. fast money and when it's going like molasses is bad. is it not? >> it's more difficult. >> it's less good. >> all right. >> you're good. >> the world's biggest retailer says consumers are still keeping a tight hold on their wallets. the chief executive of walmart's u.s. division told reuters that despite the recovering job

market consumer confidence has not increased enough to convince shoppers to ramp up spending. we'll get more on simon's view of the u.s. economy and its impact on walmart when he joins us live at 11:45 eastern time here on cnbc. samsung is warning that second quarter earnings will likely be its worst in two years although it expects improvement in the third quarter. san lists say samsung's high-end phones are simply not selling as well because of an abundance of cheaper alternatives and the company may have no alternative but to cut prices. united airlines plans to outsource more than 630 union jobs at 12 u.s. airports. the cost saving move affects positions including ticket and gate agents and baggage handlers. the jobs will be shifted from the payroll as the airline hires other companies to provide the employees. truckers at the ports of los angeles and long beach have gone on strike. they say trucking companies have prevented them from unionizing and improperly classify them as contractors to minimize wages and benefits. so far the impact on cargo

movement has been limited. but there could be broader disruption if striking truckers picket at the dockside terminal. in washington, news a congressional study finds that 76 u.s. companies have shifted their tax domiciles out of the united states to other countries. but we're going all the way back to 1983 with these inversions. it's becoming more popular, though, we talk about it all the time here on cnbc. the goal, of course, is avoid g avoiding -- well, it's avoiding the prohibitively high tax rights in the united states. i guess you could say it's avoiding u.s. taxes. they're paying taxes somewhere else. it's just -- >> they're lower somewhere else. >> like they're half other places. >> right. >> duh. >> just saying. >> people move to texas and florida, too. from illinois. that tends to happen. >> that should be illegal. >> they may do it. >> make it illegal. >> the research service says 47 inversions have been done in the past decade, and of course more are in the works. we're joined by two very special guests this morning, barry

sternlicht is chairman and ceo of starwood capital group. "squawk" market master. like midas. he works out. he's -- women love him. men want to be him. and then -- and then jerry baker -- >> and then there's me. >> you look like brothers, actually. >> wait a second. jerry baker is editor in chief of "the wall street journal" and dow jones, he joins us to commemorate the "journal's" 15th anniversary today. he'll be ringing the opening bell at the nasdaq later this morning. and i many times, jerry, i have people look at me and say god you're a journalist, man, how can you say these things? you're supposed to be a journalist. i'm not. i don't want to be. and i would just say, the "journal" better than ever. it's where i find on the op-ed pages, i read it, and i probably shouldn't come out and say but i read it and i say there's the truth that i need that i need to figure out what's happening and it's private sector, it's been

consistent for 125 years in terms of what brings prosperity. and you're with me on this aren't you? i don't want a job. >> you say very kind things, joe. 125 years, it's great. and i think we've, you know, we've existed and we've thrived as you say i hope we've got better especially in the last -- >> people on the left say it's turning into a rupert murdoch mouthpiece. >> well, you know, it stands for conservative values on its editorial pages. >> it always has. >> which is pretty unusual in much of the media. there aren't many newspapers that adopt that position. on the news pages we tell the news as it is and we tell it straight without a bias, without a skew, and yeah i think i don't always get it right but i think 125 years speaks for itself. >> the top daily newspaper by circulation -- >> subscription, right? >> sometimes i think the bulk of the paper, there are times i read it and i don't like the

slant of some of those pieces. you could almost interchange "new york times" reporters with noneditorial pages. >> send me their names. >> no, i -- >> still there's a difference about the prism that you choose. the prism that other brand "x" chooses every day is one based on whatever the social issue of the day is very hot to them. as opposed to a very consistent approach to business. >> yes. >> and profitability. with the underlying assumption that that's what leads to pros ter perty in america. >> and exploring all the other issues that are important to business, too. when people say oh, you know the "journal" does, you know, does things about arts and culture and fashion and that kind of stuff. yeah, because actually we are reporting on the culture. we're reporting on the content of this country, particularly this country and we need to report on all aspects. >> it's changed from what i would -- >> -- to publish, the "journal" is great today. i always picked up the f.t. on the weekend, being american, and they had all the coverage of the arts and stuff. and even your supplements are

really good. and worth saving. i save them. >> it's become much more general, too. >> i need a haircut. >> in the old days, the ten points seemed different, it was more about individual companies, more about sectors, and now there's definitely more geopolitical news. that's been an improvement. that's been more of murdoch based. but i look at like today, ideas for renewing on your 125th, ideas for renewing america's prosperity. and you got george shultz, paul ryan, george gilder, mike milken, carly fee wino, michelle rhee, but this if you get it, the main section -- >> we've got a special 125th anniversary. the editorial, a lot of readers you, joe and others will take, a look back on the editorial pages through some of the highlights, some of the things the editorials have said

consistent -- >> you could find the same consistency in "the new york times" over 125 years? >> oh, yeah, that's right. >> might be a little different. >> a little angle but i think you'd find the same consistency. >> great value. thank you very much. >> you going to write this while we're here you going to write this piece from stocks to farmland all assets are booming from central bank intervention? >> as with a lot of those stories you see on the front page of "the new york times" we did that one about a month ago. sometimes -- >> when "the new york times" does it, is it a sentiment indicator or a contrary sentiment indicator? >> by that time it's become the equivalent of, you know, rockefeller's -- >> -- equities -- >> we'll see. >> at least it's hard for them to finally come to the viewpoint that all of this fed action could actually be bad for the people that they're always reporting who want to help. because we are finding out, every time janet yellen says if

there's one unemployed person or one poor person, i'm doing it for them, when, in fact, the people -- the people that are doing well are the ones that keep doing better and i don't know if it's doing anything for the people down here. for the liberals to finally admit maybe this is not the way to orchestrate a recovery. >> i guess that's part of the argument. i think the having thing is, you know, as we pointed out, as they point out, all assets have been booming. how much of that is directly attributable to the fed? you know, i don't know -- >> you really going to question -- >> lots. >> clearly it's significant amount. but actually if you look, interest rates are incredibly low. so things like stock buybacks, that's been driving, you know, earnings per share, it's been driving the market more generally. but i think, look, the other thing is that the u.s. is the only game in town right now. okay. so i think if you look around the world, you look at europe, it's mired in a slump. you look at japan. well, maybe it's coming back. who knows.

but it's been 20 years of misery in japan and it's kind of hard to get excited about that. there's renewed doubts about the emerging market. one of the things, of course monetary policies play a role but the absence of really impressive investment alternatives also plays a role. where else are you going to put your money other than the united states which has got pretty good pros pents, right? the energy boom has been good. >> -- to start. doing pretty well there. >> but the uk -- >> an asset bubble i'd say -- >> clearly there's low volatility is a reflection of that. but i think the u.s. has done particularly well and i think there's a number of factors. >> okay. how has social media impacted how you guys do your job? the way that news is disseminated is faster than ever. the way that ideas are shared, via social media, you get story ideas by what you see people talking about on social media, facebook, twitter and other places? >> all of that is true. for me one of the most interesting ways in which it's changed what we do is you really have to go out, reporters and editors have to go out and

really have to promote their stories. in the past, you know, when "the wall street journal" started 15 years ago through most of its history, reporters would write a story and get printed in the paper and it would appear on somebody's doorstep and whether they read it or not you were reasonably happy. now there's so much information out there and the availability of it and the access that you have to readers, through social media, is so great that you actually have to be out there saying, read this story. because it's really important. so we use social media for that, in particularly to actually to promote our journalism to make sure people are reading it. >> we're going to take a break. and then when we get back we'll -- i like that you're here, because, i mean, you've got money and skin in the game. you really are a journalist. you've got it covered. so someone -- yeah. when someone says i'm not sure how much the fed is really and you're just going oh. come again, right? i mean you have some strong opinions about how much of this is low interest rates. and holding things down.

right? >> and distorting the market. >> market pricing. so that's what we'll talk about. you're the market master. you're just -- >> yeah. >> the guy who writes about it. >> yeah. >> all right. also coming up the small business putting more people to work? we're going to check the confidence level at 7:30 a.m. eastern time and how will the boomer generation change the future of big pharma. sanofi's ceo will tell us how this company is planning for the longevity revolution. in a world that's changing faster than ever, we believe outshining the competition tomorrow

requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

let's get back to our special guest today, barry sternlicht is chairman and ceo of starwood capital group and gerry baker editor in chief of "the wall street journal" and dow jones. we were talking about what happens when the fed raises interest rates what would that do to emerging markets. when we talk about real estate in the united states and all the hot markets everybody talks about the chinese and the russians trying to get their money out and buying stuff here. big dollar stuff. is that still true? is it ever true? >> well, first of all, money flows across boarders today more easily than ever in history. there's a lot of disturbances in the world whether in the middle east or russia flexes its muscles or the seemingly aggressiveness or new aggressiveness of china, vis-a-vis japan. you're seeing flight capital from all over the world look for safe havens, that's what gerry's point was, the united states is

benefiting from that. with london, take a london real estate market, i was there this weekend, 90% of the 's over over 2,000 pounds a foot are bought by foreigners. so it is a completely dominated foreign market. what struck me is all the offices are being converted to residential, and there's a million departments in london today. and they're dark. they're in areas that there is no people. and all of the office buildings are moving out now to the periphery of the town. and that's different in new york than in the states. we don't have yet that amount of foreign capital buying residential houses. you hear about the odd oligarch coming in and buying an apartment in new york. that seems to have slowed down lately. the big factor in the next five years will be the amount of capital that comes in from china, and as they worry about that country's slowdown or impending -- the great debate of whether they're going to have a bubble or crisis in china and its implications i think these guys have gotten so wealthy they're trying to move capital out.

>> you must have spent forever thinking about this question, right? the situation with china? >> yeah, absolutely. i was there recently, and the mood was very much, you know, people are doing exactly what barry says which is they're hedging their bets by making sure that anybody who has a lot of money in china, almost anybody who has a lot of money in china has most of it parked offshore somewhere, whether it's in london real estate. >> canadian? >> canadian real estate if they can get it. it's easier in canada -- if you've got connections it's easy to get your money out, ironically. >> we have an old law on the book, foreign investments tax act which was passed back when the japanese were buying everything and there's been a big movement in the real estate community to have it lifted. doesn't need it anymore. it would make a major change. its making its way through congress, the real estate roundtable and other organizations are working with congress to have it repealed. but they look at this as a tax increase. it's not a tax increase. it's ridiculous. >> there's no reason -- we got to let that money flow here from china if they want to come here into real estate here you've got to.

>> but then you'll create -- >> but in general let's go back to your first question. real estate is based on yield today. and since there's no yield in anything but in corporates or governments, everything, whether it's farmland, timber, everything is yield proxies. and that is creating this asset bubble, junk bonds at all-time lows, corporate debt. real estate debt spreads are crashing. it is, and people basically have given up. they're flowing in the towel. there's basically complacency and money is flowing to anything with a yield. and you're seeing, we represent many sovereign wealth funds today that invest with us. and they're anxious to get -- put that cash to work in some -- in real estate is the b beneficiary of that as is the stock market. they kind of like our quasi- -- they're taking money out of the debt markets and putting it into real estate, first into debt and eventually into equity. >> you -- this article is representative of where we are right now. >> in "the new york times."

>> i think back to the days during the crisis, when i think it might have been a lot easier to do things but a lot scarier when you did them. and i'm going to let you do your victory lap on course because i remember you were on and everything i had read is that barry sternlicht is a greenhorn and i didn't attack you. it wasn't me -- >> the "journal" did a story that we had won that option. this of course is the bank failure in 2009, you wrote we beat our nearest competitor by $500 million. >> and there was no way it was going to work out. >> we bought $4.7 billion of loans which were the assets of the failed bank for $2.7 billion and unlike the resolution trust stated back in the '90s in the first claps of the savings and loans the government said we're going to play with you in this sale. it was the smartest thing this government's ever done. so they bought -- they gave us half the money in debt. so $2.7 billion. we paid $1.35 billion in debt and they took 65% of the equity and our group put up 40% of the

equity. now we have about 99% of the assets have been resolved. so our investors will, it's about $1.7 billion of profit on the $1.3 billion of equity and the government made an increment billion bucks to the $2.7 billion. so we gave the government a billion bucks. they spent it -- >> the story wasn't a 20% return, 24 for investors compounded over four years. >> that's true, 24% over four years. >> per year. >> what the hell were you thinking? >> oh, you weren't there then. >> oh, yeah. >> 24% over four years but that's more than -- >> that's nothing compared to the s&p. >> even the s&p -- >> 72 divided by 24. >> another country by the way. >> congratulations. >> yeah well it's great for us. >> the government worked by the way -- >> nothing playing around like that. to do anymore. the one thing we didn't realize, we sold stuff too early.

we own 2,000 apartments in florida we bought them in south beach and bought them for 150 a foot, sold them for 300 a foot. the good news is everybody's happy. it was the largest distress sale of the whole feickle with the fdic. >> my point was those opportunities aren't here now for you. >> they're different. >> but they're still okay for you. >> isn't it tougher? >> we've invested $6 billion in the last three months so we must be doing okay. so it's different- >> might be three million a year. >> or nine. what's happened to real estate is yields on property have gotten stuck because everyone expects interest rates not to be at 2.6 which you pointed out but to be 3.6. so cap rates are yields on property are 6 and 7 and you can finance these at 3 and 3.5 so you're getting high cash yields out of property which are -- and ordinarily cap rates yields on property should fall.

the spread between yields on property and the cast of debt is too great. so that's why you're getting compelling risk adjusted cash yields out of property. and that's why the real estate markets are so buoyant today. there's not a lot of supply. >> gerry's got to go. >> great having you. congratulations on 125 years. >> keep fighting the good fight. you're like a beacon in the entire media landscape. >> that's very kind of you. thank you very much. >> "wall street journal" with a period at the end. >> we decided to keep it. >> smart guy. ones this place from the "journal." >> very talented former "journal" -- >> he was able to escape print -- >> yeah, some people -- >> apparently some people do. >> some people go the other way. >> i started off in television. i had to face for television or radio as they say. >> here he comes. >> you missed that. >> mostly television. >> we got to go. >> how the generation is changing the way big pharma

thinks about the future. more "squawk" coming up next. e

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welcome back to "squawk box." making head lines. tesla is being sued in china for trade mark infringement. this could spell trouble for elon musk's ambition to expand in the country. chinese businessmen registered the tesla trade mark before the u.s. company came to china. he is now demanding the company stop all sales and marketing activities there. sounds like a squatter, right? survey by the department of education finds math and science graduates earn the most money after graduation. only 16% of students took home degrees in science and technology engineering or math. for those graduates average $65,000 a year compared to just less than $50,000 for those with other kinds of degrees. a familiar face to cnbc viewers is leaving wall street for academia. banking analyst brad hintz

announcing he plans to teach and write a book. he most recently worked at bernstein research and before that was a ceo of lehman brothers and treasurer at morgan stanley. >> the latest read on small business is out. steve liesman joins us now from washington, d.c. with a special guest. steve? >> hey, thanks, scott. the fifk, national federation of independent business small business optimism falling by 1.6 points to 95. that's capping a recent step upward and the question is are we reaching some kind of top here which would be settling down at a very low level. joining us from philadelphia bill dunkelberg. he puts together the survey for nfib. bill, how are you? >> i'm fine, steve. you're looking great. >> the survey is not, bill. tell us what happened here. we were kind of marching up and we're lower than the expectations on wall street which was for a 96 or 97. what's going on with small business this month?

>> yeah, well, it's a disappointment. i thought this time maybe we would be able to do more than three months in a row, the little increases. but the pattern has been, in the expansion, basically to do kind of well in the first quarter, first half, and then fade again as the economy fades. so we kind of lost ground on all of the -- of eight of the ten components in the index. the good news was that the two components that did well were the labor market components. the job openings hard to fill, that went up again. and plans to create new jobs, that went up again. so -- and of course we are hiring more now. we have nine months in a row now that the small businesses have on average added new employees. so that's the good news. >> bill, that double-digit decline in expectations for business conditions in the next six months, that's a little scary. i mean it's like everybody went and ran for cover. in caves somewhere in the

hinterlands here. what's up with that? >> exactly. your chart shows it there. 14 of the 18 not seasonally adjusted points that we lost came from two questions. one is, you think business conditions will be better six months from now or worse. and we have now a negative ten which means ten percentage points more said worse than better and expected real sales, that was a minus four. so they're a little pessimistic about growth in real sales and those are important because those key in on decisions to invest not only in new workers, but also inventory and expand your business and so on. so, wasn't good. i don't know exactly what it is that made them more pessimistic other than the big mess that we have in washington that doesn't seem to want to straighten itself out. >> bill, the capital outlets numbers were also down. what does this say about total gdp growth and what is telling you about the pace of hiring? >> well, our model says that gdp

growth is going to stay around the 2.5 range. we really didn't get anything better than that out of the index. on the hiring side, of course, what we keep predicting is that the unemployment rate is falling. a really good predictor of the unemployment rate is that job openings number. and it just keeps getting bigger which means that for whatever reason and wherever it is, the labor markets are getting a little tighter, because along with that we've had a huge increase in the percent of owners reporting higher compensation. so, something's getting tighter somewhere and that's good news for the workers. >> those compensation numbers are interesting. they're going to be interesting to the federal reserve. i know they follow this survey and especially the labor compensation. which they're actually giving more increases than they planned to give which means they're having to i guess they're being crushed a little bit on the bottom line when it comes to profits. but what is it saying about the potential for wage inflation in the federal reserve, though? >> well, the inflation numbers

have been very interesting. we asked whether or not they increased or decreased average selling prices, that's what we think about inflation is average price level, and we have since december seen a 15 percentage point increase in the percent of owners saying that they've raised average selling prices just really been on a trip here. and it's starting to look pretty high historically. somewhere out there on main street there's some inflation cooking, and i think we'll start to see it in the major indicators. >> we'll have to follow that. bill, thanks for joining us. and guys i'll be back at 8:30 with the real question from this survey here, which is strong job growth but the other indicators are weak. and we have this incredible conundrum in the economy, which is gdp's going to be zero in the six months that ended in june. but we created 1.2 million jobs. we'll take a look at that and the reasons behind that at 8:30. >> all right, steve. why are you down there? >> i'm down here because i'm going to be talking to the

government about their statistics and how they can possibly cook the books a little bit more in line with my view of -- no. no, joe, not at all. as you know, in our office -- >> i was -- i didn't know you were joking. i love that. >> i know you didn't know that, joe. i know. the secretary of labor was in our office with a meeting with some reporters about how they can make the data more accessible, how to improve the data. i'm going to have some other interesting meetings. you know. >> who was kingfish? >> bob weir's band in the mid '70s. they did a lot of good stuff. you never heard of them? >> no, i was listening to them. it was pretty good. >> he wrote a lot of his best music became some of the dead music inside the kingfish. >> all right. because i haven't seen you. -i have backup. i have questions. >> if you put them in e-mail format please and i will respond to each one as you know when you

write me these little lines a write six page memos. >> don't do it on the air with all of our viewers going what the hell. that's an idea. that's one way of approaching it. thank you, steve. coming up the baby boomer effect. the biggest, richest and perhaps the most influential group of americans. you're not, are you? >> i'm a tail end- >> i think i'm like right in the middle. i am not turning 65 any time soon. americans are living longer, 10,000 people turn 65 every day and changing the health care landscape especially in the pharmaceutical industry. next the impact on medicine and research when the ceo of sanofi tells us how this company is keeping up with the boomer generation. "squawk box" will be back in just a moment. what can your fidelity greenline do for you? just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement.

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all right welcome back to "squawk box." let's take a look at the futures coming off a down day on wall street. an implied open on the dow of down 15 so a slight decline looks like on the open the s&p would open down a couple of points but the dow did manage to close yesterday still above 17,000. making head lines, a kick-starter campaign for potato salad has topped 35,000 dollars. yes, potato salad.

the project started as a $10 question to make the dish and throughout the campaign the man behind the project has added new goals such as better mayonnaise and a live stream of the potato salad's creation. you like potato salad? are you a potato salad or coleslaw guy? >> coleslaw. i don't really like it, and it definitely doesn't like me. >> coleslaw? >> yeah, you know -- >> the cabbage? >> yeah, cabbage. who needs it. why put yourself through it. and anybody else. the potato salad, there's two kinds. there's german -- >> and regular. >> some has the skin. i like them both. but not a lot. >> mayonnaise. >> too much mayo? >> yeah. >> it's not good. >> go with the vinegar. >> meat, fish and eggs. meat, fish and eggs. we are continuing our baby boomer effect series this morning. quick reminder of what this is all about. america's largest, richest, and most influential population is the baby boomer generation. all the sex people had after world war ii. guys got back from somewhere,

apparently -- >> is that how all those babies got born? >> and there -- and they're getting older. 10,000, 10,000 turned 65 years old every day. and they're living longer. barry just told me 65 is the new 45. >> yeah. i believe that. >> this morning we're looking at the impact of that huge demographic shift on the pharmaceutical industry. we have an overview for us and simply put if you can take a -- even if it's a $100 pill, if you can take it and you don't get some horrific hospital stay, i mean pharmaceuticals can be the best deal in town. >> that's the idea. that there's this preventive medicine that can keep people out of the hospital or get them out of the hospital sooner. we're living longer as long as we're not eating too much potato salad. life expectancy for women is up to 81. up for men to 76. that's up 11% overall in the united states since 1970. and of course this is a growing population with baby boomers getting over to the 65-plus range.

so they've got a lot of chronic conditions. they say medicare beneficiaries, two-thirds of them have two-plus chronic conditions. these are things like heart disease, high blood pressure, high cholesterol, alzheimer's, diabetes, and so big pharma really is stepping into the void here. there's more than 430 medicines in development right now for 15 most common chronic conditions affecting the aging. that's more than double there was in 2004. so this is a really big area. a couple of those we'll talk about. the most common actually that big pharma is focused on are diabetes. they've got 110 medicines in development now for diabetes. 67 in development for alzheimer's. that's really important. 5 million americans currently have alzheimer's. 36 million people worldwide have dementia. that's expected to triple by 2050 if we don't get new drugs that stop or slow the disease. it's been a really tough area. we don't understand the biology well enough for alzheimer's. and then diabetes is a huge area. it's a $64 billion market worldwide. this is huge.

sanofi, know vor nordisk, merck and lilly are in this area. 27% of baby boomers are said to have diabetes. that's growing. we didn't even mention cancer and high cholesterol. all of these companies working in these areas. you can't not focus on it if you're in big pharma. >> my kid has diabetes actually. >> oh, really? >> he's 20 now. but he was 3 when he got it. there's two types of diabetes. it's interesting, what they're doing with drugs. and what they're doing with stem cell research, which are not obviously drugs. and artificial pancreases and new pressuring devices for blood sugars that you can read the fluid in your skin so you can wear a watch or inhallers. the drugs are kind of interesting but they're probably not going to be what's going to happen with diabetes. >> you have to hope that there's something that can manage the disease or cure it with stem cell therapy. that would be incredible. >> big. exercise. genes. diet. genes are important. >> all very important. >> genes are important. i looked at all of those and

exercise, you know, does a lot, daily exercise, absolutely. anyway, thanks, meg. let's bring in the crowe of sanofi chris viehbacher, it's great to see you. chris i'm counting on you and your cohorts in biotech as well to hit this 2040 singularity but i want to live a lot longer and the pharmaceutical industry is going to help us. >> right, joe. well i'm just as motivated as you are. you know, as meg was saying, obviously the big driver in this are chronic diseases. type ii diabetes, cardiovascular disease. over 50% of people over the age of 60 have a chronic disease. and there's basically three ways i think we have to go about it. first is we have to start earlier in life. we have to do a much better job in our health care systems of preventing chronic disease. a lot of them, with some of that diet and exercise, you can avoid diseases in cardiovascular and

diabetes. the second is we have to yet make it a lot easier for people to take their medicines, and really get to better outcomes. and the third is clearly what we all in our industry see as our mission and that is to develop new medicines. there's obviously a big need for continued innovation. there's some diseases like alzheimer's which we can't treat today. even in the chronic diseases we do know how to treat we can develop much better medicines. >> those chronic diseases, you know, i think about, there are certainly -- there's a role for pharmaceutical companies, but i don't know what we need to do lifestyle-wise and the nanny state i've got on the one hand. i don't know how well the school lunch, all these initiatives work. but it seems like you could, at least 50% of the chronic disease problem could be at least dealt with to some extent by exercise, and diet, couldn't it, chris? and how do we do that as a

society without telling people what they absolutely can and can't have? it's a tough -- you know, because it's easy to chafe. and i chafe on the big gulp thing. that seemed ridiculous to me to try and legislate that in a city. >> you know, what we have to remember is that our bodies have evolved over millennia. and the fact that so much food is around is a relatively recent phenomenon in the evolution of people. so, you know, your body is telling you, you have hormones that say, you need to store energy. there are hormones that will respond to sugar, to salt, to burned fats. there's a good reason why that plate of french fries smells a whole lot better than the splat of spinach. and so a lot of ways our modern life has driven these. what we have to do is adopt our modern life now to thinking about that. you know, how much nutrition are we educating our children about? do we still have mandatory physical education in our schools? you know, a chair something

called a ceo roundtable on cancer, which engages employers to introduce preventive care in the workplace. so there are a number of things we can do. how we design our cities. how easy it is for people to take stairs, to walk, to bicycle. these are the things that we all have to take into account, it's a community-based effort. we tend to beat ourselves up. it's just a question of willpower. they say there are a lot of things in our bodies that are driving us to store energy. now, for people who do have diseases clearly we have to help them. you know, sanofi's very engaged in the fight against diabetes, cardio vascular disease. one of the interesting things we're seeing is some really interesting new medicines coming along. in the whole industry, really. i think ten years ago we all understood that we couldn't bring products to market anymore so we all really invested in some disruptive innovation. i think you're going to see a number of new medicines coming along that really have really revolutionary levels of

efficacy. we have a new drug we'll get you a better trade name for it but this belongs to a class called pcsk-9. we can dramatically reduce cholesterol levels compared to even people on a statin today. and when you think that cardiovascular disease and heart attacks are still a major source of mortality this could make a huge difference to people. we're just this morning announcing that a new diabetes drug has been accepted for filing by the fda. we have developed a flu vaccine specifically for people over the age of 65 because vaccines work on your immune system, and your immune system tends to weaken with age. so we actually developed a flu vaccine that's specifically for people over the age of 65. you know, we also need to help people actually manage their disease. you know, by the time you've been diagnosed with type ii diabetes, you've been walking around on the planet for over 50

years. someone comes along says now you have to eat differently and exercise. digital technology i think is going to help. you're seeing a lot of people wearing the fitbits. we can use smartphones more as devices to provide education and monitor people's health. so all of these things are things that certainly we as a industry and we as a company are looking at. because, you know, clearly the incidence of all these chronic diseases is only going to grow. >> chris just quickly, i was wondering do you see any correlation between education and chronic disease? or people more well educated likely to be less -- have less problems? and also, is there any correlation between socioeconomic status? you know, does it affect the affluent able to take care of themselves better, buy better drugs and actually have less problems, perhaps, than less? i'm just curious. >> yeah, you're right on both counts. the first is, when you think about our health care system, it's pretty much episodic.

you go to see a physician, you go to see a hospital, and often you get a diagnosis, prescription, and you got to go home. but, in a lot of ways you have to change your lifestyle. and we don't always support people in the time between physician visits. and this is where education is so important. in really helping people to understand if we can provide people with a continuous glucose monitor where you can immediately see the impact of your glucose of what you've been eating you start to think about what you've been eating. that glass of orange juice in the morning can cause a big spike in glucose, and so if we could help people to understand cause and effect in what we're doing, and on the second question of the socioeconomic status, you know, clearly people who do not have the same means are the people who tend to eat more fast foods, who don't always have the time to -- cooking for yourself is probably one of the best ways of really understanding what you're eating. but to do that, of course, you

have to have the time too do this, and so there is a difference in the incidence of chronic diseases amongst these different socioeconomic classes. >> i guess you don't need to do an inversion, do you, chris, here? you're all set. right? you're already in a tax friendly area, huh? >> yeah, actually, from a corporate tax point of view, you know, it's easier because you know the u.s. is the only country, significant country that i know that actually will tax a company on its worldwide revenues, which leads to -- >> you know, otherwise you know, profits start growing, shareholders start, you know, pension plans do better. just nobody needs that. thanks, chris. we appreciate it. >> take care, joe. >> and a lot of -- i understand what we need to do a lot better. i'm not optimistic maybe we can do it. but thank you, as well. you all right? >> i just got a little cough. >> see you later.

>> coming up, stocks to watch at the open plus much more from barry sternlicht. plus red versus blue states. which come out on top for business? scott cohn takes a closer look. we'll be right back. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work.

because the future belongs to those who challenge the present.

this is a news alert and it fits in to our stocks to watch. abbvie is raising its offer for shire. the new cash and stock bid is 11% higher than the previous offer, and you can see that

that's having a positive influence on shire today. i don't remember he they changed it, do you? it was a spinout of something with abbott labs, and -- >> hence the name. >> yeah. >> other stocks to watch this morning, organic grocer fresh market, downgraded itself from neutral at goldman sachs. the firm is citing increasing competition among other factors and shares of groupon are getting a boost this morning. the stock was upgraded to buy from neutral at b. riley the price target raised to $9.50 a share from $6. and apparel retailer guess been upgraded to overweight from neutral at piper jaffray. the analyst report suggests that the company's southern european market is now showing some signs of stabilizing. >> makes you want to wear your guess jeans that you have in the drawer still, right? >> you know what? i need some help with -- what --

i mean, what do you pay for jeans? what kind of jeans? i need some new jeans. and i don't want grandma obama jeans. you remember those ones he wore? >> drop 150. >> $150? >> that was really low -- >> that was really low. i'm 150 over. so i'm part of the problem with the chronic stuff? >> coming up are red states better for business? a closer look at how politics play into the economy of states like georgia and north dakota. then "squawk" market master mohamed el-erian joins us. we're back after this. [ both ] when we arrived at our hotel in new york, the porter was so incredibly... careful... careless... with our bags. and the room they gave us -- it was... beautiful. a broom closet. but the best part but the worst part

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welcome back to "squawk box." real estate, deal making, and the economy. starwood capital chairman and ceo barry sternlicht tells "squawk" about how opportunities in the marketplace. >> money flows across borders more easily today than ever in history. >> plus, another master in the lineup. mohamed el-erian weighs in on the fed strategy. and, has some advice for the fed chair. plus, georgia captured the cnbc best state for business titles. now scott cohn is measuring the

red dates versus blue states in the battle for better business. the third hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc first in business worldwide i'm joe kernen along with michelle caruso-cabrera and scott wapner. becky and andrew are off for the rest of this week. and you're here tomorrow. you're here tomorrow, too. >> mm-hmm. >> same people. >> party again tomorrow. >> if you're around. you want to hang out. >> -- if you -- >> you need chorus again at the bottom. barry sternlicht is chairman and ceo of starwood capital. people don't know about you. you studied at -- underneath one of the masters of all time. how is he doing right now?

>> not doing so well. >> you were there, and you would credit him with a lot of your acumen, would you not? >> coaching. really just a brilliant man. incredibly kind to a great mentor, and i think most important, one of the most important lessons from richard is just do it. you know, it's like the nike slogan. just do it. you create your own success. i always refer to a guy at business school wasn't richard who said this but a fellow to worked for richard, and he said be careful where you set your goals because you may achieve them. >> right. >> it sounded like a trite statement in business school which was 30 years ago but it actually is true. you reach for the stars and you just don't make it but you'll probably go further than you thought. >> what were you roommates -- >>, john jacobson and we all

shared a beach house together when we were 20 out in the hamptons, eight guys in one room. the women were -- >> in the house. >> you ended the presidency for me. >> and then where? >> where what? >> i lost my train of thought. >> where did you make your first great deals? >> i was a liberal arts major at brown. i made my own major called law in society i called it lost in society. i really attribute brown for a lot of credit for learning how to think about things. i talk about there's two kinds of people, boxheads and spaghetti heads. and a boxhead is very good at linear thinking so they can do math probably faster than i can and algorithms and logs and all that stuff. and spaghetti heads think about how everything relates to everything else. i think you have to be both. today it's more important to be a spaghetti head. what impact will isis in iraq

have on investing in the united states. what impact does chinese -- will china falls over what impact will -- >> if i parachuted you out of somewhere with $10,000, could you do it again? >> it's going to be harder today. >> what would you start with, do you think? >> i like the creative side of real estate. i like design and architecture. so for me, the numbers are fine. but, i like the physical and i was a trader, i was an arbitrage trader didn't know that, huh? i was 23. if i was doing it over again i probably would have been a hedge fund manager just because the quality of life is so incredible and it's elively easy compared to the travel. you know, we have 520 people today at starwood capital. and hedge funds we manage about 38 billion of assets but there are hedge funds that manage 22 billion with 14 people. so it's a lot easier to manage your shop. >> the last three months where have you been? >> i've been in europe twice.

>> where else? where have you -- >> in france. >> you put money in all those places? >> yeah, in the last three months. >> in the last three months we've invested in the uk. we're looking aggressively -- >> what kind of deal -- >> residential project in london, we're working on -- we bought some office buildings in poland just recently, the contract. second biggest job creation in all of europe is after london is warsaw. >> the people in warsaw are all capitalists now. >> they don't do right and the right is going left. >> they don't do socialism light like we do here. they did true communism. >> -- when you compare their gdp to ukraine -- >> and they have low labor costs, and the people still work and contrast to france where i spent a weekend and i went to

the stores they're open from 9:00 to 11:00 and then 2:00 to 5:00 and i went into a restaurant to eat and he said they're closed. i said there aren't any customers here. that's because you're closed. they just shut down. vacation is the goal of -- and that's funny. how does france survive -- >> they have a lot -- >> with this work ethic. >> they have paris. i mean they have france. >> they have a big -- >> buttist the greatest city in the world. >> they've been bequeathed with that -- >> all their best leave. they're best and brightest leave france. >> so do you know the story, i think it's true. the president of france hollande visited the mayor of london and the mayor of london said welcome to the sixth largest city in france. there are 625,000 french people in the uk. it's interesting because europe, i was in italy and spain and you see the real reform is happening in spain. right? they're lowering structural labor costs, economy is starting

to pick up, manufacturing is coming back. >> they're going to work for him -- >> i think with the ceo of duty free shops the other day and he was talking -- >> go ahead. >> cramer? >> no, it's amazing -- >> the other cramer. >> their goal is to follow where the chinese will travel now. it used to be where the japanese would travel because they had all the money. now the chinese will have all the money. italy and venice and florence will be dominated by chinese travelers. and so we think they're interesting opportunities in travel space in those markets. >> create a hotel that is catering to the chinese travel. that kind of thing? is that too simplistic? >> many of those markets are so supply constrained if you do a high end hotel i think they'll do very well. that's what the world is for real estate. you see it for walmart. >> the nation isn't doing better. there are job creation but the wages aren't going up and i think you can't underestimate

that certainty for the average american even with obamacare. nobody knows what's happening in health care costs. there's rumors there will be 20 million people health care will get canceled when this moratorium expires. i think it's frozen america that doesn't just feel secure. it is kind of a demonization of business and risk taking in the united states. and it is with all due respect to the mayor of new york, it was an extension of what obama's policies appear to be and i think it doesn't feel like a good business climate. people are getting less hopeful so they're holding onto their cash. >> the economists said about real estate in florida the biggest drivers of real estate in florida, the president of venezuela and the mayor of new york city. >> the mayor of new york city. it's true. miami will be the singapore of the united states. miami is going to attract a lot of foreign capital and a lot of people like eddie lampert who -- >> it will be underwater -- >> climate change will ruin it. >> so, my view on de blasio is

to manhattan, as president obama is to the united states. i would say -- but for manhattan he's >> he's a leaders- >> deserved -- >> but that's who they vote for manhattan, and you reap what you sew. >> it's a dangerous -- >> i was coming on this morning, saying it's so obvious that i guess somebody once said to me the guy who jumps off a building can see flying. and that's what our fiscal policy is today and our infatuation with just issuing more debt and growing the fed balance sheet. it's free. it doesn't -- nobody feels the cost of it. nobody's paying the price for any of this. >> where was it germany they issued zero debt this year? >> new york city for the first time -- >> it seems -- >> at the end of the day you're going to hit somewhere. you're going to hit the ground. >> we shouldn't get mad if they

laugh at us. they have kind of a right to laugh a little bit i guess if they issue no debt in germany and here we are. >> they're selling all their stuff -- >> the italian, we're going to spend all the -- >> germany's got a very weak currency. that's what is -- >> meanwhile the euro -- >> germany, brazil. >> they have their own currency. what's the line on that game? >> germany's favored now. brazil is without somebody else, too, got suspended. >> i love watching germany and brazil play. brazil was so lyrical. germany was like boom, boom, boom. >> you've been watching the world cup? >> you know, something else about it talking about this, the u.s. olympic committee yesterday we love the world cup because it pulled the country to the again. we want to be to the.

and the politics takes us apart right? and we love like all going to the bar and cheering for the united states. we're such a happy nation. and we want to have heroes. we want to have things to root for. and it's just a shame that the politicians are so hell bent on ripping us to shreds. >> that's true. >> look how big the world cup was. crazy. >> thanks barry. when we -- yeah, like to be tim howard for a couple of days. >> anyway. >> you're fans, too. >> do you have tattoos? >>tons of dozens. when we return separating fact from fiction when it comes to politics and cnbc's top states for business. scott cohn lays out blue versus red states next. and later mohamed el-erian. and what he sees as a jobs challenge for fed policymakers. and as we head to break check

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making head lines this morning, small business sentiment weakening last month, pulling back from a six-year high. the nfib reporting firms feel less confident the economy will improve in the coming months. the ceo of walmart u.s. says the job rebound is not spurring spending. bill simon cautions the improving employment picture has so far failed to raise cash register receipts at the retailer. don't miss the walmart exec on cnbc later this morning at 11:40 a.m. eastern time. michelle? >> social media still buzzing this morning about a promotion at t.g.i. friday's. the chain announcing endless appetizers for $10 per person. sharing is discouraged. but friday's chief marketing officer says that rule will not be enforced by servers. didn't we used to have a long conversation about diabetes and -- >> salad. >> they're going to order salad. >> yeah, a couple of those places- >> gluten free. >> cheese cake factory where you get the you know for like six people. >> portions are huge. >> well, the comments continue

to pour in two weeks after we unveiled our eighth annual list of america's top states for business. and this being an election year most of the conversation is about politics. and if you missed it, georgia, home of sea island, which you know something about, the phenomenal resort, was number one and i was happy for georgia. and rhode island was number 50, didn't really think much about that. i'm sorry. rhode island -- it's not a place where you think wow where are you going this week? >> newport is okay. >> senior correspondent scott cohn is back to separate myth from fact and red from blue. and then i'll bring him back to myth at the end. to separate the myth from fact. >> we kind of did this to you. we try to stay out of politics in our top state study every year. in the year where 36 states are choosing governors politics becomes the elephant or the

donkey in the room. so the republican governors association was quick with a press release about how states with gop governors dominate our rankings this year while in top state georgia a progressive group backing democratic gubernatorial challenger david carter accused of using data supplied by republican governor nathan deal. back for the record it's -- what do our numbers show? the top ten states for business this year six have republican governors, four are run by democrats. so red states get the edge this year. here are the bottom ten, actually we're looking at 11 because we had a tie at number 40. five red states, including new jersey and louisiana, six blue, again slate advantage for the red. the average rank for republican states this year is 22nd. the average rank for democratic states is 30th. so what does it all mean? well in terms of our study, and the way that we weigh this out it means that in the areas that states emphasize and their pitches to business, low cost being chief among them, republican states are performing better. but remember, we measure ten

categories of competitiveness, and here's where things get a little more interesting. eight of the top ten states for technology and innovation are blue states. only texas and pennsylvania made the top ten. same story for education. all blue except wisconsin and pennsylvania. in economy, which carriesed second heaviest weight in our rankages after cost, 375 points it's even steven, five blue and five red. competitive business can be complicated stuff. the true top states managed to excel in areas that often cross party lines and they often have to make tradeoffs. >> there are a couple of things, you know who a georgia democrat is sam nunn? >> mm-hmm. >> not all democrats are created equal. >> oh, sure. >> we ha bob kerrey on yesterday and you should listen -- i said to him, he's so close to being fiscally a conservative that you know he's from nebraska. so that's one thing. the other thing i told you, your top five states all went for romney. every one of them.

>> what does that -- >> my point is that -- >> two years ago. >> and in 2008 one of your states went for obama, north carolina. by 0.3%. >> okay. >> well that was my only -- >> and you can't -- >> and the top ten we've got minnesota. >> can't give the governors credit for the fact that harvard is in massachusetts and stanford is in california. education is sort of a funny thing. i look at mass education. i look at the graduation rates from high school which is probably not what you do. >> let me tell you what we look at in education. we look at across the board the number of higher education institutions. we look at test scores. we look across the board, test scores so performance k-12. we do look at spending. class size. things like that. so we try and take a very broad approach. so if you're a company that wants to go to a state where you can partner with a big university, for research, if that's what your thing is, you might want to look at a state that's better in education.

if you're looking for a state with a large pool of educated workers, that come out of a school system that perform well, you might want to look more closely at education. what we look at. the way that we weight these categories is what are the states selling? red states and blue states both sell low cost. so if you're looking at that measure, the red states -- >> but just philosophically, it's probably -- it's not simple but there are two ways to look at, there's government solutions and there's private sector solutions and we know which parties we associate with it, too. and then, for people that think it's a pejorative to be a corporatist or to be pro-business, the republicans get sullied with that all the time. so why can't they, if it's a good thing and not a pejorative, why can't they be associated with being pro-business when it's a good thing? >> i think they are. this study bears that out. >> if they're going to take the rap or being in bed with big business and being controlled by

business interest, when you're looking for friendly business states it's probably not a big stretch to be republican. >> what a lot of the commenters talk about, and it's a fair point, is what about top states for workers? and we're not doing top states for workers. we're doing top state for business. >> i would think it's the top state for business. >> depends. >> if you don't have a job it doesn't matter what your wage is. >> that's right. but, you know, but that's -- unemployment is an area -- georgia's unemployment is high. >> if business does well and gdp grows more and it's 3% or 4%, i'm not arguing for trickle-down -- >> sounds like you. >> to you it does. i know that. but normally, normally a good business or a good economy would mean good things for more jobs, and then if there's more jobs, then to get people you have to pay them more because there's more competition for those workers. it just seems simple to me to try and make it any more complicated just doesn't make any sense. >> so why do you get defensive -- >> i'm not getting defensive i don't think. >> yeah you are. you said you're not trickle-d n

trickle-down -- >> how would a state be better for workers but not good for business? >> if you look at things like quality of life, you look at things like wages, you know, we -- in the top states for business, states that are heavy union states get points off. some workers would say that they're going to do better if they're in a union. so, it's, you know, it's two different things. but you know, we're looking at top states for business, and you know, there are the results. >> there was a slide i was going to put on which showed the fiscal position of the states. >> mm-hmm. >> and their pension obligations. and you have illinois worst in the nation. closely followed by my home state connecticut and then you have things like florida the other end of the spectrum. >> no income tax. >> shockingly no issue s on tha. for those states taxes are going to have to rise.

for the blue states, they've got to do something. >> top economy -- >> and only pushes people further out of the state and how does that work -- >> it's one of the things we looked at. top economy in the country is texas. number three economy is georgia. >> and they run fairly balanced state budgets. >> exactly. >> so interesting. it's death spirals in other states. >> coming up, --. your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

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financial noise financial noise

today, washington will become only the second state in the country to allow people to buy marijuana legally. without a doctor's note. lines are forming in front of stores, but got last-minute approval to sell. eventually there will be more than 300 recreational pot shops across the state. reports say only about six licensed stores will be open, as a libertarian michelle, you're sure this is the right way to do it? >> absolutely. add heroin -- >> and get rid of the infrastructure and the criminal undertones of all of those things. >> well, i mean, half the criminal activity has to do with selling drugs, right? the issues we have. >> you don't want a nation full of stoneheads all the time. >> i don't think we'd have a nation full of stoneheads. >> you already would. >> you can basically buy pot anywhere you know. coming up making the case for the nation's economic growth versus job creation. and then mohamed el-erian with some advice for fed chair janet

yellen who is facing some big challenges in the very near future. as we head to break take a look at u.s. equity futures. slightly negative open. (vo) watching. waiting. for that moment, where right place meets right time. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours.

welcome back to "squawk box." let's look at some stocks to watch ahead of the tuesday open. abbvie has increased its offer for british drugmaker shire. the new cash and stock bid is worth about 11% more than abbvie's prior offer which was valued at $46 billion. that follows meetings last week between abbvie's chief executive and key shire shareholders. pet smart shareholder long view asset management is calling for the retailer to consider a sale of the company. that follows a similar call last week from jana partners which owns 9.9% of petshort. norwegian oil services company c-drill has offered a convertible bond offering. the potential dilution from that price. and deutsche bank is under pressure. the bank along with commerzbank have begun settlement talks with u.s. authorities over alleged violations of money laundering rules. so bnp paribas obviously just beginning for the u.s. >> steve liesman now who is in

the other washington this morning. he's looking at gdp growth and jobs. steve? >> yeah, scott, we have a major economic mystery on our hands. it's very simple. we have tons of job growth, but no or zero economic growth. i went back to 1990. and tried to find a situation like this. looked at the most six months of job growth, and average gdp over that time period. and this stands out as an incredible outlier. 1.26 million jobs created over the past six months. if you add it all together. an average growth is estimated to be, well, if we're lucky, it will be zero with a 2.9% decline in the first quarter and probably going to do 2.5, 2.7, 2.8 in the second quarter averaging out net-net equals zero. q1 '13 we had another situation like that. the first thing it means is productivity is clearly going to be crashing here. so that's an issue that has -- that the fed is going to have to

deal with when it comes to inflation. let's talk about what these two stories are. one story is of strong underlying growth. the other is very weak. here's the case for strong growth. the first is the jobs up 288 last time. three month 270 to 1.2 million over the past two months. the ism services and manufacturing strong. the housing data looks like it's been rebounding with pending home sales. that vehicle sales number you can't ignore it up 17 million at an annual rate, and stocks. the stock market seems to be buying into the stronger growth story. what about the weaker growth case? well you have that q1 gdp contraction. some of which looks to have been weather but it's very hard to explain all of it. looks like some of it by the way at least half of it coming from trade. so weak economic growth abroad seems to be an issue there. the small business optimism survey we report at 7:30 jobs factory orders have been pretty lame. part-time jobs are a big part of the job creation. and bond yields are still low. 2.61 was the yield for yesterday. take your pick here. these are two issues out there

that need to be figured out for the market. i think people care about what's going to happen. a lot of economists i talk to are still on board with the rebound, and the growth will catch up to or otherwise justify the underlying job growth. joe? >> steve, weren't answers to that or some of the answers to that in that piece that druckenmiller was on, too, the fed has orchestrated a balance sheet recovery but there's none of the investment and capital formation and things that actually add to gdp growth down the road. it's sort of ef emreand -- >> i knew you didn't like that and you would find ways of saying that it wasn't accurate. i sent it to you and i said why don't you put this under your pillow and sleep on it -- >> i was about to go on vacation joe when you sent that to me. i'd written a whole piece contradicting that -- >> contradicting warsh and druckenmiller. that takes some guts, steve. being an economist with an english degree.

>> but my point was that they needed to show some data behind what they're saying. if they're positing a connection between quantitative easing and a decline in capital spending, they need to look at that. i looked at the data, joe, and i cannot find -- i really challenge them, i said you know what? i'm ready to believe what you're saying. show me some data on this. the data i looked at credited what the two of them said that there is a connection. in fact what the fed did and when the fed comes in with qe it comes in in response to declines in capital spending. what they're suggesting is that there's a connection between the two. it's just not in the data joe. i'm happy to show you my data. >> no. i don't want to see it. >> you don't want to see it? would you rather believe warsh and druckenmiller because they're both rich? is that what it is? >> the last data you sent me was about how you know these are actually really great jobs being created and then i saws next day in the "journal" had that you know, the manufacturing jobs, and -- >> that was from wells forgo who did that, joe, and what they looked at was the past year versus what the journalists

was -- >> what's the answer, steve, and what's the problem? you know, when you say that you know when you say the job market is just going gang busters, compared to the last five years it is. but you remember when we would do -- there were days when in the '80s you did 350, 400, 5 und a month i mean. >> these are pretty historic. >> the average of 200 is historic? >> 272 is a big number. >> steve the problem with the economy has to be seen in walmart. there's 65% consumption of the economy and americans aren't spending money because they have no confidence. and i come on here before i said the more the fed intervenes in the financial markets and talks about quantitative easing and purchases and stuff, the more people realize it's not a safe place to be. so they hoard their cash and they don't spend and it gives business with all this rhetoric gives business no real confidence to invest. so people and then you throw obamacare on top of it and your health care which is your most important perk of your business, it just -- people aren't feeling and that is america.

then we have 2 million people on disability today and we're missing 1.7 million construction workers. we have a home builder on the air, tripoint which yesterday merged with warehousers home building division. we can't find the workers, the housing market's softer, and home sale starts are softer because we don't have labor. we can't -- there are supply shortages of contractors. they're either on disability, which they weren't on before but everybody seems to be happy on disability today. you heard about truck drivers earlier this morning. they can't find truck drivers. and the government isn't hiring which is good, actually. but the government jobs have not come back in this -- and wages are being held even by government sectors and states to modest increases. so you have you need if you look at the world the economy's work with education is there's an educated workforce and the best example is germany right with this moan forring of companies with training people. that's why toy have one of the lowest unemployment rates in the

whole western economy and the u.s. is not training people for the jobs that exist and people are not working. and you see the participation in the labor force -- >> -- in new york city? >> no but -- >> they don't like him much in silicon valley. >> barry i don't disagree with everything you said. the only thing i would question is this and i keep coming back to this same question i agree with the signal value i think is what you're talking about with what the fed is doing, that creates a lack of confidence. the question is considering the alternative, which is if the fed were to not be buying not trying to keep down yields, would that have a positive effect on business investment? and if it would, i'd be on board with it. it's just hard for me to understand how if the threshold for investments is at "x," adding to "x" is going to -- >> steve aren't you surprised as the fed withdrew its purchases of ten years the fed's gone the other way? higher short rate would be to allow savings and induce people to save. my parents are older they'd like

to make something on their cash. in europe you're getting fined for keeping money in cash so you have to invest it. that's not healthy. and people know that's not healthy. it's not stable. it's not long-term. so i think rate also come down in the long end and that would be great for investment. >> we've got to leave it there. thank you. he agrees with things you say. everything i say he tells me i'm wrong about. but -- if your parents need help you're help them, won't you? are they living on fixed income? do they have no -- >> they're doing fine. my dad is 84. my mom is -- >> after -- >> younger. >> when -- >> my parents are great. >> okay, all right. >> living on fixed income somewhere. all right, when we return some advice for fed chair janet yellen. mohamed el-erian will weigh in on the strategy and the jobs challenge facing the central

bank right now. check out the yield on the ten year with its ears burning 2.588.

the stronger than expected jobs report raising some big questions for janet yellen and company at the fed. joining us now, mohamed el-erian, former pimco ceo co-chief investment officer currently chief economic adviser at allianz. mohamed how are you? it's good to see you. >> good to see you, joe. thank you for having me on.

>> you know, when i think of a wedge, i think of like bleu cheese, and i think -- you know, i love ordering them. but your wedge, between the underlying economy, and where the stock market is, your fed orchestrated wedge, it's like an all-you can eat wedge again at this point. it still hasn't -- we haven't seen it narrow where the economy comes up or the market comes down. are you still concerned that this is kind of an orchestrated almost a bubble in asset valuation? >> i am, joe. you've been talking about it all morning. there's two very distinct camps. on the one hand there's what you called in the 6:00 hour never-never land where federal banks sprinkle fairy dust and you get to quote today's "new york times" that you like so much, everything booms, and everything bubbles. on the other hand, you get a different view, which is the financial paradigm has changed. that is reprising all assets, and it will reprise the economy, as well, higher.

now two issues are critical. one is productivity, that's absolutely critical and the other is macropotential policy. in the short-term the second view prevails. in the long-term we better have strong macro prudential and strong productivity. >> do you believe in this macro prudential shove? suddenly this is the new phrase. macro prudential policies. have they ever worked? >> michelle, that's a great question. we have so much riding on that. the markets do. the view from the fed is very clear. janet yellen said it again on wednesday, it is the first line of defense. she thinks it's strong enough, but if it's not strong enough, the second line of defense will be monetary policy. so her conviction is it strong enough? evidence suggests that you know what? you better be careful, because in the past, markets have been really smart about getting around macro prudential measures. >> what is wrong with letting price dictate the market? historically -- she doesn't want to let price and interest rates dictate the market.

it's unbelievable. she's afraid of that. >> yeah. and you would be, too, if you've been so conditioned to believe that the market will sell off. remember what happened in may/june, one word, paper caused not just sell-offs but caused market malfunctions. so the fed is very hesitant, and doesn't want to move on monetary policy until it is convinced that the economy -- >> but at some point, mohamed, an investor says the yield is better here, so i'm taking my money out of the emerging market and going somewhere else. at some point the interest rates start to shift, right? and does she think that's just not never going to happen that she's going to stop that that how is that possible? it's a basic decision people make when they search for yield. >> yeah. and it's a race michelle. it's a race between financial instability caused by too much money being put in the wrong places. versus the economy healing. and she's saying you know what? i need to give time for the economy to heal.

it's an all-in bet. >> what if they're doing damage to the economy? what if they are causing all kinds of issues like when you see the guy in charge of the reinsurance business say the federal reserve is ruining the reinsurance business because what's happened? reinsurers aren't getting paid so they weren't actually underwrite the risk anymore. now it's hedge funds that are paying for reinsurance risks. is that what we want? we want hedge funds deciding about hurricanes? >> oh, we have this happening all over. the view of the fed, i don't want to defend it, i'm just going to explain it. the view of the fed is as long as the economy as a whole recovers you're going to be able to deal with pockets of dislocation. my view is be careful. these pockets of dislocation are getting numerous and are multiplying. so you better be absolutely right on macro prudential and productivity. >> and what are the chances of that? >> you know, in the market we trade the short-term and for now the market is very confident about what yellen is saying. which is i'm willing to take the tradeoff. i'm willing to risk financial stability down the road for immediate economic gain and the

market is happy to hear yellen say that. >> how does the fed bomb the deal with the fact that you know we keep adding jobs, we just come off a great jobs report yet the underlying economy certainly continues to sputter. people aren't feeling great at all about where we are. how does the fed deal with all of that? >> that's where it goes into problem. productivity and competitiveness is an issue. as you said earlier there isn't enough investment. the easy way to solve that is to use the policies that address the structural issues but that's that going to happen. washington is not going to step up to the plate. congress is too dysfunctional right now. so the fed just keeps the game going hoping that you get enough feeling. and that's the big big bet right now that markets are all in as well. >> mohamed can i ask you another question we haven't talked a lot about it a lot but as a result of the volcker rule all this talk of inventories being so low on wall street that when a correction does come the gaps are likely to be very wide

because to buy and sell is going to be extremely difficult because a lot of these desks just don't have the stuff anymore they're going to go out and markets just become a lot more difficult. >> oh, absolutely. we saw it in may/june, if the paradigm changes as it did in may/june you're not going to find the intermediaries, the broker dealers willing to give you balance sheet and that's why you get not just price adjustments but market dysfunction. and with the pressure of profitability of the banks right now, that provide you even less balance sheets so the liquidity risk is probably the most mispriced risk right now in -- >> mohamed, there's a case that can be made that the fed is behind the curve. if you were to -- there are certain things in the economy that if you were to look at them, i don't know whether or how much debt there is, or i don't know retail sales look at auto sales, if you were to put someone in a time capsule and bring them back and give them some of these positive things, and ask them where you think interest rates should be right

now, very few would say that this warrants a zero on fed funds. doesn't that by definition tell you that they're behind the curve? >> it doesn't to the sense that they believe, they believe that the news interest rates both nominal and real is much lower than it was in the past. so they will say you know what you better recalibrate because when that person has been in the capsule he has not realized or she has not realized the structural changes to the economy. and that's the main issue. how much of the structural aspects are going to dictate where the long-term interest rates are. >> i'm going to change topics though and ask you a question about the dollar. it's very important for investors today, especially as we invest offshore, it's -- as i think about the next five years, and what will happen to the energy conflicts in the united states, and we'll be a net exporter of gas and oil probably at the end of the day, do you, and we used to send $250 billion

offshore into countries that were exporting oil to us, particularly in the middle east, that's going to reverse. and it will change the current account deficit, it will change the -- do you think that the dollar is in for a -- i know you don't have an opinion on the dollar but i could sees dollar especially as you look at the euro for a long term being credibly strong. that has implications for our economy, too, because as the dollar strengthens our exports may weaken. but do you think the dollar is in for -- what is your prediction for the dollar? i think one of the things peel don't talk about enough is the reversal of the balance of payments as we stop the trade deficit could actually narrow dramatically, it's always been my whole life we've been sending so much money on oil imports that could change. how do you think about that? >> so if you put a gun to my head right now and say take a position over the next two years, you can't change it, i would say dollar going stronger. why? because unless the euro weakens, unless the yen weakens, then those economies are going to be

marred in such a bad equilibrium and the central banks are not going to allow that. also the emerging markets on a better productivity issue. but in the short-term. in the short-term, it's term, it's still dependent. over the longer term, hard to see the dollar not strengthen from here. >> i agree. >> are you thin? >> i wish. >> i was staring at the palm drees, jealous. >> and grayer like you're in the sun. are you -- huh? you got some time off? tell me what is different about you, just smiling more? you're not cleaning up someone else's -- oh, nevermind. >> joe, i think it's a different studio, probably, but i'm having a great time. >> oh, it's a different studio. >> doing a lot of things and spending time with my daughter. >> okay you're not on the la treen service.

why not. i can't help it. thank you. >> more from the ceo after this, and tomorrow, cnbc exclusive, wendy's ceo on 8:40 a.m. eastern time and jane wells will try new products. cool. there will be bacon. there will be bacon. >> for us too? >> i hope so. because there's nothing more exhilarating than a powerful ride. and you can get that in places you might not expect. like the passat. and also in the fun-to-drive jetta. in fact, volkswagen has sold more turbos than any other brand over the last ten years. that is a lot of turbo. hurry in and you can get a $1,000 turbocharged reward card when you lease a new 2014 passat s for $219 a month.

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coming up, what to expect for the rest of 2014 and beyond. are you ready to tell us that? >> sure. >> okay. later on "squawk on the street," the ceo of spirit airlines will talk about the air carrier's new miles program. as we head to break, check out the first ever forbes family billionaires list. these are america's richest families with forchitunes of a million dollars. worth $152 billion, but they're not happy." squawk box" will be right back. but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro.

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now. why wait? let's get back to our guest host, a few minutes left, barry. where's the best police statila world to do deals, hotels and other things? >> asset classes, real estate, and we have an energy group, and i have investments in my family office as well. >> are the best values there? >> risk adjusted returns i think there's more product and disstressors in europe than in the united states today. we tend to go to europe.

on the macro, my view is there's a lot of come play sent si in the world and there's asset bubbles developing, and investors watch for tail risk. in our industry, in real estate, supplies in balance, but the world has never probably had more lightning points whether it's isis or israel today or the separation movements of scotland and, you know, spain. it's -- the world -- think about, i think everyone's levered long to a rising economy. i don't think rates are going anywhere globally. i think that's probably the -- what's driving this. the world's economies are not strong enough. as we mentioned in the beginning of the show, emerging markets are the sub mermging markets going down, not up. brazil, a market we invested in and have an office down there. you know, what we all missed, i think, is the education work force. they don't have the work force. we are excited about the macros

to drive the middle class, but they don't have the workers. in the united states, if we invest $2 billion in education rather than war, we would be a much stronger nation today. how's that? >> i was listening to arne duncan, head secretary of education, right? he said he put a billion dollars into early childhood, and that's like four missiles, not so great. >> he supported charter schools so dramatically in new orleans and yet on a national level, not as much. >> i think obama's done -- you know, i'd like to improve the public education school system so that's -- >> school choice would be great about that, yeah. >> it's not just that. i mean, we have to be able to work with the unions to improve. >> but they hate school choice and hate performance of teachers too. >> nervous about where the stock market is? >> nervous it goes strait up. the comment about liquidity in the system is real.

the down will feel bad because the street's not making inventories, and i think a lot has a lot of the same trades on, whether it's a lot of the trades that are short covering on both sides, currency and interest rates. >> great having you in. >> thanks, guys. >> see you soon. >> join us tomorrow and "squawk on the street" is coming up next. good tuesday morning, i'm carl quintanilla, with sarah eisen, and jimmy is back tomorrow. one of four s&p companies this week, futures weak as the dow fell yesterday but hung on to 17 k. ten-year yield settled back a bit, and we have yellen's favorite labor indicators today, the jolt survey in an hour and nearly every index in europe in the red for time being. ro