else. that's what bernanke is saying. he will join us in studio in a live cnbc exclusive for a whole hour. it's monday, october 5th, 2015, and "squawk box" begins right now. ♪ ♪ >> announcer: live from new york where business never sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. our guest is mike santoli. good morning, mike. >> good morning. >> before we get to the business news this morning check out the pictures from south carolina. torrential rainfall causing dangerous flooding in major cities prompting hundreds of rescues. officials warning residents to stay inside their houses, stay off the roads. a lot of those roads turned to rivers. the ghofr, nikki haley, saying the state hasn't seen this level

of rain in 1,000 years. we'll have more on this in an hour. in the meantime, let's get to the markets. a lot of action on friday. first of all, disappointment with the horrific jobs report that not only was below expectations but we saw lower revisions to the two prior months. initially they were up on that but at the end of the day gt market closed higher. the dow indicated 86 points, s&p 500 up by 10 and nasdaq 31. couple of big stories this morning we're watching. world bank cutting the forecast. the main reasons risk of a sharp slowdown in china and possibly spillover effects with rate hikes in the u.s. in corporate news, potash is withdrawing its offer for k and s. the big news of the morning

on the front page of the wall street jurge, nelson peltz taking aim for trian. he's building a $2.5 billion stake in the dow component. started doing that back in may. pelts peltz is calling for ge to get rid of more of its finance arm and to be more cautious on acquisition. it could take on $20 billion of debt. he believes he could get 40 to $45 if the company were to follow his plan. in a statement out this morning from ge ceo jeff immelt says the company maintains an open dye aing low. they have a plan to return more than $90 billion to investors in 2018. they are on track to complete our goal of closing $100 billion to capitalize sales in 2015. in an interview in "the journal"

immelt said it's right in front of us. an interview with ed garden. a couple of quick notes. several of our sources say they're now trying to call this what they describe it as supportive activities which is to say that he is not seeking a board seat. he's had several conversations, immelt and other directors have had conversations with peltz. the question is will they seek board seats in the future? there are no circumstances where peltz has been somewhat supportive early on and then has been a little less supportive when things have gone wrong. >> this is the biggest investment ever it's still only 1%. >> exactly. >> the pattern, right, dupont, pepsi, these are companies that an activist would say probably too big to muscle around. you might get a board seat or strategic tilt in your favor but it's not as if it's a true

activist situation where they have to fear what you said. >> you know what surprised me, i looked at a couple of immelt's actions over the last couple of months where they talked about moving out of connecticut if they didn't get a better deal, where they said if they didn't get the bank repositioned they would create more jobs overseas. i started asking around. that's different behavior for immelt. is there something different happen? he's known since may that trian was buying shares. welcomed them in the door. has that changed his position? >> is this new comment? >> yes. >> we welcome trian. we want relationships with them. i've known trian principal nelson peltz and ed garden for many years. trian has a strong track record to build long-term shareholder values. and has been an engage ger. appreciate the perspective. look forward to a constructive

ongoing dialogue. then he dove in to summarize some of the steps. >> it was down 115. >> we haven't even gotten there. >> we haven't gotten to the markets yet. >> it has undone what you thought before because now maybe the market is actually happy that the fed's going to stay in there again? forget it, we're back to bad news -- >> the quickest reaction i have is like ronald regan. there they go again, free money. they're happy about it. but, you know, it does probably put off the dollar getting any stronger. >> oh, hugely. the euro took a huge hit immediately. that was the knee-jerk reaction. that didn't take a few hours for it to work its way out. that happened instantaneously. >> they decided that the cool aid -- or the punch bowl was going to remain open. the bar was going to be extended. you can have one for the road, the drive home, it's open until

3:00 a.m. instead of 2:00 a.m. come have a couple other shots. purely looking at how exports will be better if the dollar -- >> wasn't that much stronger. >> their maladjustment. is it artificial? >> is the fed pushing investment? >> i have stuff for you on buy backs, over the past five years buy backs have doubled each year. >> yes. >> they used to buy back stock at 12 times earning. now they're buying back at 18 times. >> terrible. >> 50 mers percent of nonfinancial ebidt is going for buy backs. >> i love you. so we're on the same issue together? >> nels son peltz. >> wants to buy back stock in ge. >> we're singing "coombaya "? now we're together on this? >> no. how about all the mergers and

acquisitions at zero interest rates. >> you missed me, didn't you? >> how much capital investment has happened? >> you don't need zero interest rates to explain thins that have accompanied every bull market which is a lot of mna and buy backs. the last bull market you had more buy backs relative to the side of the market. i don't think it's a cause. it's obviously part of the back drop. do you think this economy was screaming out for half a trillion dollars more investment which is how much stock was brought back? i don't think so. the companies that have profits are not the ones that are able to invest as much in new anything, r and d or whatever. so that's why -- it's a product of high profit margins. >> making a choice, you know, to use the cheap money to borrow money to buy back stock to boost their stock price. >> sure. yes. >> who knows whether -- >> and they're going to be bad about timing it. obviously it's sort of destroying capital at some level. >> it's not driving the economy.

>> just as a -- if you wanted to say it's a cause of something -- >> kind of. >> -- this has indicated in the past that it's the top of -- >> it's far along. >> -- business cycles. for bernanke, he probably -- doesn't "the wall street journal" op ed, does he come up with how the fed saved the economy? did he write that? >> no, the editor would write that. >> mr. bernanke -- i read the whole book this weekend. he's a humble man. >> i'd be uncomfortable saying that. >> who are the three who saved the world? >> mr. greenspan -- >> what happened after they saved the world? the world ended. >> there's different versions of the end of the world. yes. >> hopefully there's not another one staring us straight in the face. everything is fine. other corporate news, fallout from the -- i'm going to start saying volkswagen. >> volkswagen. >> volkswagen.

>> you can do the opposite. in latin. the emissions scandal, "the wall street journal" reports that the probe is focusing on two top engineers who discovered they couldn't deliver on the proms for clean diesel engines for u.s. market. oh, boy. i'm telling you, it sounds like when you're not making your quarter and you turn into someone that gets the unamerican greed. one man was out as chief engineer. the other was a developer of porsches racing engines. both in charge of research and development at the volkswagen group. that's not helping sentiment either. >> no. there was commentary over the weekend where some volkswagen officials were warning in new hampshire ads saying this could

be an end to the company type of scenario. they're asking for support. >> that's what they're saying. who was it, s&p or somebody put out a note over the weekend saying they could have $80 billion in liability. i think they've preserved 7 billion. >> we talked about whether you bankrupt the u.s. version. rain fence it? >> if it's happening in europe. you're not able to do that. >> in europe, 270,000 people. there was anotherable list a week ago but people were poo-pooing that analyst. boston fed president eric rosengren still expects the bank to raise rates. in an interview rosengren says if the economy grows at less than a 2% pace or if unemployment rises from 5.1% he would likely prefer to wait until next year for the rate

hike. he becomes a voting fmoc member next year. now to our newsmaker, ben bernanke, his book is out today entitled "the courage to act." in an op ed bernanke argues the fed saved the economy. he writes with full employment in sight, further economic growth will have to come from the economic side. monetary policy can no longer be the only game in town. bernanke will join us live for an hour starting at 8:00 eastern time. obviously we have a lot of questions. >> he's making the rounds though obviously. in the journal, he's in the "usa today." >> he's here first. >> they got the populus stake in "usa today." sent more people to jail. more people should have been sent to jail. >> i read the book this weekend. >> right. but that's the headline. >> they're using that as the headline. there are lots of things in

there that we're going to get to with him. unfortunately, the book was under embargo. i found a bookstore in new york city that would sell me a copy. i went in and did a whole little dance. >> you know, i think you could be prosecuted. >> i could be prosecuted. i got the book and sat there reading it like a crazy person. >> can i weigh in on ge. >> honor the embargo? how did i not honor the embargo? >> they didn't give it to him. >> the bookstore sold me the book. >> that's what i mean. you found -- you just walked in, oh, you'll sell me one? >> no, no, no. >> you were looking. you were looking to break the law. >> i was. knowing that they were not a chain because the chains will never sell you the book. the what do you call it book stores -- >> independent. >> independent book stores sometimes accidentally put it out on the table. it was right on the table. i didn't have to even, you know, do any kind of special kind of -- i just took it off the table, walked up, paid with a credit card. >> how many book stores are now

in the business of preventing people from buying a book? if you want to come in and buy it, they'll give you anything they have. >> yeah. >> embargoes are done for a reason. >> an embargo is when as a result you sign an nda. >> they gave me information to the publisher and to the book to prevent him from seeing it. >> they didn't. >> that's what i mean. very quickly, i want to go back to ge for a second because i said i wondered about the xm and the headquarters and those moves. >> right. >> they're telling me they're unrelated to trian. i think it's a slightly different tone. >> without a doubt. i don't think anyone looks at ge and says the problem is they're a pest. they're flailing for everything that can keep them as competitive as they are. i don't think that that necessarily -- i agree with you. >> 40 to 45 would be a pretty

rarefied error for that stock price. there are a lot of things that have gone into the trevails. >> september 11th happened right after. a lot of things. a lot of things. >> still. >> you look at the raw numbers and it's kind of staggering. 80% gain in the s&p. how much down still in. >> 30, 35 maybe. >> i think most of it is the starting multiple and then just what happens to so many megaplant industrials. >> not just industrials but financials, too. >> the security -- is it truly a long-term planner? we don't know yet how this will structure the assets of ge. >> right. let's couldnnt down to a ne week on wall street. with us is sri gamar.

it's not going to be 2017, sri. you can't take a -- it's only 2015. i saw some of your e-mails. you're ready to take a victory lap today on being right that they won't raise until 2017. just relax for a second. you were right about september, probably going to be right about october, probably going to be right about december. >> forget about it. >> i'll tell you what, anyway, he made that call. i remember giving him a hard time about it. i thought it was going to be september. i think it should have been. still thought it was -- >> you have not revised your view at all given the jobs thing? >> no. no. >> all right. october. the chance for october is even worse. >> december. i think december. here's the thing to think about with regard to december. two years ago, 2013, right, they passed in september on starting the taper. the market freaked out.

why didn't they do it? something must be really wrong. no way to do it in december. in the middle of that, bad september jobs report. 140,000 new jobs. all of this stuff was going on. no way they're going to taper, they did and the world didn't end. i'm not saying december's likely but i think you can't pull the it off. >> flip around it's better this time around to the degree that you believe the debt ceiling will be off the table. >> right. >> and the budget will -- the new budget, we have a temporary budget now, then we'll have a new budget in december. that will get off the table. >> working against that is that real-time snapshot of gdp for the last quarter is down to less than 1%. >> september we're off the table after the market rallies. we're going into 2016. things really have to change. >> a handful of people, a small group of people. >> but -- >> how did you explain? why didn't you go in september?

you wanted to know why? >> how you justify them doing it. the things they look the are much worse. >> there's a lot of good stuff last week. that was one -- the jobs have never been -- >> revised. >> 5.1. >> the question is is 5.1 an accurate reflection of what's happening in the jobs market? >> adp was pretty good, too, wasn't it? >> it was. >> sri, you know, that was a warning to you. if you are going to sit there and brag we're going to cut you off. >> i said before 2017 from the long time from the beginning of the year. there won't be any increase in 2015. watch other analysts talk about june, then september, then

december kept postponing. isn't it better to say something saying it is not likely to happen? that's what happened. going into 2016, and i know you have chairman bernanke coming on later on in the program, i think he was the lucky one. he has as late as july, he didn't expect any major implications. did not foresee the financial crisis and now it is up to janet yellen to continue to clean up what has happened with all the speculative excess we have had in the last five years. the reason why i don't look for a rate increase any time soon, joe, you have so much liquidity. the fed has become a follow lower of the market. you saw the market started down on friday and then it ended up sharply up.

that is saying that the markets believe that the feds simply cannot hike rates. so if they do go about and do the increase in rate in october or in december, it is going to be a major shock because all the people positioned in fixed income and equity markets will have to reverse their position because the fed did something totally unexpected by the federal funds futures. so in that case the shock to the economy, the adverse impact is going to be a lot more adverse than if the fed had increased interest rates a couple of years ago which had been the statement i've been making repeatedly. now that they haven't essentially they just are forced to follow the market and i think it is more likely that we will have a qe 4 rather than a rate hike or if they do increase the rate hike, they'll have to quickly reverse it as the european central did. for instance, in july of 2008

when they thought inflation was the major risk, hiked the interest rates and they ended up quickly sharply cutting back. those are the two options, let it run or to reverse quickly. >> people that worry now about the possible ramifications of, you know, nine years of, you know, no rate hike in nine years, they're the same people that assign some of the blame of the financial crisis to the fed, not only in missing it, it underestimating the housing bubble. in fueling the fire giving them a lot of tinder with cheap money. then on the other side there are people that say they have nothing to do with 2007 and that it's not going to happen this time. it sounds like you think that we're kind of trapped in a monetary trap or they are maybe.

>> i think the fed was not quite in a monetary trap in 2006, 2007. they could have taken action to prevent 2008 from happening. they missed it. they didn't see the crisis coming. you can see that, joe, by all the statements that chairman bernanke made on cnbc in 2006 and 2007. they show totally not realizing what was happening and the fed is getting into a trap again because now they don't have any way of getting out. it is a total mess. they are a captive of the market and the last place we want the fed to be is an abject follow lower of the market rather than set the rules for the markets to follow. >> all right. sri kumar, thank you. >> thank you, joe. >> we'll see, 2017. all right. you're on record. we'll remember. see you later, thanks. >> thank you.

when we come back this morning we do have some key data. biotech companies spar. it has shares moving this morning. we'll get to that story next. later this morning, don't miss our newsmaker of the day. ben bernanke will be joining us live for a cnbc exclusive. that's at 8:00. first, take a look at this day in history.

welcome back to "squawk box." news alert. spark therapeutic out with a new study. >> good morning. this is a highly anticipated trial coming out from spark therapeutics. just crossing the wire, the trial was positive. company meeting goals in aiming to improve genetic forms of blindness. the studies showed the therapy increased visual function and light sensitivity with no concerning drug-related side effects. the company plans to apply for approval of this drug next year. if it is approved, it will be the first gene therapy on the market in the united states which is a huge blast. gene therapy aims to cure or significantly improve the therapy. really an historic moment potentially here. spark therapeutics, we're not seeing if it's trading early. this could drive the stock up quite a bit, you guys.

>> it's not trading yet this morning? >> we haven't seen the shares moving yet this morning. it was up on friday. there was a lot of anticipation coming into this. >> coming up, market watch. mark grant never one to mince words. he may have some comments on saving the world. hate lais latest calls on t. ben bernanke will join us live for an hour starting at 8:00 eastern. when you're not confident your company's data is secure, the possibility of a breach can quickly become the only thing you think about. that's where at&t can help. at at&t we monitor our network traffic so we can see things others can't. mitigating risks across your business. leaving you free to focus on what matters most.

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welcome back to "squawk box", everybody. take a look at the futures this morning. you're going to see some green arrows once again after friday's massive market correction where it kind of turned things around

even after that disappointing number. you see this morning the dow futures are up indicated by triple digits. that's a gien of 100 points by the dow. s&p 500 up by 11.5 and nasdaq up 35. joining us is mark grant. mark, i have to ask you. i get e-mails from you every day and every so often including on friday you send me one saying the markets are butter blocking. >> that's a spike. it's an indicator i use. i put that out for the big institutional clients when it looks to me like there's going to be a spike, which is exactly wa we had on friday from a tremendous 250 point stand. then we spiked the other way. which to me is a sign of tremendous instability in the equity markets. >> we've been thinking this morning that this is the markets once again thinking, great, the fed's going to be here forever. how are you reading it? >> i don't think the fed is

going to do anything this year, becky, but the most interesting thing to me, i'm going to change the subject a little. the most interesting thing to me is we have a fed with a 4.$4.85 billion balance sheet and it's growing from the coupons and the prophets they take. nobody, no one fed governor or president has done anything about reducing the size of the balance sheet which in my opinion they should do way before they start talking about raising interest rates. >> how would you suggest they do that? >> they can either let things roll off or sell things. they have a huge amount of profits in their portfolio. they should begin to retuesday their balance sheet and not be such a part of running this market. then you have some normalcy raising interest rates is just going to cause havoc in both the equity markets and real estate markets and anything connected to borrowing money.

>> you quoted this morning in an e-mail winston churchill. how does that relate to the markets today? >> well, you're looking at the unemployment rate and what it looks like. i have to tell you and i've said it before, i do not believe the unemployment number, there are 94 million people that the bureau of labor statistics said aren't in the market. i don't know where these people are. in greece on vacation? i just -- i think that that number is manipulated. >> that number's manipulated, that's why you think the fed shouldn't raise interest rates, we are looking at inaccurate descriptions of how strong the economy is? >> that's correct. i think the economy if you start looking at the headlines, becky, you're seeing macy's shedding stores, you're seeing big layoffs at caterpillar. you're getting all kinds of indications of problems in our economy and they're beginning to show up. they showed up in the labor statistics, the unemployment

number and i think we're going to see them in the gdp numbers in the quarters ahead. >> mark, i want to get back to your reading on the markets in terms of what that kind of big reversal says on friday. you said it speaks to baseline instability in the markets. why would you say that? why doesn't somebody look at that and say, look, that's kind of somebody ringing a bell that says some kind of a decent trading low is in here? >> i don't think it was the trading low. there's no technical analysis at least that i've seen that would indicate we were bouncing off the floor. what i think it was is the belief in the market that once again the central bank is going to save us. we get very good numbers and then they think the central bank will do something again and we're going to get propped up and then the markt runs the other way, but the way that it was trading itself to me showed a lot of instability and a lot of uncertainty in what the equity market looks like. >> mark, it's always good talking to you. thanks for getting up early with

us. >> my pleasure. tell ben i said hello. >> we will. thank you. >> thank you. >> we want him to like us and be happy. i don't think we're going to bring your name up. we'll bring up your name and jim grant's name, all the grant brothers. ulysses will be the only one -- coming up, tony robbins is here. believe me, if tony's here, you know it. he is a striking individual, isn't he? >> he is. >> whew. >> big man. >> and handsome. find out -- >> got a lot of energy. >> find out what you want to know about retirement savings. next, the house of mouse could be getting a financial makeover. they're considering off peak. coming up, mike san totoli. ben bernanke will be here for an hour starting at 8:00 eastern. you're watching "squawk box" first on cnbc and first in business worldwide.

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welcome back, everybody. among this morning's buzz stories disney is considering off peak prices for its parks. the idea could help reduce congestion at the busier times and bring customers in at the traditionally slower times. the funny thing is, this is just about the tickets. everything else if you ever try to travel to any of these theme parks is already done in this scenario. you pay a premium for the airline ticket to get there, you pay a premium for whatever car you're going to rent, you pay a premium for any hotel room. this is the lowest expense on all of those items. i'm wondering if this is because international travel may be down. for a long time that was driving

and fueling things. obviously school kids are on basically the same sort of schedule so you know the busy times. >> since they've gone to the fast pass and my magic, there is an implicit premium. let's talk retirement now. are you saving enough for the golden years? that's the question. the u.s. government accountability office found that nearly 1/3 of households with members age 55 or older now have no retirement savings or pension. adding to that, americans age 665 still rely on that. tony robbins is here. he joins us this morning. you have some kind of realization. >> yeah. >> recently about 401ks in particular. >> when i was writing the book and i interviewed 50 of the smartest people in the financial market, they told me one thing you have to look at if you want to help people, the average american has their wealth in two

places, in their home and their 401k. they showed me the level of detail. we've heard there's abuse there but it's a level i never imagined. in my company i called somebody in. they said they have america's best 401k. i said prove it. we're paying 256% more for a top flight supposed plan. with one change kept all the same equities and my people have $5 million more over 20 years just by making the one change. so i joined forces with them and i started saying let's take a look at what the differences are. the abuse is mind boggling. >> in terms of fees that they're charging? >> multiples. let's start with fees. you have an industry for 30 years didn't have to tell people what they were charging. now three years they have to do it. now they have 50 page documents that are so opaque. even if you're well versed you have a hard time figuring out. they have 17 things they don't call fees that are fees. 1% is ten years of retirement

income. the average is 3.1%. people have no clue. so give you an idea. if you're 35 years old, put $100,000 aside. you get 8% market return, 65 years old, you're going to have $761,000 if you have fees. you'll have $432,000. 76% less money for the same equities and you'll have 21 years less of income. you'll run out of income at 74 instead of 95. >> that's been the argument for years. >> it has been. >> you should be in index funds and you'll pay next to nothing. >> but that's not true. here's the problem. in the 401k they'll say for small to medium sized businesses you don't qualify. a few of them do. i'll give you one we saw yesterday morning. mind boggling. organization, big one, mutual fund organization that acts in the 401k space. they say we'll give you are our funds and the vanguard for 149 basis points. >> better than 17 points.

>> we get it for .05. if you want to buy honda accord for 30,000 or 109,000. same accord. >> you have a website you can go on. >> yes. >> who ranks the worst in this group? who ranks the best in this group? >> we don't rank it. we show you what you're paying. it's show me the fees.com. show me the fees.com, you put in two things. take you 30 seconds. you'll see the average person saves 57%. one more piece. the funds matter. you want to have funds that are the highest performing, lowest cost. we all know vanguard is a piece of that. for business owners there's something you don't know. small business owners have no clue that they're the fiduciary for that plan. it means you're legally responsible to make sure that plan is the best possible plan. two years ago the department of labor passed a new law. you have to benchmark that annually. if you don't and last year 2014 they found 75% didn't, if you don't do it, you're out of

compliance and the average fee for you is $600,000 in penalties. i can show you one where a plan only had $100,000 in there, $600,000 in there. we do that analysis for free. that's our added value. >> what's the website? i tried going to show me the fees -- >> go to america's best 401 k. >> you have a stake in america's best? >> i do. >> how did that happen? >> they came to my company. >> they were your 401k provider? >> no, somebody else was. a major firm. they gave me an analysis. >> you've met with bogo. is vanguard one of these? >> vanguard is one of them. >> no, no, is vanguard a good guy or bad guy? >> it's a great guy. if you want to pay .05 basis points or do you want to pay 149. there's another one i saw yesterday. they don't do their own fund. 65 basis points instead of .05.

they charge you a 3% sales load. every company put a dollar in. so it's like people have no clue. if you had a neighbor that was paying 30 times more for something you had or the other way around, you'd be pretty upcity set. what i want to do is provide transparency for people. when i wrote the book "america's best 401k." and the level of anger that people have and it's been happening. obama has been working hard. they're already talking about exception rules. you don't have a choice, sign this, i don't have to be a fiduciary. that's what's going to happen. >> i have to give you a hard time or at least a hard question. >> go ahead. >> after we saw you last time i got critiqued for not asking you this. when you had your book come out there were a number of people who came out and critiqued it. one of the critiques at the time was, look, why are you taking advice from tony robbins? he was out there in 2010 telling

people to get out of the stock market. >> the whole book is not about me, it's ray darling and carl a c icon. i'm not telling what you to do. it's before qe. people i'm working with people said you should take a look. it's a little knnitpick. the book stands on its own which i'm really proud of. we were on the cover of 401k specials with jack bowles and i showing what we're doing in the industry. >> smartest 50 minds in finance. did you get it, paul? >> zi get a call? >> i came to see you in person. >> i didn't get a call. nobody called me. i'm 51. she's 52. santolli, is he in the top 100. you didn't have our number. >> i do have your e-mail. >> yes. >> okay. >> only the first edition. >> exactly. thank you.

appreciate it. >> thank you so much. >> maybe i wasn't -- there's no busy signal. i have call waiting. >> you're pretty sure? >> coming up. divorce saga playing out in the legal system and in the real estate market. robert frank joins us with details of ken griffin's $290 million buying spree. that's next. then later, we're excited to talk to ben bernanke. the former fed chairman will join us in a cnbc exclusive at 8:00 a.m. eastern. you're watching skauk box. first in business and first worldwide.

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welcome back to "squawk box." big day for google. the company officially begins trading as alphabet, ink. google shares, class a and class c shares will automatically convert and the ticker symbol will not change. okay. we've got a juicy story to tell you about this morning. ken griffen going on a $290 million estate shopping spree and robert frank joins us. going on a shopping spree, 290 million. >> big shopping spree. buying binge. there's big news in the divorce area. it's a battle over a $7 billion fortune. this morning ken griffen is expected to enter a chicago

courtroom to begin the divorce hearing. she's asking for a million dollars a month. she says in court filings that he made $100 million a year last year and he can afford to give her a little bit more. ken griffin says their prenup is ironclad and only entitles her to $50 million. sources telling me over the past two years griffin has spent nearly $300 million on personal real estate. he bought two floors of the waldorf astoria in chicago for under 30 million. that's a record in chicago. in new york he bought three floors of 220 central park south for $200 million. that was a record in new york and sources telling me over the weekend that he bought miami's most expensive home paying $60 million for the penthouse of fiena house in miami. it's unlikely the divorce will set a record. because they have a prenup. it won't beat harold hamm. >> are we putting real estate in the category of investment

categories? what's this about? >> he has homes in new york, miami, chicago. these are second homes. and, yes, new york he's saying is an investment. miami -- >> investment to live in or investment to rent out? >> unclear. unclear. >> okay. >> but this adds to his homes in all three of those cities plus s aspen and hawaii. a lot of speculation on how this spending fits into the divorce. >> how about her? what does she own? >> nothing. >> nothing. she doesn't own any of their property. all of their properties, even when they were married, were in his name. >> where are they living, the family? >> the family is living in his former place at park tower in chicago where they have two floors in park tower for now. >> what's the handicap on how this divorce ultimately -- >> well, you know, there is this prenup and it's very solid. they both had attorneys. she was a hedge fund manager so she's very smart. he's going to argue in the first part of this trial which starts today that this prenup should hold. $50 million is all she's going to get. my guess is she'll get a few

hundred million, maybe if the award's in her favor, a billion, but i doubt it's going to go that high. what's surprising about this is it's even going to trial. they're subpoenaing his driver, his pilot, personal assistants. so there's going to be a lot of very personal and financial details that come out of this trial that you thought would have been avoided. >> clearly this is so ugly they're willing to go there, right? >> that's what's so surprising. i imagine that she thought that he wouldn't want this stuff out there and that he would, therefore, settle? >> yes. exactly. what's surprising is that he -- >> he doesn't care. >> what's already come out. she says he made $100 million a month last year. there will be more on what do they spend on jets, what do they spend on second homes, what do they spend on kids stuff, all the other vacations. the numbers that have already come out and that will come out are not going to look good for him. >> she must be smart.

she was a hedge fund manager. >> she's financially savvy. >> okay. okay. i think that's what i said. >> meanwhile, did tony robbins kick sand in his face. did he call you pee wee? do you work out? >> tony is huge. i mean, he must work out -- >> you have a complex. you came out here like this, hang dog look on your face. >> i had some serious shrinkage next to tony robbins. >> that we didn't need to know. anyway, he is -- yeah, i'm going to the gimenez. >> his hands. >> his hands >> his hands. >> his han >> his hands. >> his han >> his hands. >> his han >> his hands. >> his han >> his hands. >> his han >> his hands. >> his han >> his hands. >> his hany >> his hands. >> his hanm >> his hands. >> his han. >> his hands. >> his hands. >> a final thought from mike san

tolly. >> i hope it's not his final one. >> you've been sitting over there. >> i mean, look. the market stuff, friday i think it shows deep confusion in the market. i have to agree with you. they said, fine, easy money for the foresooebl. i think we've been walking the line for the longer we hang around the lows, it's not great. that was better to have the rally than not. to me the credit markets are still kind of ugly. they haven't given the green light for stocks to get them up and away. >> i have a final final. >> ben bernanke will be on in an hour. >> in other words, at some point it's become time to do it. never mind what the data have to say in all of its detail. >> in other words, do the cost-benefit analysis change? i think i probably say, yeah, at some point. >> saying make me chase, just

not right now. >> yeah. >> it was st. augustine. >> that was just part of the dialogue. >> between people. i see. i missed it. >> chemistry and everything else which entails listening. >> i missed it. >> robert, thank you. >> thank you, robert. >> mike, it's been great having you. when we come back, we have more of this morning's top stories including nelson peltz taking a $2.5 billion stake in general electric. plus we are getting ready for the interview of the morning. former fed chair ben bernanke will join us for a cnbc exclusive. fun morning coming up. stick around. we'll be right back.

dismal jobs data throwing fed rate hikes into question. we'll bring you new forecasts and break down the market response with top economists. activist nelson peltz trian fund investing $2.5 billion in ge. details straight ahead. and a new york audience getting the first look at the new steve jobs movie at this weekend's premiere. >> ten times in a day i see jobs as a genius. what do you do? >> musicians play their instruments. i play the orchestra. ♪ ♪ >> academy award winning

director danny boyle is here with the inside story of a film that jobs' family tried to block from ever being made. the second hour of "squawk box" begins right now. ♪ ♪ >> announcer: live from the beating heart of business, new york city, this is "squawk box." welcome back to the "squawk box" here on cnbc. first in business worldwide. i'm joe kernen along with becky ki quick and andrew ross sorkin. that's still good, top 100. u.s. equities futures up 93 after a turn around that i was watching. i wasn't here, but i was watching and it was -- it was so funny to watch. just as it slowly -- the whole attitude of a bad job report being bad news as finally the

true wall street mentality that i love -- hold so dear. >> what was your knee jerk reaction. we were concerned about the economy, this is what's happening. >> no. >> by the afternoon i didn't know what was going on. >> i know. i've been trying to get off drugs. i' trying to get off drugs. >> here, try this. oh, yeah. >> exactly. exactly. >> let me just one more time and then i'll go into rehab next week, i guess. >> right. let's tell you about a developing story in south carolina. historic rainfall causing heavy flooding over the weekend. at least seven people have died in weather-related incidents in north and south carolina since thursday. there's more rain on the way. parts of south carolina are expected to get another three inches of rain before the storm moves off shore later this afternoon. officials have warned residents not to leave their homes for any reason even on foot. we'll continue to bring you updates but, again, this is a hugely important story. top business stories at this hour. nelson peltz taking aim at

general electric. his trian fund built a $2.5 billion stake. he's calling on ge to step up cost cuts, trying to get more of the finance arm and be more cautious on acquisitions. trian says they can take on $20 billion in debt and repurchase shares raising the buy back debate all over again. the activist fund believes that ge stock could get to 40 or $45 a share if the company follows its plan. there's a statement out this morning suggesting this whole thing is friendly, at least at the moment. ge ceo jeff immelt says the company maintains an open dialogue with the shareholders. ge has a plan to return $90 billion to investors through 2018 and they're on track to complete the goal of asset sales in 2015. in an interview in the wall street journal immelt said the -- >> this does sound like it's a much friendlier situation.

>> it is. nelson peltz is not asking for a board seat. they are calling this behind the scenes supportive activism. he's going in suggesting there are things to be done. they're close to being on the same page not completely on the same page. will he want a board seat in the future? it will matter howell ge does. >> nelson peltz, this is the biggest investment trian does. it makes them 10% owner. >> we'll talk to ge analysts about this. programming note, you can watch trian's ed garden talk about it with david faber on squawk in the street a little later this morning. in other headlines, teen apparel american apparel has filed for voluntary chapter 11 bankruptcy protection. it's already reached a restructuring support agreement with most of its secured lenders. google is now officially

alphabet. it happened after friday's close. alphabet is the publicly traded company that houses google's business. it's going to separate the company's core businesses from ven tlierks the driverless cars, internet connected high altitude balloons. the companies creed don't be evil was changed to do the right thing. i thought spike lee had a -- >> yeah, right. >> -- i thought spike lee had a copyright on that. >> i can't get used to calling them alphabet. >> supposed to throw a flaming garbage can into a pizza place or something. what does that mean? >> means they're going to try to do the right thing, whatever that means. >> what the right thing was. >> at the time. at the time. so maybe we'll see what they -- >> don't want to read into that. >> you don't want the driverless cars driving through pizzerias. >> no. >> i want to see how the reorganization changes that company structurally. >> it's all -- i wish that the right thing was always so -- >> so obvious. >> so objective because as we

know, politics, we're all trying to do the right thing and some people do the wrong thing. >> we can ask ben bernanke. >> it's good for shareholders. there may be some crazy stuff going on at google. at least it won't be if you buy the stock for the search engine and howell things are, you may not want to participate. >> aren't you participating? it's a subcategory. >> but you have a way of -- at least you know what you're doing, right? >> no. no. all you have is more transparency about the different businesses they're in. you will now know that the driverless car, for example, might lose a ton of money that you didn't know about before. >> right. >> some people would argue it's better to hide. if you care about the long term ability to invest in those businesses, it's now going to -- it's going to put discipline on those businesses and force them to actually do stuff that they probably weren't doing. >> how is the similarity coming? that's what i want them to hurry on. >> that's an expensive project.

>> you're okay with the r and d on that? >> yes. >> that will be a money losing unit for quite some time. >> yes. >> as a nonshareholder you're okay with that? >> it's essential they move forward. that debate over friday's lackluster jobs report continued over the weekend. ste steve liesman is here. >> it ranges from whether it was a blip or the start of something worse, whether it takes the fed rate hikes off the table for this year or maybe they go in december. and in that strange market action we got when the market really wants rate hikes or is happier when the fed is off the table, economists split into a few camps. see if you can follow these. at some point a strong adp report updating consumer confidence and see the jobs report as an anomaly. quote, the september employment report seems like something right out of bizarro world. i like that quote. this is the beginning of something worse reflecting

weaker economic growth. that's what barclays writes, disappointing u. sumpt payrolls data at the end of the week although they do not change our fundamental assessment of the u.s. labor market, do race questions about the economy's underlying strength. at some point the pace of job growth has to downshift from the $200,0 $200,000. you should be prepared for 100 to 125,000 job growth. jpmorgan is in this camp. they say this slowing alliance with a projected deceleration in gdp to 1.5%. it's well above the 75,000 gain we believe is consistent with labor supply trends. we don't know -- >> they think any time you are making job gains of more than 75,000 it's in the plus category. >> in the plus even in terms of lowering the unemployment rate. there's all that slack out there which is one of the reasons why

we've done this. other people including jpmorgan said, you know what, at that rate you'll see an increase in wages. >> i wanted to point out eric rosengren said the fed will continue to monitor data. he's a dub. >> i read -- i wish i remember where i read it. it may have been david rosenberg. he said the thing that concerned him was the average hourly work week. >> it was unl changed. >> i think he said that's the equivalent of losing 200,000 jobs. >> that's right. i think we ought to talk about the idea that on saturday night you were reading economic commentary. >> i think it was saturday morning. >> that would be a little bit more excusable but still. that's an issue. there were some issues with the statistical thing with wages in september. there's no strength at all other than a 2% year over growth in

wages. >> okay. steve, thank you. i know you're going to be with us at the top of the hour with a very special guest. >> yeah, we've got a good guest coming in. somebody around this who you'll have some questions for the guy. >> got a few. former fed chairman ben bernanke is joining us at 8:00 a.m. for an exclusive interview. he'll be here for the hour and steve will be back heading that up. thank you, steve. >> thanks. let's get more on the health of the economy and the market's reaction. chris hise is here with us. our guest for the hour is bob dahl. the chief exweek at this time strategist. gentleman, welcome to both of you. >> thank you. >> good to see you. >> all right. what do you think after friday's jobs report. everything steve just said, what do you do with stocks at this point? >> i think you still own them. look, we're in a muddle through economy and we're not going to get good news or perfect news every month. this is more of the muddle through. i think as importantly for the stock market is the action last

week that joe talked about, the adrenaline and the drugs. i think the selling looks like for the moment it's exhausted. wednesday was a nice rally. friday was a nice rally. many technicians say it's the first successful test of the august problem that we have. i don't think we go straight up and the economy kind of being weakish along with china means we're not going straight up but maybe the worst is behind us. >> bottom, andrew, just said it was the bottom. there's your bottom. >> but i heard there was a bottom in august. >> no. >> that was the primary low. this was the secondary low. we might need a tertiary low. >> no. no. it's not hinge your bets. you said there was a bottom. now there's no bottom. >> chris, what do you think? >> you know, i'm with bob. people are dazed and confused. it's a mid cycle. you're going to get good numbers, you're going to get bad numbers. most of them are bad. you're looking back.

a lot of sessions in the emerging markets. it will be very hard for the emerging market growth slump and it's a big debt to be exported to us to take us back into the same kind of slump. the problem is we're in limbo. the consumer data is not enough psychologically to take us over and above all of the negative things that are going on. 12 out of 13 weeks of outflows out of emerging markets. sentiment. worst it's been since '08 and we're still growing at 2%, possibly 3% next year. from the standpoint of owning stocks, i'm going to say it because we're long-term investors. you diversify across the board. >> how? >> you diversify by buying into the weak periods. >> you're looking at this as a weak period, not the plateau before you fall off? >> yes. this has to have a catalyst. we don't see that.

>> we talk about the fed. i'm not going to get into the fed being there, not being there. when the real reality of what happened friday is the dollar got weaker. the euro got stronger. what does that mean in the short term? >> investors are looking at that as good news. one of the concerns is profit growth. will eps for the s&p 500 next year be 120, will it be 125, 130? foreign trade and the dollar more particularly does have a big impact on that. friday was a positive on that score. there are lots of other issues, chris just mentioned them. what's the consumer going to do? i think the consumer has actually behaved very well when you look at real income growth, the jobs we've gotten ignoring friday's report, just the moving averages. consumers doing better. >> they're spending more money. >> they're spending some more money. sings the high last july -- i'm sorry, a year ago july, the high

in oil prices, the low in the dollar, we've created 3 million more service jobs. granted, we've only had 150,000 new manufacturing jobs and we've lost 70,000 jobs in energy, but those service jobs come with some spending. >> we're still on this giant experiment. u.s. is trying to get themselves out of it. the beakers are in the sink, the economy is not. europe and japan are trying to reflat terrible numbers coming out of japan. they're going to be in qe possibly forever and europe is going to have to extend their qe. ultimately those dollars and our rows that fly around and the supply throughout the world will follow them right down to the consumer balance sheet. >> neither one of you guys think we'll have to extend our qe. someone said it. what if that were to happen? what if that is a harbinger, that friday number. what if things do go that route and you start hearing more than the dovish or the doves say more qe here? what if we did do that?

what if we don't raise but if we go back to another round of qe, what would that do? >> my guess is if we have to get to another round, joe, the economy is a whole lot weaker. >> that's what i mean. they're going to have to revise that headline in the "journal" op ed pages. >> correct. >> are we in the early innings of bernanke's legacy or do we know for sure? >> we don't know. >> we know we're in the early innings or late innings. you better say it now, i guess, because you never know whether you're going to be able to say it two or three years from now. >> i think it's pretty clear they saved us from deflation and depression because they stepped in early. whether they've rescued us, what ben is going to come in and talk about, i'm sure, is not just monetary policy but fiscal policy. is that ever going to do anything. >> that's a way of saying we did what we could. if it messes up from here -- that's like saying we've got the results of what happened here.

that can no longer be looked at again. you can look at a $4 trillion balance sheet. it's not fiscal authority's fault from here on out. >> i don't disagree with that, but i think what dr. bernanke will say is, look, this was a big problem, '08, '09, we did what we could. we need fiscal policy. >> i will say, there is a line in the book and i've never heard him articulate it as explicitly. it basically says the government couldn't do anything. we were it. there was nothing else for us to do. he's never really said it himself aloud. i don't think you've heard him specifically say look -- >> they did $800 billion and they spent it on something. i'm not sure what. >> by the way, he wanted much more -- he wanted much more investment in infrastructure. he wanted them to do more spending. >> he wanted them to put criminals in jail. >> that's right. >> but apparently not policy makers. >> the republican with the -- appointed by a republican president. >> not fannie and freddie.

no government enablers, people wanting homeownership at 80%. >> ask him about that. >> why does the "usa today" have that as a headline? >> because they're trying to pick the most -- >> don't start putting down other newspapers because you're trying to prop up the new york sometimes. >> i won't. they found the one quote that will get you talking. >> i'm sorry, it's not the gray lady. it's the "usa today." it can't be right. >> i think there's a much more nuanced view in the book. >> it's got the tint. print. print. print. >> chris, thank you for coming in today. >> thank you. >> good to see you. of course, bob's going to be with us for the hour. when we come back we're going to talk about nelson peltz's trian partners taking a $2.5 billion stake in ge. we'll talk about what it means. then portfolio planning for the fourth quarter.

osc oscar schaeffer will share his thoughts. danny boil is here. the movie "steve jobs" is here. don't go anywhere. at the top of the hour we have our newsmaker of the morning, former fed chairman ben bernanke will join us here on the set in an exclusive tv interview. we're right here this morning. we'll be right back.

nelson peltz is making a big bet on ge. he's taking a $2.5 billion take on the company. it's the largest investment ever for trian. joining us is sanford bernstein analyst. what does this mean? he says this is part of supportive activism. he's not taking a board seat. he's putting a stake in the ground, i'm an investor. i'm happy about what they do. i'd like them to do more. >> it's interesting. if you look at trian's history, they had a major position in ingersol larand. they provided what i call adult supervision on the board there in toerms of helping those guys make the right decisions, do the right things along the way. the next thing we find out is that he is going to make, owns two companies, we didn't know which ones. he talked about that as recently

as in may. pent air, he took a stake. i don't need a board seat. at ge we have the announcements most recently and he and ge -- >> very friendly. everybody's loving each other. >> we've heard this before. jeff has already talked about his relationship with nelson over time. we knew it was positive. we knew that jeff had sought out input from nelson -- >> right. >> -- in terms of am i doing the right things for this company. i think it's a statement that says, look, there's a lot of trapped value inside of ge. we expect the market doesn't recognize that. as they take these actions we're going to be, number one, good investors and number two a friendly nudge to make sure they stay the course. >> but explain this. here's the quote from nelson peltz this morning. recent discussions have solidified the belief that they're going to share much common ground with trian on ways to improve long-term shareholder value. then of course they go on to

publish a white paper about all the things that ge is not doing. >> so it's interesting. if you look at the things ge is doing as i look at it right now, you already have them getting rid of $200 billion of assets at ge capitol. could they do more? they could do more. >> which is what the peltz plan is. >> right. secondly, that is a huge massive transformation, culturally and otherwise for ge. biggest thing they've done. they'll be the most industrial focused company. second thing is huge cost reductions, both out of g and a and cost of goods sold. you have significant margin opportunity as a result of that. this is an enormous company still delivering margin expansion. that's a big deal. can they go forward? >> does jeff immelt look at that that they're happy that peltz is out there publicly being as supportive as they are or does he look at, oh, my goodness, i have to perform. >> i think mr. immelt is under

as much pressure today as he was a week ago. >> they got rid of appliances. >> small business but for cultural change. you're right. that's my point. they are actually making these massive changes. he's already doing these major changes. peltz will push him. >> can they afford the buy back program? >> learning and this goes to the larger debate about buy backs, zero interest rate policy. >> right. >> so ge has already talked about leafering up once they are desify. they want to come down to below the current rating. they think that will free up $20 billion of capitol. >> at least this gets the stock back to 27. they announced the exit from financial -- and they wanted -- that was a big deal. they wanted a pop. i think they felt that could get it back up in the 30s.

next thing you know -- >> yeah, next thing you know, 24 again after the august selloff. back down to 24 again. at least with this it's like -- >> if you follow nelson peltz, if you just piggyback off of nelson, you've done very well. >> jim tweeted that again. if you actually buy on the same day of his announcements, that's where he's done the research to follow it back. >> right. i would say that ge has a significant amount of opportunity and value. >> 40, $45 range that peltz is talking about? >> i'm in $32 in 12 months. i think let's get there first and we'll talk about it after that. >> you tell me. what do they say about this? >> i don't know. >> interesting thought. >> i think he gets along with jeff. >> i think he likes ge. >> okay. >> nelson -- i don't think he dislikes peltz personally. >> he dislikes carly personally. >> at this point he dislikes --

i don't know. very good question. >> we should ask. >> it was a very good question. >> because you know why, he liked the gossipy type thing. i was watching, where's the wife living right now with ken griffin you ask. andrew, that's classic. how do you come up -- >> we're talking. >> hedge fund, you want to know where the life is living. >> i didn't book the segment. we're doing a piece about the divorce. you have to ask about -- >> really? >> can i go back to ge? >> do you know? >> i suspect. >> g e's a lot more straightforward. >> last question, what's the honeymoon period? how long does the -- >> there i go again. >> how long is the honeymoon? how long does nelson -- >> are we tired of this relationship yet? >> i think they have over the next year to really show a lot of these actions and make progress, and a lot of cost cuts. >> steven, thank you. >> watch this space. >> every time i watch.

>> also trian's ed garden will be joining david faber on "squawk in the street." and hopefully can answer some of these questions as well. coming up, a flood of ipos scheduled for the next month. why the rush? kale la taushi has the story next. [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] ♪ my mom makes hospitals you can hold in your hand. ♪ my mom can print amazing things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ]

♪ my mom works at ge. ♪

. welcome back to squawk booze news. germa germany's oktoberfest came to a close. organizers said the number of visitors was down slightly from last year. munich officials said people drank 7.3 million liters, liters, it's in europe, of beer during the two-week long party. as for the food, 114 oxen and 50 calves were consumed during the festival. >> calves? babies? >> veal maybe? >> i bet it's veal. >> yeah. it's good. it's good. the last week was the busiest since august for ipos. more than a dozen companies are planning to go public in the next month. index is in correction. the return of volatility has them asking why the rush.

kayla taushi. >> it is not just the share number of ipos that wyce're expecting in the market, it's the size of them. first data and albert sons are already on the road talking to investors. they're going public in the next two weeks. it's driven by the private equity owners than necessarily a sign of market resilience. that is not to say that all deals on file with the sec will go smoothly or for that matter will even happen because in the third quarter three companies planning to go public ended up getting acquired. that was good technology, par pharmaceuticals and sungard which was a $9 billion deal. other deals will get delayed. drawn out talks at the sec or simply waiting until their numbers get better. bo box is like a full 60% of

companies trading below the ipo price. the average return on an ipo went negative in the third quarter. that's the first time that happened since 2011. so to get investors to buy in bankers and executives who are working on the ipos will need to price them at a bigger discount. that's why the majority of deals that have priced post labor day, rather, have priced below the expected range. expect much more conservative valuations. these are discounts to the multiples of their peers that are already trading in the market. if there is an up side to pricing at a discount, it is a bigger potential, guys, that you could have a little bit more possibility for gains in the aftermarket. that at least is the hope. give them an incentive to buy in and then a higher probability of the stock going up. >> okay. thank you for this. we'll see whether they actually do go in. do you think square really will go? >> i don't know. it's hard to tell. i think if they would like to go

public by the end of the year, they still have a few weeks for their s1 to be filed. i haven't seen the numbers. a lot of people are curious as to what exactly their revenue looks like and if and when they'll ever be profitable. >> now that mr. dorsey is the ceo -- >> steve jobs, elon musk. >> thank you. when we come back this morning we will talk year-end strategy with squawk platinum portfolio manager oscar schaefer. you can see triple digit gains for the dow. looks like they're 116 points above value. s&p up 15 and the nasdaq up by 38. stick around, "squawk box" will be back.

opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

mario kart. i just dropped -- did you hear that? it sounds like mario karts. that's music. this is the -- is this the

20-year-old -- this is the original squawk music? >> yeah. >> which means the mario kart stole their music from squawk. >> not the other way around. >> mario kart is pretty old. >> not 20 years old, is it? >> it might be. >> well, indexes around the world are in correction or bear market territory, although -- although you just heard bob doll. bob doll the man. that was bob dole. he said we've tested the recent lows successfully and that might be it. the fourth quarter is normally strong. we'll get more input from oscar schafer. >> mario cart, 1992. >> yeah, sorry. >> oh, my god. we stole it from them. that opens up a pandora's box of liability. oscar is chairman of rivula capitol. a member of the squawk platform capitol. we don't necessarily need you for top down macro stuff, oscar,

fwu do you but do you agree with bob? we've come back halfway i think. >> two things. number one, we may be in a technical bear market as 50% of the stocks are down 20% but we're in tnot in a fundamental market. look at the variation of what happened on friday. it's crazy. we don't spend much time thinking about day-to-day fluctuations otherwise it would drive us crazy. we're trying to get a group of great companies at cheap prices but if i had to guess, i think the market ran higher and i think next year you'll be surprised with the earnings because you'll be anniversarying the dollar problems in oil. i think earnings next year, i don't know what the s&p's going to be, that's bob's bailiwick, but i think we'll be surprised howell the market will do next year. we're in the sixth or seventh

inning. it will be interesting to see howell the mark well the market >> 125 on the s&p, bob? is that doable? 120? what will keep the market trading long? >> at least 120 does it. i think 125 is more in the range. >> on the s&p. >> oscar's absolutely right. get past the oil and the dollar anniversary and you strip those out. >> comps. comparison won't be as hard. >> won't be as hard. x goes to earnings. corporate earnings are going 10%. >> oscar, i mean, you used to be in the baron's roundtable and opine endlessly about so many things. for us you do the platinum portfolio. let's talk about the ones that you have not that it's less than it should be. it's interesting that you get to pick three stocks.

are you still with the ones that you've had before? are you changing? >> i'm with the ones i had before. i'm still at the baron's roundtable. the ones before were cogent, interaction and a and i. cogent missed a few quarters. i think the company will turn around. 5% dividend. i think they'll have $3 share and free cash flow in a couple of years. the ceo whose name happens to be schafer owns $100 million of the stock. over the top i think they're going to have an enormous increase in internet traffic which helps my second pick which is interxion. >> i can't spell it. >> it is a strange thing. i don't think they spelled it for investors. >> i had trouble with that. what would you call that? i don't know what word i would like to use. that's interxion.

sorry. >> this administrator which is consolidating earlier this year a deal was done for 16 times ebida. i think interxion won't be independent. >> when i walked for michael stein jeret over the years he said it was a good gutt check. if you bought a stock and it went down, it went down, what are you doing in the stock, in terms of cogent, it goes down and you buy more. that shows you conviction. at this time in the market having cash isn't so bad. when stocks go down, we buy more. >> the other thing though is the most common thing, marrying the losers. i'm not talking about my wife. marrying the losers. number one taking a profit. up 20%. then the stock triples and then you ride something. you buy it. you ride it to zero. i can't sell it now, it's down

50%. that's a terrible thing to get into as well. you need to know whether to buy more or whether to cut your losses. >> well, there is the story about the man who goes into the broker's office with $10,000 and he buys -- the broker buys 10,000 shares -- $100,000. six months later he calls back and says, where's the stock? i can't see it. 27 it's a better buy than you paid ten. the guy says, shucks, i should have waited. so the third stock i want to talk about is one of the rare open-ended stocks i've ever seen in my life. three times in my life i've found health care companies that have done really well, one of which you just mentioned before which is par pharmaceuticals. another one was andrex. the one i would like to talk about is ani pharmaceuticals. it has 11 drugs -- 12 drugs, has 80 in its pipeline. they're going to double the market by the end of -- they're going to double the earnings by the end of 2015 from here.

they're going to exit at market at $5 a share. in the next few years they'll earn over $10 a share. that's one of the rarest open-ended opportunities i've seen in such a low valuation. >> oscar, thank you. quick and succinct. we got a lot. the definition of a broker is someone who helps you broker or someone who will invest your money until it's gone or someone who will make you a small fortune. right? got all of those. coming up when we return, a new york audience got an early look at the new steve jobs movie. the film's director, academy award winner danny boyle will join us right here on the squawk set in just a moment.

the board believes you're no longer necessary to this company. >> i sat in the garage and invented the future because artists lead and hacks ask for a show of hands.

>> film "steve jobs" premiered this weekend at the new york film festival. it tells the story of his three launches and danny boyle is the director of the film "steve jobs" and he joins us. i was happy to see it saturday night at the opening. >> you enjoyed it. >> i thought it was spectacular. i enjoyed it very much. the questions i have, a couple of things. as a director who has directed lots of films with plenty of action, this is not an action film. how did you think of that? >> well, we -- >> but you created action. >> we tried to. it's aaron sorkin. it's a lot of dialogue. you know him. he's an amazing writer and he writes everything through dialogue. it was an action movie through words. it's driven at a pace that is like watching an action sequence. >> right. >> it's all this language as they tear each other apart, these people. >> one of the great debates about steve jobs' life is was he -- not was he a visionary but

he was a visionary but appears to be a jerk. >> yes. >> that comes through in this film. the question appears, does it have to be both? does it have to be that way? that's the question this film raises but i'm curious on where you come down on the answer. >> it's expressed nicely that steve wozniak is played and that's his belief. that's something i aspire to. i think jobs was actually someone who didn't believe necessarily in that. certainly in the early days especially. you do see his behavior. you do see the extremes of his behavior. the people are split. there's many people totally devoted to him and can see no wrong in the way that he behaved and the way he built his work and then there are others who thought there were too many sacrifices along the way. >> the family didn't want you to make this film. tim cook, the ceo of apple has called this opportunistic.

what do you say? >> i think it's crucial, actually, to make films about these people. there are so many of them. they changed the world in literally 30, 40 years. the world has turned around on its axis. that kind of change in that kind of time means that the people who have ignited that, we need to make more films about them. documentaries, novels, biographies. there needs to be more written. we need to understand them. they come out of us. express our dreams, visions, fears. the power they have, you know this in this business, they're more power full than countries. they need to be answerable to all levels. ec and i appreciate that you're doing it in a way that makes average audiences interested in these stories that we find so fascinating here, but if you're doing it and not sticking exactly to the script of what happened, is there a disservice in it? >> you could argue that. but then facts -- you know what it's like when you are chasing facts.

>> i know, right. >> they're contradictory often. depends who you're talking to. in drama you chase the facts or the feel of it. the truth is in the feel of the facts. you select the best and you chase that. >> you think the world has changed. you could film a crowd walking 20 years ago in a city and then just walking along you film a crowd now, they're like this. there's no doubt that steve jobs and the computer guys, and then i think of movies made about people that have lived three and four centuries after they're dead, mozart, for example. look at how they portrayed him. he wasn't like tom holtz. he didn't have that laugh. how great is it that my kids get to see that and now understand the genius of mozart. >> and care about him. >> in a way that may have been

dramatic and not totally true. >> you have to mesmerize people in the way he did. he would not have been shy in saying that this motion of looking down and twiddling with your fingers is as significant as humans discovering tools and then the printing press and then steve jobs. i mean, he thought in big, grand gestures like that. >> what was your thought process about getting involved in the project to begin with? one of the things we learned about in the sony hacking attack is all the machinations and people behind the scenes. it went from sony to universal, david fincher was involved early. there were other actors. how do you -- >> you just have to keep faith really. that's interesting something about jobs, it's this belief system. when you believe in something. you know, to make other people see it the way you want to see it, you have to believe in order for them to be able to believe. you have to keep faith. we had an extraordinary journey. weirdly we had seth rogan

involved. he was on a north korean trip. he kept faith in the project as well. you have to do that. you have to keep your head down and keep faith. >> danny, thank you for coming in. you made my saturday night. thank you for that. >> the universal film and the cnbc studio owned by nbc universal. coming up, this morning's big movers. your list of stocks to watch is next. then fed chairman ben bernanke wanted bankers to be prosecuted and jailed for the events that led to the financial crisis. that's according to his new memoir. andrew says that's not the biggest part of the book, is it? it's not, right? >> it's a thick book. big book. >> right. >> got a lot going on in this book. >> that's what we're teasing here. he will join us at the top of the hour.

a stock to watch, the leading experimental hot drug, spark. isn't that the one that he was talking about when he came on? was that the one? >> yeah, spark therapy. >> yes. >> i asked because it was down a quarter or something. >> i guess it has traded now. and how. 65%. so that's where it was. now we know. we want to thank our guest host,

bob doll. you think i worked on my tomorrow holtz -- >> i think you've got it down. >> then we talked about f. murray abraham. we've got to go. anything to stay the course? >> a tug of war going on between the developed world which is acceptable growth and which is struggling, which is going to win. my bet is the bigger part will but it will take time. >> great to see you. up next, the man of the morning. live and exclusive. former fed chairman ben bernanke. we'll get his take on the state of the global economy. the ripple effects still being felt today. plus, a trip inside his book "the courage to act." it's a must-see final hour of "squawk box." stick around. we'll be right back.

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>> one real reality of what happened friday is that the dollar got weaker. the euro got stronger. >> now it's time for the next 20. an exclusive conversation with former fed chairman ben bernanke. from leading the economy through the financial crisis to the wall of worry that we're confronting right now, the china slow down, mess in the middle east and the great rate debate. >> all of that through the lens of his new book, "the courage to act." the special edition of "squawk box", a conversation with former fed chairman ben bernanke, starts right now. >> announcer: live from the most powerful city in the world, new york, this is "squawk box." welcome back to "squawk box", everybody. first in business worldwide. i'm becky quick along with joe kernen and andrew ross sorkin.

today for the first time in the 20 year history we are honored to welcome ben bernanke to our set. in the financial capitol of the world. thank for being here. >> great to be here. thanks for inviting me. >> obviously your book is what's kicking this all off. "the courage to act" we'll talk about this. in the meantime this is his first live television interview since leaving washington. we're going to get to all of that in a moment. first, joe has a roundup of the top stories. >> do we really need to do these? okay. >> news breaking. twitter naming jack dorsey, the guy with the grisly adams beard, he thinks it looks good as ceo of twitter. he will remain on the board but will no longer act as chairman. dorsey will continue -- see what i mean. that's so much better. he will remain as chief executive officer of square. >> way to welcome our guest, joe, with a comment on beards. >> his beard is nice.

yeah, his beard is nice. he has the hipster get past any velvet rope in the city. >> dorsey has the z.z. top going. >> yeah, it's like the -- anyway, other stories investors we'll be talking about. nelson peltz building a $2.5 billion stake in general electric. his trian fund calling on ge to get into cost cutting, get rid of the finance arm and be more cautious on acquisitions. jeff immelt says his company maintains an open dialogue. ed garden will join ed faber on ""squawk on the street."" he says he's very positive about this. not all activist moves are, you know, not a good thing.

potash withdrawing its offer for german rifle k and s. they say the lack of management by k plus s management. now let's turn to our newsmaker of the morning. ben bernanke served as chairman of the federal reserve from january of 2006 through january of 2014. he took the helm when stocks and the housing market were soaring to record heights. not long after that he had to represent rescue the nation from the brink of financial collapse. charting the course of his tenure at the fed from the day he took the reins from alan greenspan until the day he passed the torch to chair yellen the dow gained 45% but tracking the markets from the depths of the great recession in 2009 until his departure. you find the blue chip index more than doubled. that eye popping performance has earned him legions of fans and as many critics. two years from leading the central bank the question is, of course, are many of the problems facing the global economy results of years from easy money from the federal reserve.

the income inequality we're talking about, they're all issues we are ready to talk about. steve liesman is here. thank you, steve and mr. chairman. >> andrew, thanks. he has been praised by presidents and save vablged by critics. ben bernanke. "the courage to act, a memoir in the crisis of the aftermath." the darkest days of the financial crisis when he stared into the abyss and the behind the scenes struggle to enact the policies that he believed saved the economy. thank you for joining us, mr. chairman. >> glad to be here. >> let me ask you, it's the crisis and the aftermath. i want to focus on the aftermath. are you surprised and are you disappointed that after six years of 0% interest rates, a $4.5 trillion balance sheet that this economy still struggles with 2% growth? >> well, the low growth is coming not from the recession per se. we've come back quite a bit. unemployment's down to 5% so

we've come pretty close to full employment. the slow growth is coming from slow productivity growth. output per worker has not been growing quickly. why that's happening is not totally understood. it has to do with the waves of innovation. we saw slowing and productivity growth even before the cries sits. i think that's part of it, but clearly one of the issues is that we've been relying too much on the fed. the fed has been the only game in town that's been doing most of the policy heavy lifting. we need to see more action from other policy makers. >> when you see six years of 0% wouldn't you have expected that there would be a pop? that we wouldn't be doing what we did in the first quarter, 0.6% growth and concerns almost every quarter that we're going back into recession? >> well, in a slow growth, low real return economy, not just in the u.s. but everywhere, and compare the united states with europe, compare us with japan,

other industrial countries, we've been making more progress. i'm not saying things are great. i don't mean to say that at all. monetary policy can do two things. keep inflation low and stable and help the economy come back from recession. both of those things are happening. more growth has to come from productivity, it has to come from capitol investment. those things need help from policy makers. >> quickly a follow-up on that. is that a suggestion that this is the new normal? it's going to be very difficult to fix this? >> if you look around the world, it's there. there's not that much in terms of high return investments available. i think that's not fed policy that's where the world is. >> could be qe over there, too? >> well, if it were true. if there were lots of high return investments available, you'd be seeing more capital investment. i don't think it can be qe, no. >> let's talk about where the fed is. there's a lot of talk that this is the year that interest rates

rise. along comes a jobs report 143,000, much less than expected. downward revisions to the prior two months. how would you as a policy maker process that report? >> well, you know the fed's plan to raise interest rates depends both on continued progress in the labor market and also inflation moving up to target which also depends on progress in the labor market because reducing slack, creating pressure, wages and prices is the source of inflation in their thinking. so the bad numbers or mediocre job numbers certainly is a negative for that plan, no question. >> people know you very great public servant, very humble and i read that headline on the op ed of the wall street journal this morning how the fed saved the world and it was so uncharacteristically you that i was never a print reporter but the editor came up with that, right? >> right.

your viewers should know that not only does the op ed writer not have a chance to write the headline but i couldn't even find out what the headline was until it appeared in the paper. >> what was your response when you saw it. >> my response is this is not what i wrote about. i wrote about the fed has done what it can, things are not great. the fed can't be expected to solve all problems. >> i'd hate to be quoted on that in the future as you because you remember the cover of the magazine, the committee that saved the world. >> what can i do about it? but, again -- >> write a letter to the editor. >> go on record here, wasn't my headline, wasn't my intent. >> i want to ask about current policy. there's a debate out there. i want to know where you came down. some people say they haven't hit their inflation target, in a low growth environment, we need 0% interest rates. that's what the market would set by itself or something close to that. the other one says how can you argue 5.1% unemployment, 2% growth that there's no rationale

at all for emergency level interest rates such as you set in the most dire moments of the financial crisis. where do you come down on that debate? >> well, i just point to the inflation rate. you know, even if the fed had no interest whatsoever in growth and employment, which of course it does, but it has a 2% inflation target. it needs to get inflation up to that target and, you know, easy money is justified by the need to get inflation. >> was growth good in the '50s and '60s with inflation under 2%? how can we possibly know what an optimal inflation rate is? what was it in the poos '50s and '60s? >> they had great robust growth. >> it was low. you're going to tell me that deflation happened in the 1870s, which is also true. >> i wonder if we actually know -- >> we do know -- we do know in a world where there's low demand and low real returns the risk happens that, you know, if inflation is so very, very low that it's close to deflation,

the risk is that ordinary interest rates will be low all the time, very little inflation, ordinary interest rates will be very low. what happens when there's a recessi recession? there's no place to cut. >> now you're making the argument about where people are. >> should have raised them in order to have some ammunition to cut. >> no, that doesn't make any sense. if you raise rates too early and you kill the economy, that doesn't help you. >> the flip side, with trian making an investment in ge and suggesting that they borrow more money so they can do more buy backs, you look at what's going on in corporate america, has the policy itself perverted the way businesses act? >> no, i don't think so. low return in the economy, low return, low cost to capitol. there's not as much capitol investment. autos are strong, you've seen the economy using up slack and housing is coming back. in comparison to europe where they didn't do qe and there's a big difference in unemployment. >> people say corporations at this point, the reason they're not making capitol investments

is because they're able to buy back their stock at low rates and reduce the outstanding shares. earnings per share goes up. compensated on stock prices going up. instead of doing the long-term things like hiring, capitol investment, that they're financially engineering results. they also say they're doing mergers and acquisitions where when you cut employment and you cut manufacturing, you're not expanding plants and things, so all of these things end up being miss m misallocation. >> no, i don't think so. if you could do mergers and acquisitions and you can do capitol investment, there's no reason why they're mutually exclusive. it looks to me that, again, look across the whole range of interest sensitive spending, including capital investment, equipment and research and development, by the way, which has come back very strong, you look also at autos, houses,

other interest acceptstive spse spending and it's brought us back to 5% unemployment. >> ben, i want to ask a question about the critics. they appear repeatedly in your book. they're the antagonists. there's not a single person. and you talk about the crisis giving rise to certain extremism in the political system. when you look back and think about how you handled the critics, are there things you would have done differently? >> well, i mean, i did my best to make my case. that's really all i can do. i think the one thing that i -- as i go back and think about what -- you know, what we did during the crisis. we were so engaged in trying to dealing with the weekend emergencies and the chaos in the markets in the economy. we didn't do as much as we could have. we did a lot, we didn't do as much as we could have to explain to the public what we were doing and why we were doing it. i went on "60 minutes" trying to

explain what we were doing. still out there was a lot of you, oh, the fed is helping wall street, not helping us, so on. and i -- you know, i think if we had done more of that, maybe some of that criticism would have been diffused. >> for the record, you didn't do "squawk box" just to be clear about that. >> i wanted to talk to everybody in the economy, not just investors. >> viewership is wide here. we have a lot of people who watch. >> yeah, i know. >> talk about the critics a little bit more in the next spot. >> that's right. when we've met before, you thought oh, i thought maybe it's just from watching it on tv, which means you do watch squawk. >> of course, yeah, i do. >> there's a lot. we'll talk about this in the next block. there's a lot in the book, joe, about the role the markets play in the decision-making process. >> how did you get a copy? we know andrew went -- >> i went to an independent bookstore over the weekend. >> i don't think -- i don't approve of either one of your actions. anyway. we'll ask the chairman if the

people who helped cause the financial crisis paid a heavy enough price. should more ceos and bad actors sitting behind bars and maybe policy makers, congressmen, f fannie and freddie. should the fed have done more to save lehman. has the era of easy money put the world -- somebody worked really hard on this and i have to read it because they really did a good job -- on a major -- another major financial crisis? our special conversation with ben bernanke continues when "squawk box" returns, blah, blah, blah, blah, blah. thank you. thank you. [announcer] you're on the right track to save big

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there is america. how many of you want to pay for your neighbor's bathroom? raise your hand. president obama, are you listening? >> how about we all stop paying our mortgage. it's a moral hazard. >> this is like mob rule here. i'm getting scared. >> we're thinking of having a chicago tea party in july. all you capitalists that want to show up in lake michigan, i'm going to start organizing. >> i'm just glad i was there but i wasn't really there. i'm like forrest gump.

looking at everything. turning down kids at colleges, george wallace. anyway, that was rick santelli's famous rant from february of 2009. fed chairman bernanke's new book "the courage to act" he talks at length the withering criticism he feels that he endured from the pundants, politicians and wall street. one of our delivering alpha conferences one of the louder voices was stan druckenmiller said ben bernanke is running the most inappropriate monetary policy in the history of the developed world. back to buy backs real quickly. i've been told that for non-financial companies that now 50 perfection percent of their ebit, earning before income and taxes now being spent on buy backs, and it's doubled in the past couple of years and they're able to borrow more money. previously it's possible that

it's coincident with another t . it's the law of diminishing returning. they're financial engineering. you're taking issue with the "journal" saying you're taking a victory lap and saving the world. at this point we're not out. we don't know how we're going to get out. we're in the early innings of your legacy. when will we know? if we're going into another recision right now, what will we do? >> that's the point. the fed has been using easy money because the economy needs easy support. if we had done what druckenmiller wanted -- >> that's two years ago. >> the policy has been right in the sense that the economy clearly needs the support from monetary policy. it could use help from other parts from ed dru c kenmiller's

protoge. we need help from the fiscal policy and other parts. the fed can't do it all. that was the argument i was trying to make. >> i know for a fact that kevin thinks that part of the continuing sluggishness in the sixth or seventh year of a recovery is because of the fed not their -- >> no, i don't really see it. but i would agree that a better policy would be a better mix. the fact that the fed is the only game in town means that the fed has to do too much. the fed is being relied on too heavily. >> when you decide that you're going to conjure animal spirits and hopefully the underlying economy catches up with the asset -- the price of assets going up from easy money, i understand that rationale, but you must think in the back of your mind that some people are

doing things, taking risks and there's no way to gauge how much, how big, whether that comes home to roost in some horrific way. >> financial instability after what we've been through is a huge concern. fed is very, very engaged in this. under my chairmanship the fed restructured itself internally and put lots of staff and resources into monitoring the whole system looking at ways to address the risks. that's the right way to think about it. i'm not saying there's not risks. in order to address the risks would you do the wrong monetary policy? would you weigh in just this past friday should monetary policy be used to create or to worry about financial instability in the sense that you would raise rates now in order to ward off some of the excesses that joe's talking about? >> well, it should be a last resort because you have to raise rates an awful lot, for example, to have the kinds of effects joe's concerned about and we

don't even though very much about what the linkages are. arguably if the economy is really weak because you raised rates too soon, that could cause financial problems as well. so the right thing to do first is do everything you can on the regulato regulatory, supervisory front, if nothing else works you can think about monetary policy. it's self-defeating to use the wrong monetary policy. >> except there's an assumption in there. you've proven it wrong. you were at the helm. you missed the bubble. you missed it '07. eventually as the book chronicles you come to see the seriousness of what's happening. what assurances can you see everybody in the public that the fed will see the next bubble coming? >> you can't. you can't. that misrepresents what we saw. we newhouse prices were really high. we knew sub prime mortgages were a problem. what we didn't see is the extent to which the financial system was endangered by that problem.

sub prime mortgages were a small asset class. what they did was they created distrust by investors in securitized assets and caused a panic from money being drawn out of all different assets. that panic is what created the crisis. it wasn't a fact that we didn't know house prices were high? there the first line of defense has to be more capital. tougher oversight. those sorts of things to make the system more resilient to whatever shock comes along. >> mr. chairman, can i ask you, one of the things you talked about is how you were looking at so many different arenas, how the fed changed to be looking at all of these issues. one of the criticisms is they had two mandates. a dual mandate. chairman greenspan said he only paid attention to one. he paid attention to inflation, didn't worry about unemployment. the criticism is now the fed has a lot of different mandates, 20 or more. start looking at the global

economy, look at what happens with china's stock markets, our stock markets, the strength of the dollar. those are some things that chairman yellen has cited for why they didn't raiserates. are we right to be concerned about the idea that there are a lot of different things? >> no. no. all of those things that you mentioned like the strength of the dollar are only important because they affect the fundamental mandate. the mandate of monetary policy is maximum employment and stable prices. that's what monetary policy should be aimed at. the fed was created in 1913 foreefor fofor fore -- for ending financial panic. it should be pursued by regulatory, supervisory and other kinds of actions and be tough about that. i think that's our best chance, really. >> mr. chairman, in passing you just talked about how the securitization of things were a

natural inclination for wall street with all the easy money and subprime seeing the low. there was demand around the world for product. yet you also in the "usa today" decided to run with your pop u populous comment about making investments, inflating above all, being wrong about whether the party's going to continue for everybody, chuck prince, we're going to keep dancing while we're dancing, i'm not sure that's fraud. the populus notion that a lot of these people should have gone to jail is counterproductive to the actual narrative of what happened. like who specifically? which firms were housing -- aig because they didn't back their ceos? >> i don't know if you can by securitizing for a lot of people looking for yield when you have the whole world caught up in a

housing bubble, that's not fraud. >> i think that's the first time i've ever been called a populist? >> isn't that -- >> no. what i do know is for many big banks the department of justice assessed billions and billions of dollars of penalties against firms for bad behaviors. >> a lot of them haven't admitted they did anything wrong. that doesn't mean there's criminal culpability by individuals. >> i wasn't saying that. what i was saying is that seems to me like the wrong strategy. if you think there is criminal culpability. >> why isn't there? >> look at the ligor. look at the dollar. yeah, i'm talking about traders, i'm talking about people in the whole structure, not necessarily the ceo. >> i think he's arguing your point. he would rather see them go after the bad actors. >> making bad investment decisions and losing money -- >> no. no. making bad investment decisions

is not criminality at this. >> secure advertising ceos isn't fraud. >> i agree with that. >> we will continue this conversation. we'll sneak in a break. during the break we have a lot more coming frup ben bernanke. when we return, he has a new book out. we are back in just a moment.

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welcome back to "squawk box." we have a very special guest

with us right here on the set this hour. ben bernanke, the former fed chairman. he has a new book out. i spent the weekend reading it. there was one part, of course, that i'm fascinated by which, of course, is the lehman weekend. we were talking on the commercial break how everything leads back to what happens to lehman, could it have been rescued, could it not? what really happened? i think that your book the first time articulates really what happened in a way that i don't think anyone has ever said and kind of ends the debate, which is to say that you think there was no way to save it. >> no, i don't think there was. we tried really hard. i say at the time conventional wisdom in the media elsewhere was let it go. let it go. you know, we knew -- we were afraid that it wasn't just the company itself but the fact that the markets were already in panic and the failure of that company and all of its, you know, ramifications would raise the level of panic to a whole new level that would be extraordinarily destructive. we tried very, very hard to avoid it.

unfortunately, the tools that we used in other cases were not available. >> not only that, you've suggested in the book that some of the view that's taken hold that it could be saved was your own doing, that you and hank paulsen agreed to purposefully be vague about what you actually had done and what you could or couldn't have done and that that may have led to the misimpression. >> well, in the few days, not anenpermy, in the few days following the collapse and remember that week merrill lynch was taken over, aig was rescued, you had pressure on morgan stanley, goldman sachs, you had wachovia. it was an enormously tricky week. it was our decision, o you are agreeme -- our agreement that we had been reticent that we could not save lehman because we were afraid that would create more panic. that may not have been the right decision, i certainly admit that, but that's what we did. >> one of the great values in

this book, my opinion anyway, is the kind of blueprint for the next crisis. so, do me a favor. go back in the time machine. if you could set up the lehman weekend in a perfect way for the next policy maker, obviously you don't want it to fail and you go back in this book to bear stearns and say they didn't pick up, they didn't hint from bear over that six-month period, how would you do it differently so you don't end up with this awful result on monday morning? >> as i talk about in the book, you know, lehman was not -- it was not a bank. it was a separate investment bank, broker dealer and we had no -- the fdic can tell the bank, raise capital, we'll close you down, pay off the depositors. we couldn't do that under the legal structure we had in the summer of 2008. so there's a lot of verbal pressure. i mean, tim geithner talked to dick fuld 50 times.

paulsen was on the phone raise some capital. they did raise some capital. we didn't have the tools to force them to raise more capital. they were trying. they didn't have much luck. then when the time came in september and they were on the brink of failure, you know, we didn't have the tools to save them. there's been progress on that. new tools were added in dodd-frank. they weren't there then. >> with more limitations. >> with more limitations. >> which others have been concerned that the fed would not be able to do. >> yes. that's right. i'm not saying the solution is completely perfect. >> when you look at lehman's assets today, by the way, a lot of them have come back into the positive. >> uh-huh. >> were there numbers or models that you looked at that weekend that -- specific numbers where you said, okay, we just can't do it where you knew and numbers that were built by the fed and not others? >> the new york fed, which is where the work was being done, new york fed which is where the work was being done, the staff and leadership of the new york fed was conferring closely with

other financial institutions because they had the expertise to look at all of these assets. we're working together to evaluate it. in the end it wasn't some kind of issues of are they solvent, not solvent. can we identify how much they have in the way of assets that we can lend against that are collateralizable. the judgment was, no, if we lend to them -- >> people will always say it was a judgment, right? >> the judgment was the following. it looked very likely to us that if we lent to them against the collateral that they did have, all that would happen is the other creditors would pull out as fast as they could and just leave the government with this hulking smoking -- >> andrew, the book doesn't make it close. it wasn't like if the fed put in a billion here. >> no. no. >> it was a 60 or $70 billion potential hole. >> that's the point. the firm was clearly i think insolvent. certainly under the pricing that was going on at that time and for that reason, of course, bank of america said, look, there's a

huge hole here. we can't buy this firm. and we didn't have capital. this is important to understand the timing. fannie and freddie, there was a special process to put money there and the t.a.r.p. put money into other firms. lehman was in the middle. >> i want to switch it. to joe's question about crime -- >> no. we'll talk about -- let's talk about aig. was aig treated differently in a punitive way because there was a notion that there was -- that they were even worse actors? >> no, had nothing to do with what kind of actors they were. it was a very, very difficult decision to intervene with aig. we felt we had to given that lehman had failed and the system was in crisis. >> you didn't open that window for aig when other -- >> we did open the window. $85 billion we lent them. >> did they get the access to all the liquidity? >> absolutely. they got all they needed to survive. >> what about the court ruling

say? >> the court objected to the fact that we charged a high interest rate and that we took equity for the taxpayer in doing that, but in making those decisions -- so we gave them everything they needed to survive but in being tough it wasn't because we said these are bad people, we need to punish them, it was because we were doing something for aig we weren't doing for the -- you know, there were thousands of firms in the country that were going bankrupt without any help. here we are intervening to prevent this company from failing and moral hazard. we had to do everything we could to minimize the windfall that we were giving to aig stockholders. >> it was a perfect storm because you had the ratings agencies thought that there was, you know, credit default insurance. that allowed them to give aaa so everybody had [ applause ] sa -- plausible deniability. >> it was a horrible week, i have to say. >> talking about crime or the criminal element, do you look at

dick fuld and say, that was a crime as opposed to stupidity. >> i wouldn't say that. i think there was, you know, very irresponsible behavior for example. lehman brothers was betting in implausible ways on the market not only by ensuring all of the ceos. they were basically doubling down on rnbs, mbs. >> but they weren't supposed to have collateral for all the credit default talks? >> no, they didn't. they didn't. >> were they by law required? >> no, they were not. >> i have no reason to say it was criminal but i think it was very irresponsible. >> this raises a question. when you read the book, it's a chronology of interventions and i don't know, i'm sure you didn't start out there. >> right. >> i'm sure you started out with the notion appointed by a

republican president that the market should take care of itself and yet you go in and you guarantee the commercial paper market. we raise it one after another an intervention. do you look back on this and say, how -- is there a way to get back to a better place where the market does more of its own regulation or is there now engrantd in te engrained in the american financial system uncle sam to the rescue? >> that's what we want to avoid. first of all, one of the criticisms we get is the fed was too slow to act and intervene. one of the reasons that it took us a while in 2007 to begin to get aggressive was precisely because we were concerned about this. we didn't want to have a bernanke push. we didn't want to tell the markets whenever something bad happens the fed will balance you. obviously it needed drastic intervention. we threw everything we had at it. now after the fact we want to do everything we can to make the

markets -- to get rid of the moral hazards, to make the fail problems and make the markets self-regulating and some of the ways we do that, lots more capital for banks. banks are much better capitalized than they were. they have to have capital and they have to have loss absorbing bonds. so the more that the losses, say banks, for example, fall on their owners and creditors, the more market discipline there's going to be. so that's kind of the direction we're trying to go or they were trying to go. >> talking about politics, in the book you talk about how washington has put you off with politics and that to a large degree the republican party has moved too far right for you. >> well, there's obviously a populus leaning on both sides, the democrat and the republican side, but a lot of the anti-fed, audit the fed type of legislation, not strictly from the tea party but some -- a lot of it is coming from there, some of it's come from occupy wall street as well. so i -- you know, i took a very

nonpartisan perspective when i was fed chair. i think that's appropriate. and i tried to stay very much in the middle and stay away from the extremes on both sides. >> do you think there should be some rules based decision making from here on out? we do kick it around here. if the island of cypress has a currency problem, we're not going to raise, that's one person in charge of a lot of stuff. if they're wrong or subjectively wrong, we're all at risk. >> well, you want to have it mend as they say. a lot of discretion with the fed chair but there are circumstances where you need to have a dramatic response. i would say people don't appreciate entirely -- this is something i try to explain in the book -- that this crisis was very similar in structure and form to a crises that took place 150 years ago. we know from there how central banks respond to those. >> you told me not to go back to

1950s or '60s. >> 1870. >> 1907 was a great one. jpmorgan. jpmorgan intervened as a private citizen to stop a panic. that's the creation of the fed. the fed's job is to intervene and stop panics, but you also have to have strong regulations so the that the panics are not common. >> i was talking about the current fed chair. a lot of discretion on when to do what. i'd like a couple of rules. >> well, there's targets. there's -- when i was there we put in the 2% inflation target. that's a very clear quantitative guideline. >> we have to slip in a quick break, mr. chairman. thank you. we'll talk about paul giamatti. >> never saw it? >> i haven't seen it. >> good for you. i think you came to the premiere. when we come back we will have much more from former fed chairman ben bernanke. in the meantime, take a look at the futures. the dow futures are up by about 120 points, s&p up by 14 and

nasdaq up by 30. stick around, "squawk box" will be back.

welcome back, everybody. we have a special guest with us on set this morning, ben bernanke. he has a new book out it's called "the courage to act." mr. chairman, we talked a little bit at the top of the hour how you think this is an economy that doesn't necessarily fit with raising rates. six years in is it still an economy that fits with zero interest rates? >> well, again, so these are -- we're at this point obviously the fed is looking at this and

they're tough calls. i certainly don't want to be second getting, but it's not evident to me that policy's too easy because, again, inflation is very low and, you know, we're just now approaching a full employment level of outputs. it's a tough call but, you know, again, the folks who are arguing a few years ago that the fed was, you know, creating this radically expansionary policy, they were predicting high rates and we haven't seen it. that's saying that it's if not radically easy. the fed is looking to normalize over time. they're going to make some tough calls about how to do that. again, inflation is very low. >> we had one market watcher who joined us earlier this morning, mark grant. he suggested that the fed should sell down or let run some of its balance sheet, $4.5 trillion, let that run off before they

raise interest rates. what do you think of an idea about that? >> joe had an idea earlier of how we're going to get out of 4 trillion. that's not a big issue. when the time comes the fed will let the balance sheet run off. that's pretty straightforward. i don't think that's going to create any particular problems but i think the concern is that, you know, they have less knowledge about how that would work, how that would affect the markets than they do about how short-term interest rates would. so the plan and the fed has been very clear about this is to begin by raising short-term interest rates which they could absolutely do even if the balance sheet is still 4 trillion and then if the economy is still, you know, making forward progress, then they can stop reinvesting and the balance sheet will passively run off over time. >> when was the first goalpost for when the economy will end? >> 6.5 and -- >> no, that was not a goalpost. >> hold on. >> that was not a trigger. we never, ever said -- >> it was a goalpost that moved.

>> no. >> it's not moved. >> and it's not moved. goalpost is 2% inflation. we're not there. 6.5% we promised as a form of forward guidance that we would not tighten least until we got to 6 1/2 percent. and i said that many, many times. it was clear in the statement. it's just wrong to say it was something else. >> it's hard for -- it's hard for -- with inflationary expectations, maybe you can look at some future indication of it, it's hard when inflation is being conjured up. so we had this great fracking revolution here, which may be one reason why inflation is so low. if we're at 1.6, 1.5, and we're probably not headed back down the other way, is there anything wrong with being slightly preempttive, not a lagging or -- >> that's the debate. the debate is that, you know, given that monetary policy takes

time to work, the people people who would like to raise rates now are saying we don't see inflation yet. we need to move sometime soon in order to anticipate that. >> that's the only thing we hear from you, from them. inflation, inflation. everything else indicates we shouldn't be at emergency measures. >> why do you say emergency measures. >> zero -- >> zero is 3 1/2 percentage points below of what the fed thinks is the long running fed policy rate. in 2003, we had a 1% rate. we ended up 5.25. that's 75 basis point more emergency. >> but zero you can't go lower. >> you can't go lower than zero, that's a reason to be cautious. >> how would prou social securi you process china? janet yellen said it's not a reason to move rates. others say the danger is overblown. how do you see it. >> i'm certainly no expert on

china. what i see following the information that i can, china is slowing down, but it's something we broadly anticipated would happen. it's making a transition from a heavy industry infrastructure, construction, export led economy to a more market oriented retail services oriented economy. that's going to create a slowing pace of growth is it slowing more than that would indicate? it's hard to tell. all we know is the heavy industry part is slowing that has implications for other emerging markets. the question that the fed was talking about was that, you know, we knew china was slowing, then in august we saw a sharp market reaction to this news that we should have known already. the question arises is there something that's happening that the markets are telling us that we don't know. >> the markets are saying is there something the fed knows that we don't know? >> there's a bit of a game there. given that the fed was trying to

avoid taking action, then learning right after the meeting that, oh, god, there's something happening we don't understand. it's a case of waiting to learn more. >> is there systemic risk here? >> well, the imf has talked about some risk in emerging markets. that would -- the effects would be from weaker china affectingm putting pressure on them, putting pressure on dollar borrowings. a bunch of mechanisms have to be paid attention to, for sure. china, we don't have a lot of information about what's going on inside. i wouldn't, for example, get worried about the stock market problems. they don't relate too much to their overall economy. >> one more try. this is the last one. >> promise? >> can we kind of agree that the benefits of this accommodation,

it's hard to know whether we're seeing anything great happening at this point? therefore, if we're not getting anything positive from it, just the notion that there may be some unknown dislocations, bubbles that you admittedly said that the fed can't even identify, if we're not getting anything for it and possibly conjuring up future problems, doesn't that mean it's time -- >> when you say we're not getting anything for it, you say you think the fed could raise rates 100 basis points, it wouldn't hurt anything. that's not obvious. >> all the ceos don't want the dollar -- is that the third mandate? >> no, it's relevant only insofar as that if you kill u.s. exports with a strong dollar that will have effects on domestic output and employment. that's the reason it matters. >> it's also possible that the uncertainty of things is keeping companies from doing things. >> you take that seriously?

>> i don't know. >> if i'm a guy producing widgets, i'm much more interested in what's happening in the overall economy and the widget market. i'm not fixated on the fed. >> i don't think we make widgets anymore. >> we make them with chips now. virtual widgets. >> you said this is a tough call what the fed had to decide last time what would you have decided? >> i'm not going to second guess. it is a tough call. i have every confidence that janet will do the right thing. lots of issues there. >> lots more with ben bernanke after this. to take their act to the next level... before earning 1% cash back everywhere, every time... 2% back at the grocery store... and 3% back on gas... vince of the flying branzinos got a bankamericard cash rewards credit card, because he may earn his living jumping through hoops, but he'd rather not earn cash back that way.

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changes you'll notice. wherever you are in the world. sheraton. tha ben bernanke. your back is an accounting of all the factual things that happened and an emotional recounting. tell us your most moment during this crisis? >> the worst moment was the lehman weekend, the knowledge it would fail, the fear and uncertainty associated with that. the next couple of days, as we had to deal with aig, talk to

congress -- >> what does that mean worst moment for a fed chair? were you worried that the economy would blow up? >> yeah. i was very worried. my whole background was studying the great depression, studying financial panics, effects on the economy. i saw that we were having the granddaddy of all financial panics about to explode on us. i thought the consequences would be tremendous. >> was there a good moment? a great moment? >> besides today. >> handing over the reins? >> as an economist what better job could you have? you had all these people thinking about what's happening, and providing leadership for the global economy. it was -- >> does janet yellen call you for advice? >> no, she doesn't do that. i think it's a good idea for me to keep my distance from that. >> a different moment that i thought would be his worst moment, when he got the job, in the book he calls his wife to tell her and she says oh, no.

>> she was always more insightful. when i called her to tell her, she broke into tears. they were not tears of joy. she understood it would be a tough thing. >> thanks for joining us. >> thank you. >> hopefully not your last time here. >> good luck with the book. >> thanks a lot. >> she must be happy now, obviously people must thank you. >> she's much better off. >> here you go. a party favor. >> oh, thank you. >> for the man who has everything. join us tomorrow, "squawk on the street" coming up next. good monday morning, welcome to "squawk on the street," i'm carl quintanilla, jim cramer here, what a discussion with ben bernanke. we have news on ge and twitter. the ten-year yields just above